As we all know, the emergence of L2 solutions enables smaller independent blockchains to tap into the deep liquidity on the Ethereum chain, and for DeFi, L2 also provides a way to optimize 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 Optimism's OP Stack and is called Unichain. It aims to address the current limitations of 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 greater 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. While cheap transaction costs are not new to Ethereum L2, Uniswap claims that it will achieve this low cost while maintaining decentralization, which most other L2s have not yet achieved.

Uniswap said it will achieve this goal through its upcoming decentralized validator 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 their transactions.

Additionally, Unichain has significantly reduced transaction times by leveraging a block builder developed in partnership with Ethereum development team Flashbots. At the heart of the block builder is a Trusted Execution Environment (TEE), a feature that increases transparency and speed in transaction ordering and prevents transaction failures.

Unichain promises to provide a seamless cross-chain exchange experience for transactions on Superchain (Optimistic rollup's multi-chain network) by leveraging Optimism's 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 rollup's L2 includes the Optimism mainnet, Base network, Blast, Celo, etc., all of which are potential candidates for 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 for enhanced 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 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 out an old post by Vitalik in September 2022, in which he commented on some of Uniswap's 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 a major challenge 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 Ethereum’s scalability challenges.

According to L2 Beat data, there are currently 105 L2 protocols trying to solve Ethereum's scalability problem. Currently, among these L2 protocols, Arbitrum, Base, and Optimism's 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 Ethereum’s functionality. He also recently shared his new vision for the ecosystem, centered around enhancing Ethereum’s alignment. [Note: Typically, the concept of alignment includes values ​​alignment (e.g., open source, minimal centralization, supporting public goods), technology alignment (e.g., working with ecosystem-wide standards), and economic alignment (e.g., Use ETH as token when 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 fiefdoms.

How does Unichain impact 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 moves from Ethereum to the new blockchain remains to be seen, both sources of revenue are sure to be substantial.

However, this could lead to a decline in the relevant network activity of Ethereum L1, which in turn would affect the rate of ETH destruction. More and more protocols moving away from Ethereum's L1 could 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 the Ethereum narrative, community supporters say it still has strong catalysts and that Ethereum as a technology and ecosystem will only get bigger over 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 Ethereum's throughput to over 100,000 TPS and enable seamless interoperability with competing ecosystems outside of the 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, it challenges some of Ethereum's fundamental functions to a certain extent. By redirecting fees and network activity, Uniswap's 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 Ethereum's real growth points, namely technological innovation, user growth, widespread participation of technology giants, and the explosion of Dapp applications.