Unichain was Inevitable

Uniswap announced its L2 today, Unichain. Aligned with Ethereum's rollup-centric scaling roadmap, it offers massive improvements, such as fast blocks, interoperability, and lower fees.

Dan Elitzer of Nacent predicted this would happen in his 2022 post The Inevitability of UNIchain–he even got the name right. He argued that Uniswap had high incentives to launch a rollup or appchain. This was around the same time dYdX announced their migration to a Cosmos sovereign chain, and I argued that more blue chips would take a similar path.

Unichain is a massive win for users, who benefit from a superior experience using the product.

• Lower transaction costs: Unichain will reduce transaction fees by as much as 95% compared to Ethereum L1.
• Faster transactions: Users can expect one-second blocks, and 250ms sub-blocks will soon be introduced, improving UX. Faster blocks also reduce MEV.
• Improved interoperability: As part of the Optimism Superchain, Unichain enables single-block, cross-chain message passing with Superchain L2s.
• Value capture: Fees to UNI holders rather than ETH holders, giving more utility and rewards to the community.

One surprising aspect of the announcement is that Unichain enables permissionless smart contracts. A more sensible approach might have been allowing permissioned contracts approved by governance, similar to Osmosis. I believe this would support a cleaner, more curated experience.

From one perspective, Ethereum could be seen as the loser in this announcement–the market certainly agreed. Defillama reports that Uniswap generates $423m in fees to Ethereum L1 annually. While ETH remains a vital collateral asset, it will be interesting to see if this impacts Ethereum's remaining deflationary properties in the long term, especially if other apps follow suit.

Why is this important? Many will argue that Unichain validates the appchain thesis–I can hear Cosmonauts celebrating the win already. This misses the point. Uniswap would have nowhere near its current volume and success had it launched an appchain first. It grew because it benefited from Ethereum's network effects.

The fact that Uniswap could do this demonstrates the maturity of modular architecture. There's been a lot of FUD around modular as high throughput, monolithic chains have gained a lot of traction this cycle thanks to their superior UX. I think we're close to applications built in the modular paradigm competing with Solana on speed, composability and fees.

Dapps now have an option to "graduate" to an appchain or app-rollup when they reach critical escape velocity. At a certain point, acquiring sovereignty over parts of your stack makes business sense.