Breaking New Ground in RaaS, Will Gelato Experience a New Explosion?

TL;DR

1. Established in 2019, Gelato initially helps developers in creating automated, gasless smart contracts capable of off-chain sensing and computing. In September 2023, Gelato completed its transformation into a Rollup-as-a-Service (RaaS)RaaS platform. This narrative shift is expected to open new markets and growth opportunities.
2. Layer 2 maintains a rapid growth trend, especially in order to achieve expansion, customization and reduce value loss, more and more Dapps will turn to the construction of application chains. RaaS reduces development costs and provides professional consulting services, which will have high market demand. The RaaS platform will serve as a middleware distributor in the Web3 world, helping developers quickly complete infrastructure construction.
3. Gelato is not a pioneer in the RaaS field, but it is a team that has been developing Web3 infrastructure for more than four years. Gelato’s years of development results and resources will directly translate into competitiveness in the RaaS field: (1) native Web3 middleware service integration, (2) mature account abstraction solution integration; (3) rich third-party Web3 middleware distribution resources .
4. The RaaS track is currently relatively early, and it is difficult to identify leading projects from the technical characteristics and ecological data of the projects. It is necessary to continue to pay attention to changes in the competitiveness of projects within the track.
5. Considering the narrative and timing, Gelato emerges as a strategic investment opportunity in the present context: the Dencun upgrade is one of the market’s most focused events, and the launch of $ALT has started to garner ordinary users’ attention to the RaaS sector. The value of the RaaS sector is in the process of being gradually recognized.

1 Is Rollups-as-a-Service (RaaS) a track worthy of deployment?

Before delving into Gelato, it’s essential to first understand the significance and prospects of RaaS as a whole.

First of all, the demand for capacity expansion still exists, and capacity expansion is still a key technology to achieve Web3 Mass Adoption.Although the existing Layer 2 has initially solved the need for expansion, Dapps still have to compete for Blockspace, especially for Transaction-heavy use cases (especially gaming and socialfi).Significant increases in transaction fees and waiting times continue to impact user experience. During bull markets, when transaction volumes increase dramatically, the demand for scalability will further grow. In fact, the continuously growing TVL of L2s also reflects the market’s demand for scaling solutions since 2023.

Secondly, the demand for customization of blockchains is continuously increasing. Even Dapps that have thrived on existing chains will, under the demands for flexibility in the Data Availability (DA) layer, MEV, block generation time, scalability, customer acquisition, tokenomics, and ecosystem expansion, will shift towards building their own customizable application-specific rollups, especially when the Dapp’s requirements for composability are not high.

Thirdly, transitioning from Dapp to Appchain will not only secure additional revenue for the ecosystem by reducing the value loss of gas fees (which can be locked by the project party or returned to users), but also attract more Validators to stake tokens and increase liquidity within the ecosystem. This, in turn, will empower the original project tokens and significantly enhance the economic flywheel.

Among the various scaling solutions available, rollup will be one of the core choices. As the central scaling solution chosen by Ethereum, rollups have a certain orthodoxy. Currently, general-purpose rollups have been market-tested, and their technology is relatively mature. Their development frameworks can be directly utilized.

Currently, there is a growing demand for L2 due to the conversion of Dapps to Appchains. Appchains primarily focus on customizing the chain to meet the needs of Dapps and building an ecosystem to attract users and facilitate user migration. Therefore, if the application chain itself does not need to prioritize technological innovation of the public chain and instead focuses on its core business, it may be more efficient to outsource the development and maintenance process. This allows for a greater focus on the development of the core business. Additionally, Appchains require a professional technical team to provide consulting services for various Rollup frameworks, DA layers, and other solutions.

The core business model of the RaaS platform is to become the AWS and Google of the Web3 world, becoming a distributor of blockchain middleware and making profits from it. Therefore, the scale and quality of the middleware ecosystem that can be captured will become the primary competition of the RaaS platform. force. Additionally, as the operator of Rollup, the RaaS platform will also capture transaction fees and MEV income.

According to Messari’s classification, the RaaS ecosystem currently comprises three main types of projects: SDKs, Shared Sequencer Sets, and No-code Deployment. Gelato falls into the No-code Deployment category, providing a one-stop service for developers by integrating SDK frameworks and middleware services. Other projects in the same category include Lumoz, Altlayer, Caldera, Conduit, etc.

(Image source: Messari)

2 From smart contracts to Layer2: Gelato’s transformation into a RaaS platform

Founded in 2019, Gelato initially helped developers create smart contracts that are automated, gas-free and capable of off-chain computation, and is a leader in this field. In September 2023, Gelato completed its transformation into a RaaS platform, inheriting its technology in smart contract development and its advantages accumulated in the infrastructure ecology, and its competitiveness in this track cannot be underestimated.

Currently, Gelato is in the early stages of RaaS. Its initial L2 framework was based on Polygon CDK, and in December 2023, it officially announced support for OP Stack, with plans to adopt more frameworks in the future. In terms of the DA layer, it currently supports Ethereum, Celestia DA, Avail, and Eigen Layer DA.

There are currently two projects that have chosen Gelato as their RaaS service provider: Astar and Lisk. Astar is the first L2 on Gelato to use Polygon CDK. As of December 26, 2023, more than 3,000 smart contracts have been deployed on Astar zkEVM, more than 15,000 wallets have been created, and a total of more than 300M transactions have been completed. Lisk will be the first L2 released on Gelato using the OP Stack framework, focusing on the development of RWA and DePIN ecosystems.

In order to reduce the difficulty of development, Gelato launched the Deployment Platform in December 2023. Developers can directly choose the Rollup framework, data availability layer and middleware integration, and create a Rollup with a few clicks.

Why do we believe Gelato will be highly competitive in the RaaS sector, despite not being an early entrant?

Gelato has been deeply involved in Web3 infrastructure development for over four years. Gelato’s extensive development experience and ecosystem resources will directly empower its expansion into the RaaS business. Specifically, Gelato’s competitive edge is reflected in three aspects: (1) Integration of Gelato’s native Web3 middleware services, significantly enhancing the development experience for smart contracts on rollups; (2) Integration of comprehensive ecosystem; (3) Integration of native account abstraction solutions.

1 Native business integration: automation, no gas fees, off-chain sensing and VRF

Gelato was originally used as a decentralized development backend for Web3, aiming to optimize the development and use experience of smart contracts. Its core functions include 4: contract automation, gasless transactions implemented by Relay, off-chain data sensing and calculation, and VRF.

Contract automation:

One thing that users often overlook is that the smart contract function cannot be automatically triggered. Instead, an on-chain transaction needs to be sent by the EOA account to execute the contract function. DEX limit orders, automatic compounding, and loan settlement all require contract automation. Automate is the core function of Gelato, which eliminates the cost of manual operations or running bots by contract developers. Gelato as a marketplace brings together two parties: developers who want to automate transactions, and infrastructure operators who run bots to find tasks that need to be completed in exchange for a fee for the service.

There are three roles in Gelato’s network architecture, namely Event Listener, Checker and Executor. The Listener is responsible for monitoring events on the chain. When the trigger condition is found to be met, the user logic is submitted to the Checker. The Checker checks whether the automated task can be executed at a given moment based on the logic. When the trigger condition is deemed to have been correctly met, the Checker submits the transaction to the Executor. Executor is a network of infrastructure operators, responsible for the final execution of on-chain transactions, also known as Bot or Keeper.

Relayer and gasless transactions:

In standard on-chain transactions, users are required to deposit native tokens into their EOA (Externally Owned Account) wallets to cover gas fees, a step that often hinders the onboarding of new users. With Gelato relay, however, users can initiate transactions simply by signing a message allows users to have their transaction costs covered by developers, or alternatively, users can opt to pay gas fees with any ERC20 token. Additionally, Gelato relay have a more flexible payment system; 1balance enabling users to manage and settle all their costs across various networks from a single, convenient balance.

Off-chain data sensing and computing:

Gelato upgrades Automate to Web3 Functions. This upgrade will break through the limitation that smart contracts cannot connect to off-chain data, allowing developers to calculate and execute on-chain transactions based on any off-chain data. Functions written in Typescript, stored on IPFS and run by Gelato, enable seamless integration with off-chain data, enhanced computing power (avoiding complex calculations consuming large amounts of gas on-chain), and customizable logic execution.

VRF (Verifiable Random Number Generation):

The VRF function is widely used in games, NFT generation, random election Validators and other fields. The key is that the entity operating this function can generate random numbers and prove its randomness and correctness. The generated random numbers are required to have no preference and Unpredictable, others can prove that the randomness-generating process is not evil.

The core component of Gelato VRF is Drand. The Drand network consists of a group of decentralized nodes that reach a consensus on the threshold parameter before generating the random number. Each node creates a signature and broadcasts it across the network. Once the threshold parameter is reached, the final node creates the final BLS signature, which can be verified by the entire network for its authenticity. The random number is then the hash value of this signature.

Gelato possesses a strong competitive edge in its native services. Gelato’s Functions support up to 15 blockchain networks. According to the 2023 H1 Product Roadmap Roundup, over 400 applications have integrated Gelato, and more than 5.5 million transactions have been executed using Gelato. The data is still improving rapidly, with over 450 integrations and more than 6.4 million transactions executed at the end of 2023. Notably, leading projects such as MakerDAO, Gnosis Pay, and Pancake Swap have integrated its services. Chainlink is the only direct competitor in this field.

2 Integration of mature account abstraction solutions

Based on the Relay service, Gelato developed Relay Kit and worked with Safe to create an account abstraction SDK. Safe’s account abstraction consists of multiple Kits, of which the core kit is developed by itself and some kits use third-party solutions. The Relay Kit provided by Gelato implements the function of Payment Abstraction, that is, users can directly use native tokens or ERC-20 tokens to pay transaction fees on Ethereum, not just ETH.

Account abstraction can be divided into two key steps: Signature Abstraction and Payment Abstraction. The former enables various contract accounts to use different signature verification schemes (such as EOA’s single private key signature, multi-signature aggregation, etc.), while the latter mainly provides options for paying gas fees with customized tokens or third-party payments. We know that Layer 2 public chains such as zkSync and StarkNet have developed native account abstraction solutions. Compared with directly using the AA solution in the SDK, what are the advantages of the account abstraction provided by Gelato?

In short, the current ZK-Rollup basically implements the Signature Abstraction process well, but the Payment Abstraction has not yet been developed maturely. Gelato uses its own Relay and 1Balance services, and has verified its ability to complete flexible payments and Gasless transactions. It has a relatively mature solution for completing Payment Abstraction. Payment Abstraction is also the most direct way to improve user experience (UX) , and Gelato and The AA SDK integrated with Safe can also be used directly to achieve social account login and wordless memory experience.

3 Rich Web3 middleware distribution resources

In the analysis of the RaaS track pattern, we mentioned that middleware distribution resources will be one of the core competitiveness of the RaaS platform. Although the general-purpose Layer2 provides an SDK, the development of a chain also requires the development of a series of functions such as block explorers, Indexers, oracles, and cross-chain bridges. Gelato has accumulated a large number of infrastructure and middleware partnerships in its four-year development business, and can be used directly as a development tool, providing an out-of-the-box kit for one-click chaining. Currently, the Gelato RaaS Marketplace provides 27 middleware integration services, but it is worth noting that Gelato has integrated more than 400 applications in the Web3 Function business. These customers will be quickly converted into distribution resources, greatly promoting the development of the Gelato RaaS ecosystem.

3 Competitive landscape: RaaS is still in the early stage

Projects within the same No-code Deployment category include Conduit, Altlayer, Caldera, and Lumoz. Basic information about each project can be found in the following table.

In terms of ecosystem expansion, only a few projects used RaaS services for launching their chains. Many first movers in the RaaS track do not have relatively ideal data. It is currently difficult for us to measure the competitiveness of projects based on the number of chains issued.

Looking at middleware resources, Gelato RaaS Marketplace doesn’t hold a numerical advantage in integrations. However, Gelato’s ecosystem of over 400 applications could serve as a reserve pool for the marketplace. It’s essential to closely monitor the growth in Gelato’s integration to evaluate its changing competitiveness in the RaaS sector.

Overall, the RaaS track is still in a very early stage, and many projects are still in the test network stage. It is difficult to judge the leading project from the existing data. Altlayer has just been launched on Binance Launchpad recently. Currently, only Altlayer and Gelato issue tokens in the RaaS track, which are the only secondary market targets for RaaS. Judging from the valuation comparison between the two, Altlayer’s current market value is $451,466,031 and its FDV is $4,104,236,647. Gelato’s market value is $167,412,873 and its FDV is $287,476,805. Regardless of market value or FDV, Gelato’s valuation is more cost-effective.

4 Flywheel of Gelato: Tokenomics

GEL is the native token of Gelato. Currently, token economics is still focused on the Automate business and has not yet been empowered for the RaaS business.

The bot operator responsible for running Automate can only participate in the network by staking GEL. The revenue comes from two sources: 1) transaction fees charged on top of each transaction and 2) market opportunities that can be taken advantage of by back running transactions. Malicious behavior by bots could lead to slashing.

In July 2023, Gelato updated its tokenomics and task allocation mechanisms to accelerate the Gelato flywheel. After the update, bots still need to stake $GEL to join the network. To become a node, a minimum of 150k $GEL must be staked, with a three-month unstaking period. Gelato has adjusted its parallel task allocation algorithm. Gelato assigns tasks to Node Operators based on the amount of $GEL they stake, encouraging Node Operators to continually stake more $GEL, therefore further stimulating the staking flywheel.

Gelato’s tokenomics could potentially integrate with its RaaS business in the future, which requires more observation.

5 Conclusion: Gelato is in the early stages of value discovery

Gelato’s expansion into RaaS will create a more impactful presence in the narrative space. This shift, from back-end development services that are not directly visible to users, to a more market-visible RaaS platform, will open up new opportunities for growth for Gelato. From a technical perspective, Gelato’s native automation, account abstraction, and other services will empower the development of Layer 2 (L2), providing a more convenient experience for L2 developers and users. Additionally, automating tasks and abstracting accounts will optimize costs by reducing complex on-chain operations and lowering gas costs. Therefore, the transition to L2 also presents new possibilities for Gelato’s native services. With the accumulated customer resources from its middleware business over the years, Gelato can swiftly leverage these resources to empower L2 development. This transformation enables a mutually beneficial relationship between the two major businesses.

Judging from the token’s performance, Gelato’s announcement of its transformation into a RaaS (Robot-as-a-Service) platform in September last year did not have a significant impact on the token price. It was only in the past month that the market gradually began to discover Gelato’s RaaS transformation, resulting in the price starting at $0.3 and experiencing a significant increase. This increase can mainly be attributed to the hype surrounding the Cancun upgrade and the popularity brought by ALT listing on Binance in the RaaS track. The RaaS track has always lacked secondary hype targets, which is why it has not received enough market attention. However, with the Cancun upgrade and the launch of ALT, ordinary users are starting to pay attention to the RaaS track, and its value is being slowly discovered. Currently, there are not many secondary targets in the RaaS track. The hype funds for this track are mainly focused on ALT and GEL tokens. Gelato has a long development time, solid fundamentals, and abundant ecological resources. Its current market value is still relatively underestimated, making this a crucial period for its growth. However, it’s important to note that Gelato does not currently hold the leading position in the RaaS track, so it’s necessary to continue monitoring its competitiveness in the future.

Subsequent efforts for this project will involve adopting RaaS (Robot-as-a-Service) services, listing tokens, and potentially making changes to token economics. Currently, the project holds a prominent position in the field of automated services. If it can secure a leading position in the RaaS market, it will further validate its significant growth potential.

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