Uniswap Launches L2 (Unichain), What Does It Mean for Ethereum?

On October 10, Uniswap announced its plan to establish an L2 on Ethereum, using Optimism's OP Stack to build a solution called Unichain, aiming to address the current limitations of DeFi, namely cost, speed, and interoperability, to unlock new markets and use cases with faster, cheaper transactions and better cross-chain liquidity.

Author: Ebunker

As is well known, the emergence of L2 solutions allows smaller independent blockchains to leverage the deep liquidity of the Ethereum mainnet, and for DeFi, L2 also provides a way to optimize the user experience - this is the direction that the largest DEX Uniswap is currently betting on.

Uniswap Launches Native L2

On October 10, Uniswap announced its plan to establish an L2 on Ethereum, using Optimism's OP Stack to build a solution called Unichain, aiming to address the current limitations of DeFi, namely cost, speed, and interoperability, to unlock 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 scaling DeFi products, we have seen where blockchains need improvement and the conditions required to continue advancing the Ethereum roadmap. Unichain will provide the speed and cost savings of L2, better cross-chain access to liquidity, and achieve greater decentralization."

Features and Advantages of Unichain

Among the many L2 solutions, Unichain aims to improve competitiveness in the three key areas of cost, speed, and interoperability.

According to official estimates, after the launch of Unichain, transaction costs will be 95% cheaper than Ethereum, and costs will continue to decrease over time. While cheap transaction costs are not new for Ethereum L2s, Uniswap claims it will achieve this low cost while maintaining decentralization, which most other L2s have not yet achieved.

Uniswap states that it will achieve this goal through the upcoming decentralized verification network, allowing full nodes to help verify blocks by staking UNI, further decentralizing the blockchain. UNI stakers will act as a second layer of security for the Unichain platform, strengthening the network's security and making it less vulnerable to attacks and manipulation. The addition of new validators will also increase the network's resilience, ensuring it can support larger transaction demands 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 reduced 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 crucial role in enhancing market efficiency.

Unichain's short block time will reduce the value loss caused by MEV (Miner Extractable Value, a form of attack that allows block builders to front-run normal users' transactions). With Unichain's fast transaction times, the opportunities for arbitrage and MEV are reduced, allowing users to get better value from their transactions.

Furthermore, Unichain significantly shortens transaction times by leveraging the block builder developed in collaboration with the Ethereum development team Flashbots. The core of the block builder is the Trusted Execution Environment (TEE), which can improve the transparency and speed of transaction ordering and prevent transaction failures.

Unichain promises seamless cross-chain swap experiences for Superchain (the multi-chain network of Optimistic rollups) transactions by leveraging Optimism's native interoperability. This is crucial for the future of DeFi, as users and protocols increasingly demand the ability to access different blockchains smoothly and conveniently. Currently, Optimistic rollup L2s include Optimism mainnet, Base network, Blast, Celo, and others, all of which are potential future candidates for seamless cross-chain interoperability.

For chains outside of Superchain, Unichain is working to improve the way different blockchains communicate. Through initiatives like ERC-7683, the cross-chain transaction execution standard developed by Uniswap and Across protocols, the goal is to make transactions between any chains effortless.

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

How does Vitalik view Unichain?

Currently, Vitalik has not commented on Unichain, but many community members are curious about Ethereum co-founder Vitalik Buterin's stance on the launch of Unichain. Some have searched X and found an old post from Vitalik in September 2022, where he commented on some of Uniswap's ideas at the time.

Vitalik believes that Uniswap's value proposition is the convenience of trading, so deploying a rollup on a DEX is meaningless. He also stated that if Uniswap deployed on every rollup, it would be better for its development.

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

In fact, Uniswap has been expanding 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 Ethereum's scalability challenges.

L2Beat data shows that there are currently 105 L2 protocols trying to solve Ethereum's scalability issues. Currently, among these L2 protocols, Arbitrum, Base, and Optimism's OP Mainnet rank the top three in TVL, with $13 billion, $7.2 billion, and $5.8 billion, respectively.

At the same time, Vitalik is also seeking more ways to improve Ethereum's functionality. He has recently shared his new vision for the ecosystem, with a focus on enhancing Ethereum's alignment. [Note: The concept of alignment typically includes value alignment (e.g., open-source, minimizing centralization, supporting public goods), technical alignment (e.g., cooperating with standards within the ecosystem scope), and economic alignment (e.g., using ETH as the token where possible).]

Within the Ethereum ecosystem, balance is a crucial governance challenge, integrating decentralization and collaboration. The strength of this ecosystem lies in the wide range of individuals and organizations (client teams, researchers, L2 teams, app developers, local community groups) all working towards their own visions of what Ethereum could become. The main challenge is to ensure that all projects are building a unified Ethereum ecosystem, rather than 138 incompatible fiefdoms.

How will Unichain impact Ethereum?

Since Uniswap has generated the highest revenue for Ethereum, it is one of the largest user groups on the Ethereum L1 chain. Some crypto community commentators believe that the launch of a native L2 chain by Uniswap may impact the Ethereum mainnet. Once Uniswap moves to its own chain, it will be able to capture transaction fees and MEV fees. Although the exact business share that will shift from Ethereum to the new blockchain remains to be observed, these two revenue sources are certainly significant.

However, this may lead to a decline in network activity related to the Ethereum L1, which in turn will affect the rate of ETH burning. The increasing migration of protocols from Ethereum's L1 may further weaken the narrative of ETH as a "hyper-deflationary asset" (by default after the activation of EIP-1559).

Catalysts for Ethereum's Growth: Innovation, Users, Big Tech, dApps

Although the launch of Unichain has raised doubts about the Ethereum narrative, community supporters argue that Ethereum still has strong catalysts, and Ethereum as a technology and ecosystem will only grow over time.

First, the rise of staking infrastructure like Eigenlayer is bringing a wealth of innovation to Ethereum technology: data availability layers, on-chain oracles, trustless bridges, and more. The next generation of L2 solutions will drive Ethereum's throughput beyond 100,000 TPS and achieve seamless interoperability with ecosystems beyond the EVM.

Second, the participation of top asset managers (Blackrock) and Web2 tech giants (Sony, Samsung) in Ethereum solutions will only increase over time.

Finally, L2s are actually continuously bringing retail customers to Ethereum, especially in cases of low on-chain transaction fees. Mainstream dApps are also doing so, such as Polymarket or Farcaster, which have finally found product-market fit and are meeting the real-world needs of internet users.

Summary

Although the launch of Unichain may have some impact on Ethereum L1's transaction fees, to some extent challenging Ethereum's foundational role. By redirecting fees and network activity, Uniswap's move may trigger a broader migration trend, reshaping the competitive landscape of the crypto market, and encouraging Ethereum and other blockchains to innovate and remain competitive.

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

Fundamentally, L2s like Unichain are not directly competing with Ethereum, but rather creating more suitable scenarios for mass adoption, and unlocking Ethereum's true growth drivers, namely technological innovation, user growth, widespread participation of tech giants, and the explosion of dApp applications.

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