The Launch of Unichain and Its Impact on the Ethereum Ecosystem

The emergence of L2 solutions allows smaller independent blockchains to leverage the deep liquidity on the Ethereum chain, while providing a way to optimize user experience for DeFi. This is precisely the direction that the largest decentralized exchanges are currently betting on.

On October 10th, a well-known DEX announced its plan to establish Layer 2 on Ethereum. This solution, built using the OP Stack, is called Unichain and aims to address the limitations currently faced by DeFi, namely cost, speed, and interoperability, to unlock new markets and use cases with faster, cheaper transactions and better cross-chain liquidity.

The CEO of the DEX stated: "After years of building and expanding DeFi products, we have seen where blockchain needs improvement and the conditions necessary to continue advancing the Ethereum roadmap. Unichain will provide the speed and cost savings achieved through L2, better cross-chain liquidity acquisition, and achieve greater decentralization."

Features and Advantages of Unichain

Among the many L2 solutions, Unichain seeks to enhance its competitiveness in three key areas: cost, speed, and interoperability.

According to official estimates, after the launch of Unichain, transaction costs will be 95% cheaper than Ethereum, and costs will decrease over time. While cheap transaction costs are not new for Ethereum L2, Unichain claims it will achieve this low cost while maintaining decentralization, which most other L2s have not yet achieved.

Unichain states that it will achieve this goal through the upcoming decentralized validation network, allowing full nodes to assist in block validation by staking governance tokens, which further promotes the decentralization of the blockchain. Stakers will serve as a second layer of security on the Unichain platform, enhancing the network's security and making it less susceptible 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 nearly instant transactions, with a block time of 1 second, which will ultimately be reduced to 0.2-0.25 seconds. In contrast, 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 crucial role in enhancing market efficiency.

The shorter block time of Unichain will reduce the value loss caused by MEV (MEV is a form of attack that allows block builders to front-run normal users through preemptive trading). With Unichain's fast transaction times, opportunities for arbitrage and MEV are reduced, allowing users to gain better value from their trades.

In addition, Unichain has significantly reduced transaction times by utilizing a block builder developed in collaboration with the Ethereum development team. The core of the block builder is a Trusted Execution Environment (TEE), which enhances the transparency and speed of transaction ordering and prevents transaction failures.

Unichain is committed to providing a seamless cross-chain exchange experience for transactions on Superchain (a multi-chain network of Optimistic rollups) by leveraging the native interoperability of Optimism. This is crucial for the future of DeFi, as users and protocols increasingly demand smooth and convenient access to various blockchains. Currently, the L2s of Optimistic rollups include the Optimism mainnet, Base network, Blast, Celo, etc., all of which have the potential to achieve seamless interoperability in the future.

For chains outside of Superchain, Unichain is working to improve communication methods between different blockchains. Through initiatives like ERC-7683, which is a cross-chain transaction execution standard aimed at enhancing cross-chain transactions, the goal is to make transactions between any chains effortless.

Unichain adopts a modular design, which means that new features can be added to make it more decentralized and user-friendly. Moreover, it is open-source, allowing other chains to join and utilize its technology. The development team will also continue to contribute to the scalability of Ethereum, ensuring that DeFi provides a better experience for everyone.

Vitalik's View on Unichain

Although Vitalik has not yet expressed his views on Unichain, community members have found an old post from September 2022 where he commented on some ideas regarding a certain DEX at that time.

Vitalik believes that the value proposition of this DEX is the convenience of trading, so deploying rollups on the DEX is meaningless. He also stated that if the DEX deploys on each rollup, it can achieve better development.

Of course, this can only represent some of 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 addresses a major challenge for mainstream adoption.

In fact, this DEX has been continuously 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 the scalability challenges of Ethereum.

Data shows that there are currently 105 L2 protocols attempting to solve Ethereum's scalability issues. Among these L2 protocols, Arbitrum, Base, and Optimism's OP Mainnet have the top three TVL rankings, respectively at $13 billion, $7.2 billion, and $5.8 billion.

At the same time, Vitalik is also seeking more ways to improve the functionality of Ethereum. He recently shared his new vision for the ecosystem, which focuses on enhancing the consistency of Ethereum.

In the Ethereum ecosystem, balance is one of the most important governance challenges, integrating decentralization and cooperation. The strength of this ecosystem lies in the wide range of individuals and organizations (client teams, researchers, layer two network teams, application developers, local community groups) all working towards their respective visions of what Ethereum could become. The main challenge is to ensure that all projects collectively build an Ethereum ecosystem, rather than 138 incompatible territories.

The Impact of Unichain on Ethereum

Due to a certain DEX generating the highest revenue for Ethereum, it is one of the largest user bases on the Ethereum L1 chain. Some commentators in the crypto community believe that the launch of a native L2 chain may impact the Ethereum mainnet. Once the DEX transitions to its own chain, it will be able to capture transaction fees and MEV fees. Although the exact market share of the business moving from Ethereum to the new blockchain remains to be seen, both sources of revenue are certainly substantial.

However, this may lead to a decrease in related network activity on Ethereum L1, which in turn will affect the rate of ETH destruction. An increasing number of protocols moving away from Ethereum's L1 may continue to weaken the narrative of ETH as a "super sound currency" (an asset that defaults to deflationary after the activation of EIP-1559).

Catalyst for Ethereum Growth

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 larger over time.

First, the rise of re-staking infrastructures like Eigenlayer has brought a wealth of innovation to Ethereum technology: data availability layers, on-chain oracles, trustless bridges, and more. Next-generation L2 solutions will drive Ethereum's throughput beyond 100,000 TPS and achieve seamless interoperability with competitive ecosystems outside of EVM.

Secondly, the participation of top asset management firms and Web2 tech giants in Ethereum solutions will only increase over time.

Finally, L2 is actually continuously bringing retail customers to Ethereum, especially when on-chain transaction fees are lower. The same goes for mainstream dApps, such as Polymarket or Farcaster, which have finally found product-market fit and meet the real-world needs of internet users.

Summary

Although the launch of Unichain may impact the transaction fees on Ethereum L1 and challenge some of Ethereum's fundamental roles to a certain extent. By redirecting fees and network activity, this initiative may trigger a broader migration trend, reshaping the competitive landscape of the cryptocurrency market and encouraging innovation and competitiveness among Ethereum and other blockchains.

At the same time, as the largest decentralized exchange by trading volume, Unichain will expand DeFi and the Ethereum ecosystem by optimizing transaction speed, reducing costs, and improving user experience, increasing user participation in DeFi and promoting widespread adoption, benefiting multiple blockchains including Ethereum.

Essentially, Unichain and other L2 solutions are not in direct competition with Ethereum; rather, they work together to create scenarios that are more suitable for mass adoption, tapping into Ethereum's true growth points, namely technological innovation, user growth, extensive participation from tech giants, and the explosion of Dapp applications.