What does Uniswap’s launch of L2 (Unichain) 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 Optimism's OP Stack, called Unichain, which aims to solve the current limitations of DeFi, namely cost, speed and interoperability, and 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 expanding DeFi products, we have seen where blockchain needs to be improved 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 be more decentralized."

Features and advantages of Unichain

Among many L2 solutions, Unichain attempts to improve 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 says 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 network's security and making it less vulnerable to attacks and manipulation. The addition of new validators also improves the network's resilience, 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 reduced to 0.2–0.25 seconds. In comparison, Ethereum has a block time of 12 seconds, while 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 normal users by front-running transactions). Under Unichain's fast transaction times, the opportunities for arbitrage and MEV are reduced, allowing users to get better value from transactions.

In addition, Unichain has significantly reduced transaction times by leveraging a block builder developed in collaboration with the Ethereum development team Flashbots. At the core of the block builder is a trusted execution environment (TEE), which improves the transparency and speed of 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 require smooth and convenient access to various blockchains. At present, L2 of Optimistic rollup includes Optimism mainnet, Base network, Blast, Celo, etc., which are all potential to achieve seamless cross-border in the future.

For chains outside Superchain, Unichain is working to improve the communication methods between different blockchains. Through plans such as ERC-7683, the cross-chain transaction execution standard developed by Uniswap and Across Protocol, it is used to enhance cross-chain transactions, with the goal of making transactions between any chains a breeze.

Unichain adopts a modular design, which means that 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 to ensure that DeFi brings a better experience for everyone.

What does Vitalik think of Unichain?

Currently, Vitalik has not expressed his views on Unichain, but many community members are curious about Ethereum co-founder Vitalik Buterin's attitude 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 transactions, so it makes no 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 can only represent some of Vitalik's past ideas, 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 of 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 finally 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 problems. Currently, among these L2 protocols, Arbitrum, Base, and Optimism’s OP Mainnet rank in the top three in TVL. They 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, with the core being to enhance Ethereum’s alignment. [Note: Typically, the concept of consistency includes value consistency (e.g., open source, minimal centralization, support for public goods), technical consistency (e.g., cooperation with ecosystem-wide standards), and economic consistency (e.g., using ETH as a token when possible). ]

In the Ethereum ecosystem, the balance is the most important governance challenge, integrating decentralization and cooperation. The advantage 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) working towards their respective visions of what Ethereum could become. The main challenge is to ensure that all projects work together to build an Ethereum ecosystem, rather than 138 incompatible territories.

How does Unichain affect Ethereum?

Since Uniswap has generated the highest revenue for Ethereum and is one of the largest user bases of Ethereum's L1 chain. Some crypto community commentators believe that Uniswap's launch of a native L2 chain may affect the Ethereum mainnet. Once Uniswap moves to its own chain, it will be able to capture both transaction fees and MEV fees. While the exact share of business that moves from Ethereum to the new blockchain remains to be seen, both revenue streams are sure to be substantial.

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

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

While the launch of Unichain has raised doubts about Ethereum's narrative, community supporters say Ethereum still has strong catalysts and that Ethereum as a technology and ecosystem will only get bigger over time.

First, the rise of restaking infrastructure like Eigenlayer has brought a ton of innovation to Ethereum technology: data availability layers, on-chain oracles, trustless bridges, and more. Next-generation L2 solutions will push Ethereum’s throughput past 100K TPS and enable seamless interoperability with competing ecosystems outside of the EVM.

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

Finally, L2 is actually bringing retail customers to Ethereum, especially with low on-chain transaction fees. The same is true for mainstream dApps like 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 the transaction fees of Ethereum L1, it has challenged some of the basic functions of Ethereum to a certain extent. By redirecting fees and network activities, 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 L2 and Ethereum are not in direct competition, but together create scenarios that are more suitable for large-scale adoption and tap into Ethereum's real growth points, namely technological innovation, user growth, extensive participation of technology giants, and the outbreak of Dapp applications.