Uniswap Launches Unichain, What Does It Mean for Ethereum?

As we all know, the emergence of L2 solutions enables smaller independent blockchains to take advantage of the deep liquidity on the Ethereum chain. Moreover, for DeFi, L2 also provides a way to optimize the user experience - this is the direction that Uniswap, the DEX with the largest trading volume, is currently betting on.

Uniswap launches native L2

On October 10, Uniswap announced plans to build L2 on Ethereum. The solution is built using Optimisms OP Stack and is called Unichain. It aims to address the limitations currently faced by DeFi, namely cost, speed, and interoperability, unlocking new markets and use cases with faster, cheaper transactions and better cross-chain liquidity.

Hayden Adams, CEO of Uniswap Labs, believes that “after years of building and expanding DeFi products, we have seen where blockchain needs to improve and what is needed to continue to advance the Ethereum roadmap. Unichain will provide the speed and cost savings that L2 has achieved, better cross-chain liquidity, and more decentralization.”

Unichain Features and Benefits

Among the many L2 solutions, Unichain attempts to improve its competitiveness in three key areas: cost, speed, and interoperability.

It is officially expected that transaction costs will be 95% cheaper than Ethereum after Unichain is launched, and costs will decrease over time. Although cheap transaction costs are not new to Ethereum L2, Uniswap claims that it will achieve this low cost while maintaining decentralization, while most other L2s have not yet achieved decentralization.

Uniswap said it will achieve this goal through its upcoming decentralized validation network, allowing full nodes to help validate blocks by staking UNI, which will help further decentralize the blockchain. UNI stakers will act as a second layer of security on the Unichain platform, strengthening the security of the network and making it less vulnerable to attacks and manipulation. The addition of new validators also improves the resilience of the network, ensuring that the network can support greater transaction demand without compromising security.

At the same time, Unichain will provide users with near-instant transactions with a block time of 1 second, which will eventually be shortened to 0.2-0.25 seconds. In comparison, Ethereum has a block time of 12 seconds, and most L2s have a block time of 2 seconds. This speed not only improves the user experience, but also plays a vital role in improving market efficiency.

Unichain’s shorter block times will reduce the value loss caused by MEV (MEV is a form of attack that allows block builders to front-run legitimate users by front-running transactions). With Unichain’s fast transaction times, opportunities for arbitrage and MEV are reduced, allowing users to get better value from transactions.

In addition, Unichain has significantly reduced transaction times by utilizing a block builder developed in collaboration with Ethereum development team Flashbots. At the core of the block builder is a trusted execution environment (TEE), a feature that increases the transparency and speed of transaction sequencing and prevents transaction failures.

Unichain promises to provide a seamless cross-chain exchange experience for transactions on Superchain (Optimistic rollups multi-chain network) by leveraging Optimisms native interoperability. This is critical to the future of DeFi, as users and protocols increasingly demand smooth and convenient access to various blockchains. Currently, Optimistic rollups L2 includes the Optimism mainnet, Base network, Blast, Celo, etc., all of which are potentially able to achieve seamless cross-chain in the future.

For chains outside of Superchain, Unichain is working to improve the way different blockchains communicate with each other. Through initiatives such as ERC-7683, the cross-chain transaction execution standard developed by Uniswap and Across Protocol, which is used to enhance cross-chain transactions, the goal is to make transactions between any chains a breeze.

Unichain is modular in design, which means new features can be added to make it more decentralized and user-friendly. And it is open source, so other chains can also join and use its technology. Uniswap Labs will also continue to contribute to the expansion of Ethereum, ensuring that DeFi brings a better experience for everyone.

What does Vitalik think of Unichain?

At present, Vitalik has not expressed his views on Unichain, but many community members are curious about the attitude of Ethereum co-founder Vitalik Buterin towards the launch of Unichain. So, someone searched for clues on X and finally dug up an old post by Vitalik in September 2022, in which he commented on some of Uniswaps ideas at the time.

Vitalik believes that Uniswap’s value proposition is the convenience of trading, so it does not make sense to deploy rollups on DEX. He also said that if Uniswap is deployed on each rollup, it will be able to develop better.

Of course, this only represents some of Vitalik’s past thoughts, and based on his comments on L2 last month, he believes that L2’s low transaction fees are an important milestone for the entire Ethereum ecosystem because it solves the main challenges to mainstream adoption.

In fact, Uniswap has continued to expand since its launch and has been deployed on multiple protocols, including Ethereum, Base, and Binance Smart Chain, but ultimately chose to launch its native L2, Unichain. It is worth noting that the launch of Ethereum L2 solutions has become a common phenomenon in the crypto space. Most of these projects focus on addressing Ethereums scalability challenges.

According to L2 Beat data, there are currently 105 L2 protocols trying to solve Ethereums scalability problem. Currently, among these L2 protocols, Arbitrum, Base, and Optimisms OP Mainnet rank in the top three in terms of TVL, which are $13 billion, $7.2 billion, and $5.8 billion, respectively.

At the same time, Vitalik is also looking for more ways to improve the functionality of Ethereum. He also recently shared his new vision for the ecosystem, the core of which is to enhance the alignment of Ethereum. [Note: Generally, the concept of alignment includes value alignment (e.g., open source, minimal centralization, support for public goods), technical alignment (e.g., cooperation with ecosystem-wide standards), and economic alignment (e.g., using ETH as a token where possible). 】

In the Ethereum ecosystem, the balance is the most important governance challenge, integrating decentralization and cooperation. The strength of this ecosystem is that there are a wide range of individuals and organizations (client teams, researchers, second-layer network teams, application developers, local community groups), all working towards their own vision of what Ethereum can become. The main challenge is to ensure that all projects work together to build one Ethereum ecosystem, rather than 138 incompatible territories.

How does Unichain affect Ethereum?

Since Uniswap generates the highest revenue for Ethereum and has one of the largest user bases on the Ethereum L1 chain, some crypto community commentators believe that Uniswap’s launch of a native L2 chain could affect the Ethereum mainnet. Once Uniswap moves to its own chain, it will be able to capture transaction fees and MEV fees. Although the exact share of business that will be transferred from Ethereum to the new blockchain remains to be seen, both sources of revenue are certainly substantial.

However, this could lead to a decline in the relevant network activity of Ethereum L1, which in turn affects the rate of ETH destruction. More and more protocols moving away from Ethereums L1 may continue to weaken the narrative of ETH as a super sound money (an asset that is deflationary by default after EIP-1559 is activated).

Ethereum’s growth catalysts: innovation, users, big tech, dApps

While the launch of Unichain has sparked skepticism about Ethereum’s narrative, community supporters say it still has powerful catalysts and that Ethereum as a technology and ecosystem will only get bigger with time.

First, the rise of restaking infrastructure such as Eigenlayer has brought a lot of innovation to Ethereum technology: data availability layer, on-chain oracles, trustless bridges, etc. The next generation of L2 solutions will push Ethereums throughput to over 100,000 TPS and enable seamless interoperability with competing ecosystems outside of EVM.

Second, participation from top asset managers (Blackrock) and Web2 technology giants (Sony, Samsung) using Ethereum solutions will only increase over time.

Finally, L2 is actually bringing retail customers to Ethereum, especially with the low on-chain transaction fees. The same is true for mainstream dApps, such as Polymarket or Farcaster, which have finally found product-market fit and are meeting real-world needs of Internet users.

summary

Although the launch of Unichain may have some impact on Ethereum L1 transaction fees and challenge some of Ethereums fundamental functions to a certain extent, by redirecting fees and network activity, Uniswaps move may trigger a broader migration trend, reshape the competitive situation in the cryptocurrency market, and encourage Ethereum and other blockchains to innovate and remain competitive.

At the same time, as the decentralized exchange with the largest trading volume, Unichain will expand the DeFi and Ethereum ecosystem by optimizing transaction speed, reducing costs and improving user experience, increase user participation in DeFi, promote large-scale adoption, and benefit multiple blockchains including Ethereum.

In essence, Unichain and other L2s are not in direct competition with Ethereum. Instead, they work together to create scenarios that are more suitable for large-scale adoption and tap into Ethereums real growth points, namely technological innovation, user growth, widespread participation of technology giants, and the explosion of Dapp applications.