Blockworks Research analyst Boccaccio recently shared his views on Uniswap’s construction of the L2 network Unichain. He believes that the launch of Unichain could continue to weaken liquidity providers (LPs) and Ethereum, posing potential threats to other L2s.
According to the current design framework, in order to become a validator on the Uniswap Validation Network (UVN), node operators need to stake UNI tokens on the Ethereum mainnet, and the active validators will be determined by a few participants with the highest UNI stake weight. Boccaccio believes that the weight staking validation mechanism of UVN may result in most of Unichain’s “Maximum Extractable Value” (MEV) and transaction fee rewards being controlled by a few individuals (in the worst case, Uniswap Labs, and in the best case, financial institutions).
For Uniswap, the biggest challenge of launching Unichain is how to attract users to this new system when other L2 solutions (such as Base on Superchain) are already available. Currently, it seems that Uniswap’s goal is to provide Unichain with enough liquidity to make its exchange cost cheaper than other options (even considering cross-chain interoperability costs), with the long-term goal of making Unichain a liquidity layer.
Boccaccio believes that in the early stages, Unichain may compete with other L2s, especially those on Optimism. However, Ethereum will still retain a significant amount of liquidity that is difficult to transfer to other networks. On the other hand, Boccaccio also points out that Unichain may address the long-standing debate about Uniswap’s fee switch mechanism, and potential solutions may involve Uniswap allocating a portion of the income from MEV to UNI token stakers on the Ethereum chain.
Finally, Boccaccio emphasizes the significant impact of Unichain on asset issuance on Ethereum and L2. Although existing liquidity cannot be directly transferred, protocols, applications, and users may choose to issue tokens on the new Unichain. In this case, Unichain not only threatens the transaction volume of Ethereum L1 and other L2s but also affects the issuance of on-chain assets.
From the perspective of Unichain’s plans, this is a solution that has significant differences from the existing L2 ecosystem. If Unichain can successfully capture transaction volume and distribute it to token holders and stakers, especially if it can solve cross-chain exchanges and transactions of ETH, WETH, USDC, and USDT, then it may succeed. Furthermore, if it can capture these cross-chain fees and return them to UNI token holders, it may even significantly change the value proposition of UNI.