AltLayer Research Report: Rollup as a Service and its Potential

AltLayer has come a long way from aggregating boxed zk solutions to launching proprietary re-staking-based technology to scale and accelerate web3 progress. Let’s dive into this topic with real-world examples!  

Table of Contents

1. Introduction

2. Rollup Hub

3. Recollateralized Rollups

4. Partners

• 4.1 Partners and Projects Using AltLayer Technology

• 4.2 Integration Examples

5. Token Economics

6. Who is Behind AltLayer?

7. Supporters

8. Conclusion

1. Introduction

In the evolving blockchain space, scalability and customization have become major concerns for application developers. With the popularity of ZK Rollups and Optimistic Rollups, there is a clear need for solutions that allow developers to scale their applications while maintaining flexibility and control.

In recent years, ZK Rollups and Optimistic Rollups have made significant progress in the blockchain space as they can significantly improve the throughput and efficiency of existing blockchains such as Ethereum. However, despite their promise, these rollup technologies also bring their own set of challenges, especially in terms of accessibility, customization, centralization of sequencers, soft finality, liquidity fragmentation, etc.

This is where AltLayer comes in. Unlike existing options currently available to application builders, AltLayer offers Rollups-as-a-Service for developers seeking hands-on control over their rollup solutions. The RaaS service allows developers to directly manage their rollups, providing a high degree of customization and control over their blockchain infrastructure.

However, what truly sets AltLayer apart is its new re-collateralized Rollup framework, which introduces re-collateralization to rollups. RaaS combined with the re-collateralized Rollup framework enables anyone, including individuals with little to no coding experience, to create their own custom blockchain execution layer in minutes and bring additional security and decentralization to their rollups. This notable feature bridges the gap between technical and non-technical users, making AltLayer an attractive option for a wide range of application builders.

In this article, we will dive into the mechanics and potential of AltLayer and explore how it can become a Rollups-as-a-Service solution in the rapidly evolving blockchain space.

2. Rollup Hub

AltLayer is a Rollup-as-a-Service protocol that allows developers to launch their own Layer 2 (imagine launching a version of Optimism, zkSync, Arbitrum, etc. specifically for your application). AltLayer provides:

• SDK for developers who want to manage rollups themselves

• No-code dashboard that allows anyone to generate a custom execution layer in minutes with a few simple clicks

Basically, AltLayer is a decentralized rollup hub that allows individuals to launch their own L2 solutions based on their needs. However, questions may arise regarding the types of execution methods available, rollup speeds, general/special purpose rollups, etc.

AltLayer allows launching ZK Rollups and Optimistic Rollups, with EVM, WASM or other runtimes, for general purpose or application specific purposes. Users can fully customize their rollups according to their needs and preferences.  

As mentioned above, AltLayer allows for rapid deployment in minutes, and the process is similar to deploying on a general chain. AltLayer's rollups do not need to be secured by hundreds of validators (such as Cosmos SDK) because they use the underlying chain (Layer 1) as a security layer.

AltLayer is designed with modularity at its core, allowing end users to customize their rollup solutions based on their preferences. This flexibility extends to the choice of runtime environment, including options such as EVM, WASM, etc. In addition, users are free to choose their preferred data availability layer, whether it is an L1 blockchain or a data layer like Celestia. AltLayer also allows users to choose their preferred settlement layer, such as Ethereum or Arbitrum One.

The main problem faced by most rollups is the decentralization of the sorter (the ordering and processing of transactions). However, AltLayer is operated by a decentralized network of sorters. These collators are selected from a network of collators called SQUAD, based on their stake and some randomness. We will discuss SQUAD in detail in the next section.

Finally, a core feature worth mentioning is hierarchical finality. Traditional blockchains typically classify blocks as finalized or unfinalized. However, AltLayer takes a more nuanced approach to block finalization, implementing a tiered system. This tiered system enables end users to determine the finality of their transactions based on the security budget they choose. As a block passes through these different tiers of finalization, the confidence of the finalization gradually increases. The confidence of the finalization is lowest at the execution level and culminates at the rollup level.

AltLayer's finalization process consists of three different tiers: the execution level (suitable for low security budgets), the verification level (suitable for medium security budgets), and the rollup level (suitable for high security budgets).

• Execution-level finality: The transaction pool contents are collected and organized into blocks by block producers. These blocks are then submitted to the consensus protocol. Once the consensus protocol validates and accepts these blocks and the transactions they contain, they receive finality at the execution level.

• Validation-level finality: Once a block produced and validated by the block producers and the consensus protocol is validated by validators, validation-level finality is achieved. Further, stronger finality occurs when more validators are able to confirm or reject the update, and more confirmations increase the likelihood of correctness.

• Rollup-level finality: Blocks cleared by arbitration consensus will go through a challenge phase, where anyone can run their validator and participate in the validation. If a discrepancy is found in the on-chain proposal, a challenger can raise a challenge. A successful challenge invalidates subsequent blocks, triggering a state rollback. Unsuccessful challenges result in the challenger's stake being slashed.

AltLayer also offers another type of rollup, called Flash Layers, which are better suited to address scalability issues. Flash Layers are one-off, application-customized rollups with optional fraud proofs.

With Flash Layers, dApp developers can:

• Quickly launch a fast and scalable rollup guaranteed by Layer 1

• Use rollups when needed, preventing congestion on Layer 1

• Process rollups by performing “final settlement” on Layer 1

This significantly optimizes resource utilization because the execution layer and its resources are only called upon when the dApp experiences high traffic that exceeds Layer 1 limits. When demand decreases, the dApp can seamlessly return to operating on Layer 1.

Potential use cases include NFT minting events, gaming, event ticketing, and more.

3. Re-collateralized Rollups

This is a new concept proposed in collaboration with EigenLayer. It consists of a set of vertically integrated active verification services (AVS) created on demand for a given rollup bundle. Together, these AVS provide three key services for rollup applications: decentralized ordering, state correctness verification, and faster finality. This contributes to the decentralization of rollups, security enhancements, and interoperability between rollups, while leveraging Ethereum's trusted network through re-collateralization. The updated rollup bundle consists of three modular components called:

• VITAL (AVS for decentralized rollup state validation)

• MACH (AVS for fast finality)

• SQUAD (AVS for decentralized ordering)

Let’s take a closer look at these components:

VITAL acts as an integrated validation layer for rollup bundles. It consists of a network of AVS-registered operators that validate all new states proposed by SQUAD operators. VITAL operators detect invalid state roots and can challenge SQUAD operators using a bipartite protocol. Basically, VITAL is a network of operators that validate new states. Unlike the initial confirmation provided by rollup orderers, the confirmation provided by VITAL is much stronger due to the economic incentives behind it. This allows assets to be withdrawn immediately. VITAL can also be used with optimistic and ZK proofs, where VITAL operators can ask SQUAD operators to generate ZK proofs for disputed state roots.

MACH aims to solve the slow finality problem of rollup by validating rollup blocks and ensuring that the blocks are valid according to the state transition function of the rollup. Once an invalid block is detected, MACH operators will issue an alert. If enough operators agree with the alert, it can be upgraded to upstream dApps. The MACH service will be provided to end users as an RPC endpoint, reporting whether a specific rollup block is considered final. This RPC endpoint can be integrated into any aggregated decentralized application, providing faster and more reliable confirmation. MACH will also facilitate exchanges, bridges, light clients, and other ancillary services that need streaming access to rollup states and blocks to provide their products and services.

SQUAD enables nodes operated by EigenLayer AVS operators to register their interest in being a rollup orderer. Once the required number of orderers have staked the minimum collateral, these orderers can begin ordering transactions for the rollup. To facilitate orderer discovery, SQUAD is designed as a network of nodes that any EigenLayer AVS operator can join, effectively acting as a full blockchain with WASM and EVM execution environments. Nodes in SQUAD are called validators, which is typical in any PoS network.

4. Relevant participants

4.1 Partners and projects using AltLayer technology

AltLayer has many partners, most of which are of an integrated nature, involving the use of AltLayer's technology stack or integrating the technology stack of other projects into AltLayer. This is a strong indication of providing a Rollup-as-a-Service product. As of September 2023, AltLayer has several partners and integrations: EigenLayer, Sovereign SDK, HyperLane, Celestia, Orbiter Finance, Espresso Systems, Radius, Double Jump.Tokyo, Arbitrum Orbit, and other projects associated with AltLayer include: Another World, My Square, Connext, MatchBox, Oveit, BendDAO, Skyark, Port3, Degame, Uforica, Evolv, Chirpley, StratisX, RNS.ID, 3UP, Evolv, Fobo.club, Automata, MySquare NFT, TaskOn, and DF Archon. As of the end of May 2024, AltLayer has a large number of partners and integrations, with weekly blog announcements and an ecosystem section with 120 projects across various categories.

4.2 Integration Example

EigenLayer is an Ethereum re-staking protocol. AltLayer and EigenLayer collaborated to propose the concept of re-staking rollups, as mentioned above. AltLayer’s current re-staking rollups running on the EigenLayer mainnet include:

• Polyhedra: ZkBridge from the Polyhedra Network has made significant progress in the blockchain industry, providing a robust, efficient, and secure cross-network interaction protocol for a variety of Layer 1 and Layer 2 networks. With the integration of zkBridge, AltLayer’s rollups can now ensure seamless compatibility with more than 30 different Layer 1 and Layer 2 networks. As part of the collaboration, AltLayer plans to join Polyhedra AVS through re-staking to support Bitcoin zkBridge.

• Injective: Integrates AltLayer’s MACH for inEVM, making it possible to deploy and integrate smart contracts compiled to EVM bytecode in the Injective ecosystem while ensuring composability through WASM/EVM. AltLayer’s MACH will provide re-staking-based security in inEVM, benefiting applications running on inEVM.

• Brevis is a zero-knowledge coprocessor that allows smart contracts to read and utilize the full history of any chain and perform custom computations in a trustless manner. Using Brevis, developers can create a variety of data-driven functions. AltLayer’s re-staking rollups will be enhanced with the Brevis coprocessor. By providing the Brevis coprocessor, developers on AltLayer can reliably perform on-chain historical data computations and build data-driven decentralized applications that respond to dynamic data inputs.

• Sovereign SDK is an interoperable and scalable rollup package ecosystem that can run on any blockchain. Their SDK is an open source toolkit for creating zk and optimistic rollup packages. The Sovereign SDK is used by protocols such as Haun, 1kx, EigenLayer, and Celestia. In AltLayer, Sovereign is integrated to facilitate rollup package deployment within the Rollups-as-a-Service (RaaS) ecosystem.

• HyperLane simplifies the deployment of functional compatibility within their blockchain. With permissionless interoperability, users can deploy HyperLane anywhere, anytime. As a result, blockchain creators and developers can enjoy greater autonomy and quickly make their products available across chains. AltLayer has partnered with Hyperlane to provide permissionless compatibility within the AltLayer ecosystem. In addition to the built-in merge bridge, projects using the AltLayer technology stack can also leverage Hyperlane for deployment and communication across merged services.

• Celestia is a modular blockchain that is being used by AltLayer for Data Availability (DA) to address the challenges of data availability and reliable state verification. AltLayer is configured to support Celestia’s DA layer as one of the rollup package options created through the AltLayer merge dashboard, reducing the cost required for data availability. As part of the integration, AltLayer developers will extract chain data from Celestia, compress it, and upload it to the Celestia network. This will allow the state of the rollup to be fully reconstructed using Celestia data.

• Nebra: AltLayer has partnered with Nebra to integrate its advanced Universal Proof Aggregation (UPA) technology into its rollup solution. Nebra’s UPA is the first production-ready universal proof aggregation protocol, designed to achieve over 10x reduction in gas costs and composability for zero-knowledge proof verification.

• Orbiter Finance serves as a bridge between Ethereum and L2 rollups. Orbiter partners with AltLayer to address liquidity fragmentation on L2 through feature compatibility tools.

• Espresso Systems integrates into the AltLayer stack, adding Espresso Sequencer, a decentralized sequencer solution. Developers can choose whether to use AltLayer’s decentralized verification solution and/or Espresso Sequencer when deploying their rollup packages within the AltLayer stack. This partnership provides application developers with an easy way to launch a scalable and customizable L2 layer, while ensuring that future users of the merged package benefit from the properties provided by decentralized sequencers.

• Radius redefines the decentralization of rollup packages through MEV prevention, censorship resistance, and financial stability. Together with crypto-based ordering, this protects users from censorship and MEV risks. With the integration of Radius with AltLayer, developers will find the dual benefits of the user-friendly and efficient AltLayer platform for creating rollup packages, and the crypto-based ordering provided by Radius.

• Double jump.tokyo: A leading Japanese blockchain gaming and NFT startup, partnered to integrate AltLayer’s comprehensive technology stack into Oasys, a blockchain optimized for game development created by a group of developers (including Double jump.tokyo). Notably, AltLayer generally embraces web3 gaming narratives and caters to clients in this space. AltLayer offers two types of rollup packages for game developers: temporary and persistent. Temporary rollup packages are ideal for event-driven applications that experience rapid demand surges in a short period of time, such as mini-games or turn-based games. On the other hand, durable rollup packages are best suited for games with longer lifecycles. Notably, AltLayer's rollup package (flash layer) was previously used to host popular fully networked games such as Dark Forest, which attract hundreds of thousands of transactions per day. AltLayer positions Flash Layer as a solution suitable for games.

• Arbitrum Orbit is a permissionless solution recently announced by the Arbitrum Foundation that enables developers to create fully customizable Layer 3s secured by Arbitrum One. AltLayer has begun integrating support for Arbitrum Orbit and its technology stack on its no-code startup dashboard and will be ready in Q2 2023 as the first rollup package provider to support Arbitrum Orbit.

• Deri Protocol is a way to trade derivatives using DeFi: hedging, speculation, arbitrage, all on-chain. With Deri Protocol, trades are executed according to the AMM paradigm and positions are tokenized as NFTs for easy integration with other DeFi projects.

• Automata is a blockchain middleware provider backed by Binance Labs, Jump Crypto, and others. They recently launched a modular validation layer where validation happens entirely on-chain for off-protocol computations.

• Cometh is a French gaming studio. They have worked with high-profile clients such as the French National Lottery (FDJ), Lacoste, FanLive Rugby, and Life Beyond Studios for their Web3 needs.

5. Token Economics

The functionality of the AltLayer token includes the following aspects:

• Economic Security: ALT tokens will be used together with re-hypothecation assets to provide economic security. This security can be slashed if malicious behavior is detected.

• Governance: ALT token holders can vote on governance decisions.

• Protocol Incentives: Operators in the AltLayer ecosystem can earn ALT tokens as rewards for their services.

• Protocol Fees: Network participants will need to pay ALT tokens for services within the network.

In addition, AltLayer also provides token wrappers - reALT and stALT:

• reALT: stands for "Re-staked ALT Token", is an ERC20 interest accumulation token that records the holder's ALT stake and accumulates the rewards earned through compound interest. reALT tokens are issued to users who stake ALT in the main staking pool. It is a reward accumulation token that accumulates re-staking rewards.

• stALT: This is an ERC1155 token that represents the holder's stake in the main staking pool. stALT tokens can be manually converted to reALT through the portal.

6. Who is behind AltLayer?

The AltLayer team is mainly composed of Zilliqa's core team members and developers, most of whose experience can be traced back to 2017, indicating that they have a strong technical background. In addition, the team members enjoy a good reputation within the crypto industry.

• Yaoqi Jia (贾耀奇), CEO: In 2019, Yaoqi was selected as Forbes Asia's "30 Under 30". He received his PhD in Computer Science from the School of Computing at the National University of Singapore in 2017. Yaoqi led the design and creation of the first public blockchain platform with full sharding capabilities, including network, transaction, and smart contract sharding. He also launched the StraitsX stablecoin project for Southeast Asia in partnership with Xfers, and has been involved in blockchain projects with Mindshare, Singapore Exchange, Hg Exchange, and others. Prior to joining Zilliqa, Yaoqi worked at Parity Technologies.

• Amrit Kumar, COO: Amrit holds a Master's degree in Information Systems Security, Cryptography, and Coding. He received his PhD in Computer Science from Grenoble Alpes University, France, and worked at the Grenoble Informatics Laboratory (Inria). He co-founded and served as Chief Investment Officer of Zilliqa, and is currently the COO of Alt Research, a research firm associated with AltLayer.

• Tan Jun Hao, Head of Product Engineering: Former Zilliqa co-founder and core developer, Tan Jun Hao is very active in the Zilliqa community covering technical aspects and the DeFi ecosystem and its state. He has been involved in the computer security space since 2019 and holds a Bachelor’s degree in Computer Science from the National University of Singapore, with a focus on Information Security.

• Antonio Nunez, Head of Platform Development: Antonio holds a Bachelor’s degree in Physics and Computer Engineering from the Ateneo de Manila University, has extensive development experience in various languages ​​and tools since 2006, and is a former Zilliqa co-founder and senior engineer.

• Dorothy Liu, Head of Growth: Dorothy holds a Bachelor’s degree in International Business Management and a Master’s degree in Marketing. She previously worked as a Consultant at Deloitte and as a Vice President at OSL. With experience at renowned companies such as Synthetix and HashKey Trading, Dorothy has an excellent understanding of the inter-layered mechanics of blockchain.

• Aparna Narayanan, Head of Communications: Previously working in Public Affairs & Strategic Communications at APCO Worldwide, Aparna holds a Bachelor’s degree in Economics, Management, Political Science, and Public Policy. She entered the crypto space in 2019 and rose through the ranks from Community Manager to Head of Communications at Zilliqa.

7. Backers

AltLayer is primarily backed by backers from the Tier 1 category and individuals with a good reputation within the crypto industry: Polychain Capital, Breyer Capital, Jump, Binance Labs Fund, Hashkey Capital, Bankless Ventures, IOSG Ventures, Primitive Ventures, TRGC, Mask, OKX Ventures, DAO 5, as well as notable figures such as Circle co-founder Sean Nevile, Gavin Wood, a16z general partner Balaji Srinivasan, Synthetix’s Kain Warwick, Messari’s Ryan Selkis, Synthetix’s Jordan Momtazi, and Bodhi Ventures.

8. Conclusion

In the last cycle of the crypto industry, projects aimed to increase fragmentation, striving to dominate the market in the battle for liquidity and users. However, more and more people are now aware of the importance of cooperation. Each project has its advantages and disadvantages and focuses on specific user categories and developers. In recent years, there has been a clear trend of aggregation - dApps, different strategies, liquidity and modular blockchains.

AltLayer is a project in line with the current era, aiming to provide developers with the greatest convenience without spending a lot of resources, not only to launch their own network, but even to implement it from the SDK. In addition, AltLayer provides its own actual technical solution for launching rollups and provides the ability to use other technologies (including modular technologies), positioning its product as Rollup-as-a-Service.

In addition, AltLayer has successfully integrated with new technologies and incorporated them into its technology stack. This was demonstrated in the integration with EigenLayer - AltLayer quickly provided an AVS-based solution and seamlessly integrated its rollups product into it.