What do you think of Unichain, the new layer2 chain launched by Uniswap?

Author: Haotian-CryptoInsight

What do you think of @Uniswap's upcoming launch of DeFi-specific layer2—Unichain? I see that the public opinion is in an uproar, and it is interpreted as the top DeFi application "defecting" from Ethereum. Previously, dYdX made an independent application chain, and MakerDAO called its Endgame NewChain, which had caused heated discussions.

In fact, Uniswap's independent chain plan cannot be considered a defection, but rather a catalyst to boost Ethereum's layer2. Why? Next, let me talk about my opinion:

1) dYdX made an independent chain based on the Cosmos IBC architecture and MakerDAO intended to get close to Solana to make an independent chain. The nature is similar, and both are hindered by the performance bottleneck of Ethereum's main chain. Ethereum's Gas Limit determines that a block can only process more than a thousand transactions, and the performance of the layer2 chain is limited by the main network's Rollup contract processing capacity even if it is expanded off-chain. Therefore, dYdX and MakerDAO finally chose independent consensus chains. I have previously systematically analyzed the reasons in an article.

Since UniswapX, Uniswap has developed an expansion plan that combines off-chain preprocessing and on-chain. Therefore, even if it is a chain, it will continue to maintain a deep connection with Ethereum, and there is no qualitative "defection".

This time, Uniswap labs announced that it would build a Unichain layer2 chain based on OP Stack, which explains the problem. After all, the layer2 chain is still in line with the grand strategy of Ethereum Rollup-Centric.

2) On the contrary, in my opinion, the layout of the layer2 chain of projects such as Uniswap, which has phenomenal application genes, will become a catalyst to break the current layer2 development dilemma.

On the one hand, Unichain is a layer2 chain dedicated to expanding DeFi, which is of great benefit to the development of DeFi in the current Ethereum layer2 market, because the layer2 chains of the two camps of OP-Rollup and ZK-Rollup have not stimulated the activity of DeFi applications.

The trust in lending is questionable due to non-native token pledge, while DEX is constrained by liquidity and user dispersion and is difficult to generate synergy. Except for the emergence of individual platforms such as GMX, the overall layer2 chain environment is not friendly to the development of the DeFi ecosystem.

The new layer2 @MetisL2 attempts to use native tokens and decentralized sequencer mining mechanisms to create an independent layer2 economy in order to solve the problem of insufficient momentum for the development of layer2 DeFi. However, most layer2 Tokenomics designs are still not friendly to DeFi.

Now, Uniswap, a leading star that accounts for more than 60% of the transaction volume on the Ethereum mainnet, is going to jump out to become a DeFi-specific layer2 chain. It is hard not to have expectations;

On the other hand, Unichain chose the OP Stack super chain camp to be a layer2 instead of a layer3 application chain. The difference is that layer3 can further customize tokens and consensus mechanisms to be more independent and flexible, but layer3 must rely on layer2 chains for interoperability and component sharing. The current narrative is not mature enough and is more suitable for some unpopular and specific applications.

And giant applications such as Uniswap have greater commercial imagination space as layer2 chains, and there is no need to be on top of other layer2s.

Of course, layer3 may be able to issue a new Gas Token, but layer2 chains can empower $UNI tokens with strong governance, and at the same time will bring vitality to the dormant layer2 markets such as @arbitrum and @Starknet, and can also integrate its Uniswap Wallet, UniswapX and other series of combination products and protocols, which is more meaningful than issuing new tokens out of thin air.

3) Unichain has two core features that deserve special mention:

1. A decentralized verification network will be introduced, which will add an additional layer of Finality security confirmation.

It can be considered that this is a middleware verification network similar to Eigenlayer AVS, but it is more like a Pre-Confirmation consensus network, which can provide a layer of security consensus protection for Unichain's 1-second block generation and 250-millisecond sub-blocks, as well as the newly introduced TEE data privacy and MEV protection mechanisms. The most important thing is that the governance token UNI will be enabled, and the nodes participating in the verification must stake UNI tokens to work.

A layer1 protocol governance token will become a brand new layer2 staking and reward security consensus token. This role change is very unusual;

2. The upgraded content of the EIP-7683 proposal will be introduced, and the "cross-chain intention" standard will be proposed, providing a common interface for the cross-chain transaction execution system.

In short, it defines the cross-chain order information standard, including basic information such as who wants to trade, what to trade, and the transaction deadline. After the unified framework, different chains can collaborate to process the same order.

Obviously, Unichain is going to make a big deal about cross-chain operability. By leveraging Uniswap’s huge user base and liquidity siphoning effect, Unichain is bound to attract a large number of DeFi applications. If Unichain attracts a large number of application ecosystems, it will not be too late to judge whether layer2 Rollup will be falsified.

4) As for whether the original Uniswap protocol on the Ethereum mainnet will be affected after Unichain goes online, which many people are worried about, I personally think it will not. After all, the business layout that Uniswap labs wants to do and the development of Uniswap’s open source decentralized protocol have actually been “parallel” for a long time. Even if Unichain is launched, the original Uniswap protocol will not be affected.

If there is any impact, there is only one, Unichain will compete with other layer2s as a new layer2, and ultimately boost the overall weight of the layer2 market.

At present, Unichain will have a first-mover advantage in terms of application prosperity and user activity due to the influence of Uniswap wallet and brand effect. If Uniswap's siphon effect becomes prominent in the later stage, it will inevitably make most users and traffic settle on layer2, which also completes the entire Ethereum's Rollup-centric strategic vision.

That's all.

Finally, I would like to emphasize that Uniswap labs' layout of chain building is definitely a big boon to the Ethereum ecosystem, and I especially look forward to its market "catfish" effect as a disruptor in layer2.

As for whether the Unichain chain is meaningful, it depends on what perspective you judge it from. From a pure application perspective, @VitalikButerin is right to say that it is meaningless, but if you consider it from a business strategy perspective, Uniswap's ambition to not be satisfied with just being an application has long been known to everyone. No matter what it does, as long as it is within the Ethereum roadmap plan, it will complement each other.