Unichain empowers UNI by alleviating the negative impacts of MEV through its built-in MEV redistribution mechanism, fast confirmation times, and transparent transaction ordering rules, though it cannot completely eliminate MEV.

Written by: 0XNATALIE

Yesterday, Uniswap announced a partnership with Flashbots to launch Unichain, an Ethereum L2 designed specifically for DeFi. This is an Optimistic Rollup based on the OP Stack, aimed at addressing some of the challenges faced by DeFi. Notably, Uniswap, Flashbots, and Optimism have all received investment support from Paradigm.

Currently, the block time for Ethereum L1 is 12 seconds, and the slow transaction speed limits user experience. Additionally, the MEV issue urgently needs to be addressed, as the existing block building mechanism allows certain participants to gain unfair profits by manipulating transaction order, thereby reducing market efficiency. To tackle these issues, Unichain introduces a 1-second block time and 250-millisecond "Flashblocks," combined with a verifiable priority ordering mechanism and a Trusted Execution Environment (TEE), significantly enhancing transaction speed while increasing the transparency and fairness of transaction ordering, injecting new vitality into the Layer 2 DeFi ecosystem.

Technical Features of Unichain

1. Verifiable Block Building

This is a new block building mechanism introduced by Unichain, implemented by Rollup-Boost. It aims to improve the transparency of transaction ordering on the blockchain, reduce unfair MEV extraction, and enhance transaction processing speed. The basic idea is to use TEE to execute the block building process, providing a transparent and trustworthy ordering mechanism. Rollup-Boost is a verifiable block building platform developed by Flashbots to upgrade Rollup performance, optimizing the block building process through TEE. Unichain is its first practical application. Rollup-Boost is integrated as sidecar software on Unichain, leveraging its technical features (such as the fast confirmation of Flashblocks and verifiable priority ordering) to enhance Unichain's performance and user experience.

How verifiable block building works:

• Using TEE for block building: TEE is a hardware security technology that can execute computing tasks in an isolated environment, ensuring that the external environment cannot tamper with or interfere. In Unichain, block builders operate within TEE, ensuring that the building process is secure and reliable. TEE simulates transaction execution, detects any transactions that may fail, and removes failed transactions, preventing users from incurring high fees due to failed transactions.
• Generating Flashblocks: Unichain generates a block every second and introduces a pre-confirmation mechanism called Flashblocks, dividing each block into four flashblocks (i.e., generating a pre-confirmation every 250 milliseconds) and transmitting them in real-time to the sequencer. Users can receive early confirmations before their transactions are officially packaged, preventing rollbacks due to block reorganization and reducing additional costs caused by uncertainty. This mechanism accelerates transaction settlement speed and reduces opportunities for MEV extraction.
• Priority ordering and verifiability: Rollup-Boost provides a verifiable transaction ordering method, allowing users to verify the execution order of their transactions in the block. By building blocks within TEE, transaction priority ordering can be transparently conducted according to specific rules (such as paid priority fees), and the block building can be confirmed to comply with these rules through verification proofs. This mechanism not only prevents block builders from abusing their ordering power but also internalizes MEV, i.e., setting rules (such as MEV tax) to allocate a portion of MEV profits to the protocol or liquidity providers.

2. Unichain Validation Network (UVN)

The Unichain Validation Network (UVN) addresses the risks present in a single sequencer architecture through staking and distributed validation, accelerating the economic finality of the blockchain.

UVN consists of multiple nodes, each capable of independently verifying the state of blocks, ensuring that all transaction records are legitimate and unaltered. It can prevent the risks of conflicting blocks (Block Equivocation Risk) or invalid blocks (Invalid Block Risk) in a single sequencer, thereby enhancing network security. Operators who become UVN validation nodes must stake UNI tokens on the Ethereum mainnet; the more tokens staked, the greater the weight of the node, increasing the chances of becoming an active validation node.

Additionally, UVN provides a faster economic finality mechanism by reducing potential delays caused by a single sequencer through multi-node parallel validation. Each validation node confirms the validity of blocks during the validation period and publicly shares the validation information on the network, increasing the credibility of the chain state. Once a block passes validation, these transactions are considered irreversibly completed (i.e., economic finality). Validators must verify blocks and publish notarizations during each validation period; otherwise, they will not receive corresponding rewards.

What does the community think of Unichain?

Ryan Watkins, co-founder of Syncracy Capital, proposed the view that "RollApps are FatApps," suggesting that the RollApp represented by Unichain has greater control and flexibility, similar to fat applications, possessing more control and management capabilities over the infrastructure, allowing for better management of the value they create. He categorized application structures into three types and compared their control scopes:

1. Standard Application: These applications only control application logic and application fees, relying on blockchain infrastructure for execution, settlement, consensus, and data availability. The control scope of the application is relatively small.
2. Smart Contract RollApp: This extends the functionality and control scope of applications through smart contracts, covering the execution layer, allowing applications to manage their own execution logic and fees, but still relying on the underlying blockchain (such as Ethereum) for consensus and data availability.
3. Sovereign RollApp: These applications can control almost all aspects (except data availability), exhibiting greater independence from the infrastructure, providing users and developers with higher levels of customizable control and functionality.

Yuki, a researcher at Fenbushi Capital, pointed out that Unichain is not a blockchain designed specifically for a particular application (app-chain), but rather a general L2 solution with a built-in MEV redistribution mechanism. However, it still requires some custom mechanisms (such as hooks) to ensure that MEV profits flow to specific target groups (such as users or liquidity providers).

Researcher Haotian believes that Uniswap's launch of Unichain does not deviate from Ethereum but further promotes the development of the Ethereum L2 ecosystem. The current L2 ecosystem has not fully stimulated the vitality of DeFi, and Unichain will act as a catalyst for expansion in the DeFi space. Unlike dYdX and MakerDAO, which choose completely independent architectures and consensus mechanisms, Unichain is based on OP Stack, still aligning with Ethereum's Rollup-Centric scaling strategy, while also endowing the UNI token with more functionality. Unichain will compete with other L2s, helping to enhance the overall vitality of the L2 market.

There are also differing opinions; for example, KOL sudo rm believes that the current scaling strategy overlooks some core issues. L2 expands the network's processing capacity, but user security issues have not been effectively addressed. Rather than investing heavily in L2 development, it would be better to first resolve the most basic and fundamental issues in the Ethereum ecosystem, such as user security and resistance to attacks. KOL Temmy questions the necessity of Uniswap launching Unichain and feels confused about the need for more L2 solutions, as he believes the existing L2s are already sufficient. He suggests that Uniswap's actions may lead to more liquidity fragmentation, and if other dApps follow suit, the situation could be worse than expected.

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