Is UniChain a bearish or bullish factor for Ethereum?

Author: Mu Mu | Plain Language Blockchain

Recently, Uniswap Labs officially announced the launch of the Ethereum Layer 2 network UniChain based on OP Stack and has launched the testnet. As a pillar of the Ethereum ecosystem and the DeFi field, the crypto community is paying high attention to this important development event of Uniswap. Vitalik and other KOLs have expressed different views, but perhaps the most concerned are those old Ethereum FUDers, who have begun to conduct a "death countdown analysis" of ETH after the "largest DApp defection from Ethereum"…

01
Is UniChain really a "defection" route for Uniswap?

According to official information, the main purpose of launching UniChain is to address some challenges in DeFi, such as: cost, efficiency, and the seamless cross-chain swap demand due to liquidity fragmentation. In simple terms, the Uniswap team will continue to improve user experience and the competitiveness of its products by customizing a unique Layer 2 network.

In response, comments from various KOLs have been mixed; aside from relatively positive views, the most eye-catching may be the opposition from Vitalik and others. In fact, as early as 2022, Vitalik commented on the concept of UniChain on social media, stating: "The main value proposition of Uniswap is that you can complete a transaction in 30 seconds without much thought. In this case, Uniswap chain or even Rollup is meaningless; it only makes sense if there is a Uniswap copy on each Rollup."

Overall, the main argument from Vitalik and other opponents is that Uniswap should focus on successful application areas, deploying as the most successful DeFi application on the mainnet and each Layer 2, rather than diverting attention to develop (reinventing the wheel) a new chain. Of course, the context two years ago was that Layer 2 solutions had not yet been implemented; if UniChain had been proposed at that time, it would have certainly been an independent application chain rather than a Layer 2 chain, which is why the opposition from Vitalik and other Ethereum crypto community KOLs was quite strong back then.

Compared to the internal opposition within the community, some who are outside the Ethereum community and have long been skeptical of Ethereum, frequently releasing ETH FUD analyses, seem to have found a new strong "argument" here. They further analyzed that UniChain would be Uniswap's "defection" from Ethereum, believing that this DApp, which contributes the most to gas burning on Ethereum, is about to take away Ethereum's last revenue, and Ethereum's gas fee income will again be pushed to the cold palace, ultimately nearing "death."

Gas burning ranking since Ethereum's merge Source: Ultrasound money

Clearly, the launch of UniChain two years later has sparked widespread discussion not only within the Ethereum community but is also seen as a slap in the face to Vitalik. However, compared to the discussions from Vitalik and others within the community, these external FUD voices may stem from the fact that Ethereum has "made too many enemies" over the years. The previously unpromising Layer 2 route has attracted increasing interest from major companies and institutions, and the success of Layer 2 has blocked many cross-chain tracks and some high-performance public chains. Only if Ethereum's development stagnates can they gain more market space, which is one of the fundamental reasons why ETH FUD is rampant.

Uniswap founder Hayden Adams recently responded to the controversy, stating: "Zero-sum bias is a big problem in the crypto community; do not stand on the side of high fees. Scaling through L2 is beneficial for Ethereum."

That said, the analysis that considers UniChain as Uniswap's "defection" is a misinterpretation. Although on the surface it seems that developing Layer 2 has created a new chain, unlike the "relocation" style of dydx joining the Cosmos ecosystem as an independent application chain, UniChain not only remains within the Ethereum ecosystem but also keeps the Ethereum mainnet as Uniswap's primary "battlefield." Most of the DeFi funds in the entire crypto ecosystem are on Ethereum, and large holders pursue "safety and stability" more, which is one reason why Ethereum serves as an irreplaceable "city wall." The high frequency and timeliness of interaction needs between UniSwap users and dydx users differ; early deployment on the Ethereum network and rooting in the safe and stable Ethereum ecosystem is also one of Uniswap's greatest advantages as an important infrastructure in DeFi.

In the foreseeable future, Uniswap on the Ethereum mainnet will still gather more liquidity to meet the large secure swaps of big holders, while some small high-frequency trades will need to cross to Layer 2 like UniChain.

To give a simple example, if Ethereum is a huge agricultural market, Uniswap is the most popular vendor in a prominent location with the highest foot traffic. As business grows, it rents an independent storefront with a warehouse at the entrance of the market; the space is independent and more spacious, equipped with air conditioning, making it more comfortable for customers to shop. The stall and the store meet different customer needs.

Therefore, the "defection" theory does not hold water; leaving is impossible, and Uniswap still wants to be the most eye-catching player in the Ethereum ecosystem.

02
Why is it necessary to create UniChain?

It seems that since someone proposed UniChain two years ago, Uniswap has made a difficult decision. From the perspective of Vitalik and some people in the Ethereum community, Uniswap is already very successful and does not need to take unnecessary actions. However, from the perspective of the Uniswap community and development team, this may not be the case; at least it has the following sufficient reasons to launch UniChain:

1) Optimizing expansion to meet challenges and competition

Although Uniswap is already very successful, it actually faces many challenges and competition in the future of multi-chain (including multiple Layer 2s). Aside from the advantages of the Ethereum mainnet, in some Layer 2s and high-performance EVM chains, for various reasons, many public chains have "local" new DEX brands occupying the top of the DEX track, such as Pancakswap, QuickSwap, etc. At the same time, the existing challenges of liquidity fragmentation in Layer 2 also leave Uniswap, as an upper-layer application, with no room to maneuver.

Choosing OP Stack as part of the Optimism Superchain should be a well-considered decision. Among the top Rollups in Layer 2 TVL rankings, besides OP Mainnet, there are Base and Blast, which together gather over ten billion dollars in liquidity. Coupled with the deployment and adoption by many crypto-native teams like SNX, Mantle, and external giants like Sony, the Superchain can be said to be rich in funds and talent. As a "homomorphic" chain, it shares a consistent development path and technology, making it easier to solve interoperability issues. Currently, Uniswap Labs has stated that it is working with OP Labs to achieve native cross-chain interoperability, addressing the liquidity fragmentation issue between Layer 2s while providing a seamless cross-chain swap experience.

Source: L2beat

In simple terms, by deploying a Layer 2 through OP Stack at a lower cost while joining this Layer 2 development community, sharing technological achievements, accelerating interoperability between Layer 2s, and solving the major issue of liquidity fragmentation, as well as MEV and other issues, can all be addressed through customized underlying solutions, which were previously beyond Uniswap's control as just a DApp.

2) An inevitable choice after DApp grows stronger

DApps deployed on public chain platforms will inevitably consider their future development roadmap as they grow. In addition to the aforementioned optimization and expansion, there are also more internal community demands and pressures from token empowerment, which is why the news of UniChain's release caused UNI to rise immediately. In fact, every DApp, as it grows from a small circle to a large community, will be pushed forward by the community even if the project team does not want to move. At the same time, high-quality projects have ample income and talent reserves, breaking through bottlenecks and even crossing tracks to bring more possibilities, making "growing bigger and stronger" a natural outcome.

For example, many offline or online shopping malls will host a large number of brand merchants, such as Uniqlo, Starbucks, KFC, etc. After these brands occupy a certain market share in their respective tracks, they often establish their own independent channels, such as official online stores, official mini-programs, etc. Unlike the form of being hosted, having all user-generated data ownership and flexibility through official independent channels allows for personalized marketing activities, collecting and meeting more personalized user needs.

In the future, UniChain may open up differentiated advantages to share the liquidity of the Uniswap protocol, attract more DeFi applications to settle in, and create a unique ecosystem, which is a beautiful vision.

3) Uniswap: This is my freedom

In the value system of crypto openness and freedom, no underlying infrastructure should lock any users and funds like centralized traditional finance, and of course, the development team cannot be locked either. The multi-chain interoperable ecosystem remains the future. The decentralized Ethereum community will not and cannot forcibly lock these users and funds; they will maintain free flow, with a flourishing application ecosystem where the fittest survive, and products brought by developers will compete freely in the free market.

Whether UniChain is a major strategy of Uniswap or just a "trial run," it is the freedom of Uniswap Labs and the Uniswap community, all for the common benefit of the community.

 03
Is it a good or bad thing for Ethereum?

From the erroneous interpretation of ETH FUD, it seems that UniChain will accelerate Ethereum's demise. However, the reality is quite the opposite; the launch of UniChain is not a bad thing at all. It can not only help address the cross-chain liquidity issues of Ethereum's Layer 2 ecosystem, bringing about ecological prosperity, but also facilitate the adoption of Layer 2 solutions, with more major companies like Sony on the way.

From another perspective, the launch of UniChain is inevitable. Although it has brought about opinions from Vitalik and others that it is "unnecessary and not recommended," it directly validates the correctness of Ethereum's Layer 2 route from years ago and the foresight of many development teams in the Ethereum community. Imagine if there were not so many successful and open Layer 2 solutions today; these DApps might have grown to a point where they could no longer tolerate Ethereum's high fees and low efficiency, deeming it unpromising and directly transitioning to independent chains to solve scalability issues. That would truly mean leaving the Ethereum ecosystem and even being forced to become an "Ethereum killer."

The current outcome is a process of self-innovation and transformation within the Ethereum ecosystem. We are no longer in the past era of expensive and slow transactions. Applications deployed in the vast ecosystem of Ethereum now have more and better internal options while maintaining their original intentions, thus not needing to compromise with centralization for scalability and performance.

 04
Conclusion

Regardless, we respect the choice of the UniSwap community and hope that UniChain continues to create a different future for the DeFi track, bringing more new possibilities.

ETH FUD often clings to the issue of Layer 2 reducing and "siphoning" Ethereum platform gas fees. In reality, one only needs to understand this question: Is the value of Ethereum solely for collecting gas fees? Infrastructure like client wallets, scaling solutions, application implementation, and user experience, all flourishing while continuously leading crypto innovation, is where Ethereum's value lies.

When Ethereum's gas fees were high, they said it was bearish; when Layer 2 was proposed, they said this route would fail; when Layer 2 scaling succeeded and gas fees dropped, they said it was siphoning Ethereum, and they still claimed it was bearish… As Uniswap's founder said, the crypto community is filled with zero-sum biases, and some bears haven't even truly understood Ethereum, merely standing on different positions. Therefore, it is essential to DYOR to avoid being easily misled.

Article link: https://www.hellobtc.com/kp/du/10/5479.html

Source: https://mp.weixin.qq.com/s/okspF06X3gSgNWv4oPVETA

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