Web3 infra, Crpyto Gaming, Metaverse Researcher; Ex. JPM TMT IB banker @ HK; MIT MFin Class '20
Web3 infra, Crpyto Gaming, Metaverse Researcher; Ex. JPM TMT IB banker @ HK; MIT MFin Class '20
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Project Overview
Eclipse offers a customizable, modular architecture that provides scalability and interoperability for decentralized applications (dApps), enabling a no-code and more adaptable development experience. It serves as both a settlement layer and a hub for rollups, providing a high degree of flexibility and compatibility with multiple layer-1 blockchains, offering flexibility and adaptability in virtual machines and data availability layers, coupled with IBC-enabled composability, can tailor towards different needs of dApps and making it an adjustable architecture that is ideal for high-throughput dApps. Eclipse aims to transform the deployment of layer 3 networks and become a universal layer 2 for modular ecosystem.
Investment Thesis
Market Potential for Modular Rollups-a- a-Service (RaaS): Investing in the RaaS vertical presents an opportunity to capture value in the growing demand for scalable and customizable execution environments. Eclipse's modular architecture enables projects to make trade-offs and create tailored solutions, addressing the needs of developers seeking flexibility and autonomy. As more decentralized applications migrate to their own blockchains, Eclipse's role as a settlement layer and rollup provider tailored to developers’ need positions it to capture value in this evolving market.
Product-Market-Fit: Eclipse stands out as the go-to choice for RaaS solutions due to its versatile infrastructure layer and support for computationally intensive and high frequency tasks. The platform's compatibility with various data availability layers and adaptability for execution environments (Ethereum, Solana, Move, ZK and OP rollups), as well as deep customer know-how enhance its value proposition. Eclipse offers the speed, flexibility, and composability necessary for developers building high-throughput Web3 applications while maintaining shared security, such as gaming and decentralized finance (DeFi) projects, enabling new use cases and driving traffic to the network.
Eclipse offers a highly customizable and adaptable development experience, enabling developers to choose their preferred virtual machine, settlement layer, and data availability layer for their dApps.
Eclipse offers a highly customizable and adaptable development experience, enabling developers to choose their preferred virtual machine, settlement layer, and data availability layer for their dApps.
Project Overview
Eclipse offers a customizable, modular architecture that provides scalability and interoperability for decentralized applications (dApps), enabling a no-code and more adaptable development experience. It serves as both a settlement layer and a hub for rollups, providing a high degree of flexibility and compatibility with multiple layer-1 blockchains, offering flexibility and adaptability in virtual machines and data availability layers, coupled with IBC-enabled composability, can tailor towards different needs of dApps and making it an adjustable architecture that is ideal for high-throughput dApps. Eclipse aims to transform the deployment of layer 3 networks and become a universal layer 2 for modular ecosystem.
Investment Thesis
Market Potential for Modular Rollups-a- a-Service (RaaS): Investing in the RaaS vertical presents an opportunity to capture value in the growing demand for scalable and customizable execution environments. Eclipse's modular architecture enables projects to make trade-offs and create tailored solutions, addressing the needs of developers seeking flexibility and autonomy. As more decentralized applications migrate to their own blockchains, Eclipse's role as a settlement layer and rollup provider tailored to developers’ need positions it to capture value in this evolving market.
Product-Market-Fit: Eclipse stands out as the go-to choice for RaaS solutions due to its versatile infrastructure layer and support for computationally intensive and high frequency tasks. The platform's compatibility with various data availability layers and adaptability for execution environments (Ethereum, Solana, Move, ZK and OP rollups), as well as deep customer know-how enhance its value proposition. Eclipse offers the speed, flexibility, and composability necessary for developers building high-throughput Web3 applications while maintaining shared security, such as gaming and decentralized finance (DeFi) projects, enabling new use cases and driving traffic to the network.
Eclipse offers a highly customizable and adaptable development experience, enabling developers to choose their preferred virtual machine, settlement layer, and data availability layer for their dApps.
Eclipse offers a highly customizable and adaptable development experience, enabling developers to choose their preferred virtual machine, settlement layer, and data availability layer for their dApps.
Proactive Use Cases and Partnerships: By collaborating with top projects in the ecosystem, including Solona, Polygon, Celestia, EigenLayer, and RISC Zero (ZKEVM), Eclipse expands its network effect and drives adoption. The integration with Cosmos infrastructure enables interoperability within the Eclipse network and wider Cosmos ecosystem. This positions Eclipse as a prominent settlement layer for application-specific rollups and contributes to its potential as a universal layer 2 solution.
Investment Risks and Mitigants
Adoption Risk: There may be limited market appetite for RaaS from a settlement layer as dApps can go to generic large scale rollups with scalability and cost efficiency. However, Eclipse's customizable and versatile architecture, combined with its partnerships and proactive developers support, mitigate this risk by offering tailored solutions and addressing specific needs.
Technology Risk: If ZK technology or optimizations of Optimistic rollups improve to the point where they can charge negligible fees, the need for a settlement layer may diminish. Eclipse can mitigate this risk by staying at the forefront of technological advancements, adapting its offerings accordingly, and leveraging its modular architecture to integrate emerging technologies (already collaborating with ZKEVM integrations)
Competition Risk: Developers could choose other RaaS providers with similar product offering but cheaper pricing. To mitigate this risk, Eclipse should focus on establishing deeper verticals know-how for gaming, DeFi, and other dApps to accommodate their needs, with continuous technological innovation, strong partnerships, and providing competitive pricing models to retain developers.
Conclusion
Eclipse's customizable rollup solutions, combined with its role as a settlement layer and strong partnerships, position it as a promising investment opportunity within the RaaS vertical. The company's focus on proactive use cases with deep end user know-how, and adaptive modular architecture provides a competitive advantage in capturing value in the evolving blockchain ecosystem. While there are inherent investment risks, the mitigants, along with continued technological innovation and security measures, enhance the potential for long-term success.
Future DD Area and Question Lists
Market and Competition:
· What is the current demand for Rollups-as-a-Service (RaaS) solutions in the market, and please kindly provide data or projections on the potential market size and growth for RaaS?
· How does Eclipse differentiate itself from competitors in terms of target market segments and use cases? What’s the key attributes of out wining the fragmented market?
Product Strength and Technical Infrastructure:
· What is the roadmap for ongoing product development and improvement? Are there any upcoming milestones or planned updates?
· Is the technology open-source or proprietary? How secure is the infrastructure, and have there been any audits or security assessments conducted?
· What is the transaction throughput and latency of the 10 testnets?
User Traction and Go-to-Market Strategy:
· Apart from the 10 testnets launched with partners, how many dApps or projects expressed interest?
· What is the go-to-market strategy and ways to retain developers on the platform? Are there any incentives or benefits for developers to build on Eclipse?
· How does Eclipse plan to address the network effect and grow adoption?
· Are there any undisclosed strategic partnerships in place to accelerate market penetration?
· What are the most active communication channels for users and investors to stay updated? How engaged and supportive is the community around Eclipse? How responsive is the team to community inquiries or feedback?
Financials and Revenue Drivers:
· Please give breakdowns of current revenue streams and key drivers for each
· Please discuss pipelines of clients and pricing structure including associated fees (if any)
· Please share anonymous contract with projects and partners regarding contract term, fees, revenue split, IP rights and etc.
Governance and Tokenomics:
· Is there a token plan and tokenomics whitepaper available?
· What is the utility of the native token within the Eclipse ecosystem? How does the token align incentives and drive value within the platform?
· What is the token distribution & allocation and any vesting schedules for team and early investors?
· How is governance structured within Eclipse's ecosystem? Are there mechanisms for community participation and decision-making?
Regulatory Compliance and security:
· What is the project's approach to regulatory compliance? What are the regulatory considerations and compliance measures that Eclipse has implemented?
· Are there any legal or regulatory risks associated with Eclipse? Has the project sought legal counsel or engaged with regulators to ensure compliance?
· Are there any legal or regulatory risks associated with the use of Eclipse's RaaS solution?
Valuation Framework
I suggest using a SOTP valuation method to value Eclipse as its business model is a combination of 2B SaaS-like service and a L2 blockchain.
For 2B business, we can adopt a P/S multiple referring to SaaS and Cloud companies. Topline is forecasted using both top-down and bottom-up methods:
Top-down: Forecast total # of dApps and growth rate of dApps, apply Eclipse penetration in respective verticals of Gaming, DeFi and others, multiply by ARR (Annual Recurring Revenue) or a take rate on total transaction volume. IBC fees can be calculated as % of total transaction volume.
Bottom-up: Due Diligence on contract pipeline and forecasting contract by contract.
L2 Blockchain valuation can be challenging using traditional methods, as the source of value extends beyond transaction fees. Hence we can adopt a P/S ratio of listed blockchain token, applying a premium or discount taking into considerations below:
Network Effects and Adoption: As more developers build on the platform, the network becomes more valuable and attracts a larger user base. The size and activity within the ecosystem can be indicative of the project's value.
Tokenomics: Analyze the tokenomics of Eclipse, including its token supply, distribution, inflation rate, and potential token burning mechanisms. The scarcity or abundance of tokens and how they are designed to align incentives can influence the token's value. The token utility may have various use cases within the ecosystem, such as transaction fees, staking, governance, or access to specific features. Assessing the token's utility and its potential demand in the market can provide insights into its value.
Interoperability and Partnerships: Eclipse's interoperability with other blockchains and partnerships with key projects can enhance its value. The ability to connect and transact with different ecosystems expands its reach and potential user base. Evaluating the quality and impact of these partnerships can contribute to the valuation.
The key is to evaluate the key drivers of demand for the Eclipse native token, and its potential share in the Rollup (L2) ecosystem.
In addition to traditional metrics like P/E and P/S ratios to evaluate the network's actual revenue, we can also focus on developer activity (as tracked by Electric Capital and Geometry by Aztec), Network Value to Transaction ratio, daily active users, and other factors such as issuance ratio and rate. The Monetary Equation of Exchange (M=PQ/V) is also relevant.
Proactive Use Cases and Partnerships: By collaborating with top projects in the ecosystem, including Solona, Polygon, Celestia, EigenLayer, and RISC Zero (ZKEVM), Eclipse expands its network effect and drives adoption. The integration with Cosmos infrastructure enables interoperability within the Eclipse network and wider Cosmos ecosystem. This positions Eclipse as a prominent settlement layer for application-specific rollups and contributes to its potential as a universal layer 2 solution.
Investment Risks and Mitigants
Adoption Risk: There may be limited market appetite for RaaS from a settlement layer as dApps can go to generic large scale rollups with scalability and cost efficiency. However, Eclipse's customizable and versatile architecture, combined with its partnerships and proactive developers support, mitigate this risk by offering tailored solutions and addressing specific needs.
Technology Risk: If ZK technology or optimizations of Optimistic rollups improve to the point where they can charge negligible fees, the need for a settlement layer may diminish. Eclipse can mitigate this risk by staying at the forefront of technological advancements, adapting its offerings accordingly, and leveraging its modular architecture to integrate emerging technologies (already collaborating with ZKEVM integrations)
Competition Risk: Developers could choose other RaaS providers with similar product offering but cheaper pricing. To mitigate this risk, Eclipse should focus on establishing deeper verticals know-how for gaming, DeFi, and other dApps to accommodate their needs, with continuous technological innovation, strong partnerships, and providing competitive pricing models to retain developers.
Conclusion
Eclipse's customizable rollup solutions, combined with its role as a settlement layer and strong partnerships, position it as a promising investment opportunity within the RaaS vertical. The company's focus on proactive use cases with deep end user know-how, and adaptive modular architecture provides a competitive advantage in capturing value in the evolving blockchain ecosystem. While there are inherent investment risks, the mitigants, along with continued technological innovation and security measures, enhance the potential for long-term success.
Future DD Area and Question Lists
Market and Competition:
· What is the current demand for Rollups-as-a-Service (RaaS) solutions in the market, and please kindly provide data or projections on the potential market size and growth for RaaS?
· How does Eclipse differentiate itself from competitors in terms of target market segments and use cases? What’s the key attributes of out wining the fragmented market?
Product Strength and Technical Infrastructure:
· What is the roadmap for ongoing product development and improvement? Are there any upcoming milestones or planned updates?
· Is the technology open-source or proprietary? How secure is the infrastructure, and have there been any audits or security assessments conducted?
· What is the transaction throughput and latency of the 10 testnets?
User Traction and Go-to-Market Strategy:
· Apart from the 10 testnets launched with partners, how many dApps or projects expressed interest?
· What is the go-to-market strategy and ways to retain developers on the platform? Are there any incentives or benefits for developers to build on Eclipse?
· How does Eclipse plan to address the network effect and grow adoption?
· Are there any undisclosed strategic partnerships in place to accelerate market penetration?
· What are the most active communication channels for users and investors to stay updated? How engaged and supportive is the community around Eclipse? How responsive is the team to community inquiries or feedback?
Financials and Revenue Drivers:
· Please give breakdowns of current revenue streams and key drivers for each
· Please discuss pipelines of clients and pricing structure including associated fees (if any)
· Please share anonymous contract with projects and partners regarding contract term, fees, revenue split, IP rights and etc.
Governance and Tokenomics:
· Is there a token plan and tokenomics whitepaper available?
· What is the utility of the native token within the Eclipse ecosystem? How does the token align incentives and drive value within the platform?
· What is the token distribution & allocation and any vesting schedules for team and early investors?
· How is governance structured within Eclipse's ecosystem? Are there mechanisms for community participation and decision-making?
Regulatory Compliance and security:
· What is the project's approach to regulatory compliance? What are the regulatory considerations and compliance measures that Eclipse has implemented?
· Are there any legal or regulatory risks associated with Eclipse? Has the project sought legal counsel or engaged with regulators to ensure compliance?
· Are there any legal or regulatory risks associated with the use of Eclipse's RaaS solution?
Valuation Framework
I suggest using a SOTP valuation method to value Eclipse as its business model is a combination of 2B SaaS-like service and a L2 blockchain.
For 2B business, we can adopt a P/S multiple referring to SaaS and Cloud companies. Topline is forecasted using both top-down and bottom-up methods:
Top-down: Forecast total # of dApps and growth rate of dApps, apply Eclipse penetration in respective verticals of Gaming, DeFi and others, multiply by ARR (Annual Recurring Revenue) or a take rate on total transaction volume. IBC fees can be calculated as % of total transaction volume.
Bottom-up: Due Diligence on contract pipeline and forecasting contract by contract.
L2 Blockchain valuation can be challenging using traditional methods, as the source of value extends beyond transaction fees. Hence we can adopt a P/S ratio of listed blockchain token, applying a premium or discount taking into considerations below:
Network Effects and Adoption: As more developers build on the platform, the network becomes more valuable and attracts a larger user base. The size and activity within the ecosystem can be indicative of the project's value.
Tokenomics: Analyze the tokenomics of Eclipse, including its token supply, distribution, inflation rate, and potential token burning mechanisms. The scarcity or abundance of tokens and how they are designed to align incentives can influence the token's value. The token utility may have various use cases within the ecosystem, such as transaction fees, staking, governance, or access to specific features. Assessing the token's utility and its potential demand in the market can provide insights into its value.
Interoperability and Partnerships: Eclipse's interoperability with other blockchains and partnerships with key projects can enhance its value. The ability to connect and transact with different ecosystems expands its reach and potential user base. Evaluating the quality and impact of these partnerships can contribute to the valuation.
The key is to evaluate the key drivers of demand for the Eclipse native token, and its potential share in the Rollup (L2) ecosystem.
In addition to traditional metrics like P/E and P/S ratios to evaluate the network's actual revenue, we can also focus on developer activity (as tracked by Electric Capital and Geometry by Aztec), Network Value to Transaction ratio, daily active users, and other factors such as issuance ratio and rate. The Monetary Equation of Exchange (M=PQ/V) is also relevant.
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