Title: Exploring Rollups-as-a-Service and Thoughts on Restaking
Today, we will delve into some major Rollups-as-a-Service (RaaS) providers and the author’s perspective on Restaking.
1. About Rollup
When it comes to Rollups (L2 and L3), RaaS is a topic of controversy. On one hand, supporters believe platforms like Caldera and Conduit make building Rollups very easy, which is positive for the overall ecosystem. On the other hand, some argue that we already have enough block space, making these tools irrelevant. My personal opinion falls somewhere in between, as both sides have valid arguments. I believe that Rollup infrastructure is beneficial for the field, regardless of scale, but I also understand why some are skeptical about how this technology drives the adoption of cryptocurrencies.
L2 Beat lists around 55 active Rollups, with the top five (Arbitrum, Optimism, Base, Blast, and Mantle) holding 82.74% of the market share at the time of writing. Whether this phenomenon should be seen as a symptom of the early stage of undifferentiated Rollup designs in the cryptocurrency field or a general lack of interest in most Rollups remains uncertain – perhaps it is a combination of the three.
Arbitrum and Optimism easily emerge as the most mature Rollups, resembling more of a “real” chain rather than Ethereum’s sidechain. Base boasts a very active community and may currently be the best-positioned Rollup despite its smaller locked value. A similar case applies to Blast, though I am unsure if their higher locked value is more appealing than the community Base has built without a gamified token plan. Base even explicitly states that they will not issue tokens, yet nobody seems to mind because it is the first Rollup to exhibit spontaneous activity – even before airdrop announcements, Arbitrum and Optimism were heavily mined.
Mantle is a Rollup I am not very familiar with, but after a brief overview of their ecosystem, I believe their positioning is better than Mode, Manta, or even Scroll. Their future development depends entirely on the influx of locked value and the deployment of new applications, both of which are pending further progress.
There are 44 projects set to launch on L2 Beat’s upcoming Rollup list, which is more concerning than the existing 55 active Rollups. These 44 Rollups adopt various designs like Optimiums and Validiums, ultimately competing in the same market. Few active Rollups can transition from “modular execution layer / Ethereum sidechain ‘jump’ to mainnet” in a worrying scenario.
Success for L1 only comes when years of developer talent converge into a fundamentally stable base layer, providing opportunities for community formation and ecosystem creation (think of Solana’s Memecoin casino era, Ethereum’s DeFi summer frenzy, or even Bitcoin’s halvings). The utility of Rollups stems from their shared security with the base layer, which in 99% of cases is Ethereum, unless you are discussing Solana’s L2 and its relatively lower transaction costs.
I believe that purely relying on technology is not enough for a Rollup to occupy a significant position in ideology or market share. This can be seen from some of the “most powerful” technologies like Scroll, Taiko, and Polygon zkEVM not making breakthrough progress in the locked value game. Perhaps these teams will indeed see an increase in locked value in the long run, but based on current sentiments and lack of pursuit, I do not see any signs of this. No, your eight users do not want to participate in another Galxe event, and they certainly do not want points that can be exchanged for non-transferable tokens.
If you were to put yourself in the shoes of a brand-new, blissfully ignorant cryptocurrency investor, how would you feel about Rollups? Unless it has some Memecoin that can make you money, I am not sure you would be thrilled to see the 15th zero-knowledge Rollup and something like a zkEVM equivalent.
This brief analysis (simply browsing L2 Beat) may seem quite pessimistic, but as long as I have not invested funds in L2 or L3, I am content with it. I believe that an increasing number of Rollups may not necessarily be a bad thing for the field, but we should be more honest about the utility they bring. Over the past few months, many apps have become chain-specific (such as Lyra, Aevo, ApeX, Zora, Redstone), and I suspect this trend will continue until everyone, from Uniswap to Eigenlayer, becomes L2.
Therefore, while we cannot stop the deployment of new Rollups, we can at least try to maintain an honest discussion about their impact on cryptocurrencies. We have too much block space, and even the Ethereum mainnet does not need any additional block space – it may cost up to $10 to complete a transaction now, and this situation has been ongoing for weeks.
RaaS providers like Conduit and Caldera are quite difficult to distinguish, and I say this with confidence in the hope that someone can correct me if I am wrong. Here is a brief overview of their respective Rollup deployment processes:
Conduit offers OP Stack and Arbitrum Orbit; Caldera provides Arbitrum Nitro, ZK Stack, and OP Stack.
Conduit settles with Ethereum, Arbitrum One, and Base; Caldera does not list a settlement layer, but I imagine it is likely very similar.
Conduit’s DA offerings include Ethereum, Celestia, EigenDA, and Arbitrum’s AnyTrust DA; Caldera offers Celestia and Ethereum but plans to integrate Near and EigenDA soon.
Conduit allows you to use any ERC-20 as a native gas token; Caldera allows you to use DAI, USDC, ETH, WBTC, and SHIB.
Overall, these two platforms are very similar. The only difference may come from the actual consulting experience of the teams. I have not spoken with either of these teams, so if any of this seems rushed or misinformed, I apologize, but I believe they would appreciate honest observations on RaaS and the current industry landscape.
I have considered creating my own Rollup for fun, but I cannot reasonably spend $3,000 a month to maintain a virtual chain (unless a venture capitalist wants to DM me, and we can discuss).
In general, I support Rollups-as-a-Service (RaaS) and hope that everyone dedicated to this field continues to strive. I truly do not see any issue with it and find the controversy over “too many Rollups” meaningless in the current state of our industry.
2. About Restaking
In discussing the current state of our industry, it is time to briefly discuss my frustrations with Restaking, LRT, AVS, and Eigenlayer.
As of today, an enormous amount of Ethereum has been deposited into Eigenlayer, around 5.14 million. Initially, I thought that most of the funds would flow out after the token program ended, but disappointingly, the recent airdrop announcement did not redirect funds to more valuable places; in fact, it increased. For those who expected Eigenlayer’s airdrop to easily multiply capital by 20-25 times, I think they may be a bit delusional, but I did not anticipate the subsequent geo-blocking of almost all major countries. Many tweets have expressed dissatisfaction with Eigenlayer’s double standards (including one of my own tweets), but I truly do not see any point in further discussing this issue.
The team also released a massive whitepaper explaining how EIGEN works and introducing a new concept called intersubjective utility. In reality, no one truly understands its meaning, and no one is discussing it because EIGEN will initially be non-transferable, a huge taboo for those looking to build a community around their protocol. If people cannot get rich through tokens or an ecosystem built around tokens, they will turn to areas with money-making potential (like memecoins).
I have no opinion on Eigenlayer or the team itself, and I want to make that clear. However, I have concerns about Restaking and the AVSs basket currently whitelisted on Eigenlayer. With over five million ETH already deposited in Eigenlayer, you might think people can earn high returns, right? I must tell you that this assumption is incorrect.
When considering the utility of Restaking, you are essentially extracting economic security from the world’s most stable blockchain validator set. You deposit various types of stETH into Restaking platforms like Eigenlayer (or Karak, eventually Symbiotic) to earn higher returns on stETH that already have attractive yields. My issue lies in the fact that Restaking itself does not generate intrinsic revenue; the earnings must come from the AVSs provided within Eigenlayer. If you are a Restaker, depositing 10 stETH into Eigenlayer and delegating this Restaking ETH to operators like ether.fi, you need to trust them to select the right AVSs basket to generate returns for you.
But where do these returns come from?
Indeed, Ethereum does not promise on a protocol level that ETH stakers will earn more rewards by staking their risk in restaking protocols. The earnings can only come from one place: the Tokens issued by the AVS itself.
I am not an expert, but I find it hard to understand why no one is raising this question on Twitter. Of course, more critical issues like poor airdrops and the risks to Ethereum security are receiving more attention. But why is no one asking a simple question: what might happen once Eigenlayer launches and eventually activates the penalization mechanism?
When the team fails to discuss the actual numbers of potential revenue generation or bear the burden of over $10 million in assets with over 500 million or more Restaking ETH, where is the incentive to keep my assets deposited?
We are in an intriguing situation on Eigenlayer, where the top ten operators have registered an average of five AVS each, with clear overlaps between them. Eigenlayer wisely announced that the penalization mechanism will not be activated for about a year to allow everyone to adapt to the new Restaking reality. Given that apart from Gauntlet and Mike Neuder, no one is discussing Restaking risks, this is a wise decision. Despite both articles being very informative, they do not provide concrete examples as the current AVSs have almost no impact.
As I mentioned earlier, the advantages of Eigenlayer are clear. But is it necessary to provide nearly a billion dollars of user Restaking ETH to every emerging protocol and expose them to future risks? While the penalization mechanism has not been activated yet, it will be within less than a year – are operators fully aware of their Restaking risks and the increasing risks with each subsequent AVS registration?
I am not sure about this. Perhaps we will see other Restaking platforms gradually eat into Eigenlayer’s market share, ideally gaining product-market fit gradually and providing smaller amounts of Restaking ETH to AVS rather than the other way around.
