Uniswap shocked the market last week by announcing Unichain - let's break down the announcements and explore the winners and losers.
Ben Simpson
Navigating the world of crypto with confidence & expertise | Founder & CEO of Collective Shift | Helped 1000+ investors maximise their returns & create a winning portfolio strategy
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Uniswap shocked the market last week by announcing Unichain, an upcoming layer-two (L2) network on Ethereum.
Let's break down the announcement and explore the winners and losers. ??
Unichain debuted on testnet following a whitepaper released in collaboration with high-profile Ethereum builders—Flashbots, OP Labs and Paradigm.
And they aren't wasting any time, with Unichain planned to go live on mainnet by year-end.
What Makes Unichain Unique?
Unichain is not an appchain, such as dYdX Chain, which embeds its product in the chain itself.
Instead, Unichain is a general-purpose L2 aiming to be the “home of DeFi” and future Uniswap products.
Simply put, Unichain aims to offer a user experience similar to Solana rather than Ethereum mainnet.
Who Are The Winners?
#1. UNI
Unichain's launch will see UNI gain increased utility as it will be used to stake in the new network design.?
It opens the door for fee switches and value to flow to UNI stakers. (This may have been why the UNI fee-switch vote was delayed in June.)
#2. Optimism and OP
Optimism’s OP Stack was again chosen as the infrastructure for the launch, joining other big-name adopters such as Sony, Base, Worldcoin and Synthetix.
Whichever L2 ecosystem attracts the most users and developers can enjoy accelerated network effects and ultimately out-compete the many different L2s battling for attention.
Who Are The Losers?
It’s hard not to see other L2s (e.g. Arbitrum, Polygon) as losers. Having recently lost its lead as the top L2 by TVL, Arbitrum will soon face additional competition in the race to be the go-to L2 for DeFi.
The Impact On Ethereum & ETH Is Nuanced
The bull case
As Ethereum’s leading app, Uniswap's commitment to the ecosystem reinforces that projects want to build on Ethereum and its dominance as the settlement network of choice.
Uniswap and its stakeholders (i.e. Uniswap Labs, the Uniswap Foundation) are incentivised and motivated to help fix the challenges facing Ethereum’s poor user experience.
For example, Uniswap Labs is working with OP Labs to allow all chains on the OP Stack to talk to each other easily and is pushing initiatives like ERC-7683 to improve user experience.
The bear case
Unichain is a net negative for ETH value accrual because more value will leave Ethereum L1, which some argue is critical to ETH value.
Uniswap products accounted for <15% of all gas consumption on Ethereum on October 16. And as we know, more demand for gas on Ethereum L1 equals a higher ETH burn, all else being equal.
While Unichain's launch is a positive for Ethereum as a whole, its impact on ETH value remains hotly contested.
Overall, Positive Steps
Stepping back, the move is very positive for Uniswap as it doubles down on its Uniswap brand and gives more utility to UNI.
Could Unichain, combined with its upcoming V4, new wallet, and UniswapX aggregation layer, help UNI break free from its muted price action?
UNI's price is still -86% below its ATH from the last bull market. (And -75% in terms of market cap.)
What happened? The new shooter game topped the Epic Games Store charts and was played by several influential streamers, some of whom were reportedly sponsored. Off The Grid has its own Avalanche subnet (i.e. GUNZ) for players to mint and trade in-game items as NFTs. Its upcoming GUN token will launch on the subnet soon.
Why does it matter to you? The strong interest among non-crypto gamers is a positive sign for the struggling gaming narrative and shows the game's ability to generate wallets and onchain transactions. The ultimate challenge will be whether Off The Grid can sustain this level of interest.
What happened? The report shares trends using a range of in-house data points, with a big focus on stablecoins, AI and L2s.
Why does it matter to you? Some key takeaways were that (i) crypto activity has never been higher, (ii) stablecoins remain crypto's "clearest killer app,” (iii) DePIN is an emerging narrative, and (iv) the industry has finally built a sufficient amount of infrastructure.
What happened? Vice President Kamala Harris pledged to support a crypto regulatory framework as part of her 'Opportunity Agenda for Black Men' plan.
Why does it matter to you? It’s the first time Harris has promised a regulatory framework. As per the below scorecard by Galaxy Digital, there is growing sense of optimism that Harris could be more supportive towards crypto than Biden has been.
?? Should You Worry About Tesla Moving Its Bitcoin?
Probably not. This activity could be caused by a variety of factors other than selling (e.g. key management, changing custody solutions).?
While Tesla selling $1.4B worth of BTC could trigger short-term concerns, Bitcoin has withstood much larger sell pressure this year, such as from the German government and Mt. Gox distributions.
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