Unichain: Will Uniswap Spark Another Industry Surge?
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Unichain: Will Uniswap Spark Another Industry Surge?
Unichain ushers in a new era for DeFi.
Navigating Web3 tides with focused insightsWritten by: Heechang, Dan Elitzer
Translated by: Block unicorn
In 2022, Dan Elitzer (founder of IDEO Futures and a seasoned industry OG) wrote that Unichain—the L2 chain launched by Uniswap—was inevitable, driven by inefficiencies and value leakage within the existing Uniswap ecosystem. He noted that current Uniswap traders face three costs: swap fees paid to liquidity providers, transaction fees paid to Ethereum validators, and MEV (Miner Extractable Value) costs.
Today, this prediction has become reality. Uniswap, the most widely used decentralized cryptocurrency trading protocol, has announced its own Layer 2 solution called Unichain. This OP Stack-based rollup aims to address key challenges in the DeFi ecosystem by improving DeFi execution environments, enhancing user experience, and solving liquidity fragmentation.
1. Background – The Logic Behind Unichain
1.1 Dan Elitzer’s Prediction
Dan Elitzer's research shows that transaction fees and MEV costs paid to Ethereum validators and market makers exceed the swap fees earned by liquidity providers. This means entities outside of Uniswap are better positioned to capture value—value that should otherwise belong to Uniswap users, liquidity providers, or $UNI token holders—is being extracted externally.
Block unicorn note: MEV refers to Miner Extractable Value. When we transact on-chain, speculative traders can bribe miners with higher gas fees to jump ahead in transaction order, front-running our trades for arbitrage opportunities and increasing our on-chain transaction costs.
To summarize the argument for Unichain’s necessity: Unichain can help reduce inefficient value capture caused by transaction fees and MEV costs while increasing value for $UNI holders. By operating its own chain, Uniswap can significantly lower transaction fees—especially beneficial for small transactions. Additionally, solutions like intent-based routing or batched swaps can reduce traders’ MEV exposure.
The biggest advantage of Unichain is enabling better incentive alignment among Uniswap participants. Currently, $UNI token holders have limited options for value capture, mostly restricted to governance decisions such as adjusting swap fees. A dedicated chain would allow $UNI holders to benefit from transaction fees and internalized MEV, strengthening the token’s value proposition. This approach not only rewards $UNI holders but also creates a more efficient trading environment for users, potentially solidifying Uniswap’s position as the leading decentralized exchange (DEX).
1.2 Unichain – Capturing More Value and Achieving Unity
Unichain, built on the OP Stack as a superchain, introduces two innovations designed to improve cross-L2 efficiency, user experience, and liquidity management:
The first key feature is Verifiable Block Building, developed in collaboration with Flashbots, including a mechanism called Flashblocks. By dividing each block into four sub-blocks, it achieves an effective block time of 200–250 milliseconds, allowing Unichain to update state faster. Additionally, Unichain uses Trusted Execution Environments (TEE) to separate sequencers from block builders and implements Priority Ordering, which taxes MEV opportunities so applications can directly extract and internalize MEV.
The second major feature is the Unichain Verification Network (UVN), a decentralized network of node operators who independently verify blockchain states. UVN enables Unichain to offer fast finality and economically secure cross-chain settlements. When a new block is produced on Unichain, verifiers must prove it belongs to the canonical chain, reducing security risks associated with a single sequencer. To become a verifier, one must stake $UNI; if selected into the active validator set based on staking weight, they perform verification tasks and earn rewards accordingly. This model allows $UNI holders to delegate their stakes to verification nodes and receive proportional rewards.
2. Key Takeaways – The Direction of DeFi Evolution Proposed by Unichain
Decentralized finance (DeFi) is no longer confined to standalone applications but is evolving along increasingly complex paths. DeFi apps are actively internalizing value that would otherwise be captured externally, launching their own app chains or L2s, and building wallet services. Application-Specific Sequencing (ASS), which allows apps to directly extract MEV, is gaining attention. Within these trends, Unichain’s launch clearly illustrates the future direction of DeFi: sufficiently large and mature DeFi protocols will ensure independence over their infrastructure.
2.1 DeFi Is Getting "Fatter"
DeFi is choosing to internalize value through more complex development processes, improving user experience, or offering self-contained “money legos” via interoperability between native financial products.
This trend manifests in applications that avoid MEV extraction during transaction sequencing by using ASS designs instead of adopting L2/L3 execution models. For example, controlling trade orders dependent on external oracle data allows applications to directly capture MEV (i.e., Oracle Extractable Value, OEV), or intent-based batch auctions using solver networks eliminate MEV exposure. Alternatively, they enhance user experience by developing auxiliary infrastructure—such as optimized application wallets or mobile interfaces—preventing value leakage to third-party platforms.
2.1.1 ASS (Application-Specific Sequencing): CoW AMM
CoW AMM protects liquidity providers (LPs) from MEV by bundling trades into offline batches and auctioning off arbitrage opportunities. Whenever there's an arbitrage opportunity in CoW AMM, solvers compete for the right to rebalance the pool. The solver offering the best trade terms and preserving the highest surplus in the liquidity pool wins the right to rebalance. Through this batch auction mechanism, CoW AMM captures the MEV value that arbitrage bots would otherwise extract when rebalancing price imbalances in liquidity pools, eliminating LPs’ LVR (Loss Versus Rebalancing) risk.
2.1.2 Mobile / Wallet: Jupiter / Uniswap Wallet
Looking at current device usage share among users, mobile accounts for 63% versus 37% for desktop, indicating significant growth in mobile adoption. Therefore, building mobile-friendly environments has become increasingly important in crypto application development.
Recently, Jupiter launched a mobile app capable of handling all functions—from swaps and slippage adjustment to priority fee settings and fiat onramps—within a mobile environment. Users can route trades via Jupiter to execute at optimal prices without fees, delivering a superior DeFi experience.
Additionally, Uniswap has developed and deployed its own wallet service. With this wallet, users can easily swap from Uniswap’s liquidity pools at routed prices, while Uniswap Labs earns front-end fees on wallet-initiated swaps, creating a sustainable cash flow.
Thus, DeFi is no longer limited to implementing DEXs, money markets, or options contracts—it is becoming increasingly sophisticated by introducing ASS or developing additional infrastructure. In doing so, applications maximize value internalization to redistribute among participants or deliver enhanced experiences. However, Unichain’s choice of its own L2, aiming to become the “home of DeFi and cross-chain liquidity,” signals that expanding to L2 is a crucial step beyond single-application scope to unlock greater potential.
2.2 From Dapp to L2
With the launch of Unichain, the roadmap for applications expanding to L2s has become clearer. Many apps have already chosen to improve infrastructure and user experience by moving to L2s, starting with a single DeFi product (like stablecoins or liquid staking) and gradually expanding their vision. This shift to L2 creates substantial value for applications in two primary ways:
First, leveraging L2 infrastructure, applications can generate diverse revenue streams through unique mechanisms. Selling blockspace based on demand has long proven profitable in crypto, and sequencer revenue plus MEV extraction creates significant cash flows for L2 operators. Unichain’s L2 architecture introduces new possibilities for differentiated MEV operations through Priority Ordering. By separating block builders and sequencers via TEE, Unichain enables applications to directly control MEV and operate extracted MEV under agreed terms with users. In other words, Unichain provides a platform where MEV is controlled by apps and users—not sequencers—and operated under consistent rules. This offers a meaningful methodology for application-specific L2s to manage MEV.
The second area of enhanced value comes from token economics. Uniswap’s $UNI token has historically had limited utility beyond governance. Early proposals like Fee Switch aimed to distribute Uniswap’s revenue to $UNI holders but were not advanced due to regulatory concerns.
In this context, Unichain gives $UNI real utility. Staking $UNI is required to become a UVN validator, establishing cryptoeconomic security. $UNI holders can delegate stakes to validator nodes and earn allocated rewards. Thus, transitioning to an L2 enables native tokens to accumulate value across multiple vectors—including sequencer revenue, MEV, and staking rewards.
While L2 transition can significantly boost value in both aspects, is it the ideal path for the Ethereum ecosystem? Like any solution, it brings dual consequences. From the broader Ethereum ecosystem perspective, over 100 different L2s are currently fragmenting liquidity on Ethereum. Moreover, compared to L2 activity, relatively little value accrues to the Ethereum mainnet, creating an economic “parasitic” issue where L2s benefit from Ethereum without adequately contributing back.
2.3 Ethereum’s Value Accrual Problem
Ethereum’s current system for capturing value from L2 solutions is problematic. As more applications build their own L2s, these issues become more pronounced. Currently, L2s use only about 0.9% of Ethereum’s total gas fees, highlighting a disconnect between L2 growth and mainnet value appreciation. Recent upgrades like EIP-4844 further reduce fees L2s pay to Ethereum, potentially weakening demand for ETH as gas.
This situation raises concerns that L2s may be economically “parasitic” on Ethereum. Despite Ethereum’s vast ecosystem and strong developer community, its economic model is being questioned. Reduced fees from L2s mean lower network income for Ethereum, potentially undermining ETH’s value. I believe that while L2 solutions benefit from Ethereum’s established infrastructure, they may not sufficiently support the economic health of the base layer.
However, as the L2 ecosystem expands, it could attract more liquidity and potentially cement ETH as the primary currency for economic activity within Ethereum. While this might sustain ETH’s use as an asset, the question remains: Can ETH continue growing and become a more valuable asset under this structure?
3. Other Perspectives
3.1 Jon Charboneau’s View: “An L2 is to Ethereum what Tesla is to California.”
3.2 Mason Nystrom from Pantera
Key insights on Unichain and its significance:
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Token value accrual: $UNI evolves from a governance token into a fee-accruing token. Validators with the largest $UNI stake earn rewards by participating in the verification network and collecting fees.
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Unichain supports the “fat app” thesis: Applications create their own chains to gain economic control and manage blockspace. Uniswap’s chain will capture fees from various activities—including swaps, lending, and perpetuals—going beyond traditional DEX functions.
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Internalizing MEV: Unichain’s verifiable block building and “flashblock” sequencing show promise. Apps are exploring how to internalize MEV or redistribute it to users and stakeholders.
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Unichain vs. Ethereum: Unichain could significantly impact Ethereum’s mainnet. DeFi activity may migrate to Unichain, attracted by sequencer fees tied to $UNI staking and better user pricing.
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Vertical integration: Larger applications have incentives to control the entire tech stack—from the application layer (Uniswap Wallet, frontend + Uniswap X), to protocols (Uniswap V4, V3, V2), down to the blockchain itself (Unichain).
These perspectives highlight Unichain’s potential impact on the DeFi ecosystem, particularly regarding tokenomics, MEV internalization, and the trend of applications gaining control over their chains.
3.3 Ryan Watkins from Syncracy Capital
Ryan Watkins challenges the notion that Bitcoin and stablecoins are the only valuable blockchain applications. He argues we’ve entered an era of diversified blockchain applications. Platforms like Ethereum and Solana now host numerous apps generating substantial revenue and growing rapidly. Yet, these apps are often valued below the underlying blockchain infrastructure. The trend shows apps earning an increasing share of blockchain fees, sometimes exceeding those of the foundational assets. This shift could mark a turning point in blockchain development.
The rise of “fat apps” in blockchain reflects growing application autonomy. Drivers behind this include demands for better scalability, improved user experience, and greater economic control relative to base-layer infrastructure. As chain abstraction and smart wallet technologies evolve, this application-centric approach is expected to become smoother, potentially reshaping how value and control are distributed within the blockchain ecosystem.
Ryan Watkins’ view emphasizes the rising importance of applications in the blockchain ecosystem and how this trend impacts the distribution of value between infrastructure and applications.
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