Unichain will host Uniswap, a popular DeFi protocol. The move might significantly reduce Ethereum value and activity.
It's a change from Uniswap's past fee money going to Ether holders.
Over the last year, DeFi Report creator Michael Nadeau said Uniswap earned $1.3 billion from trading and settlement fees across five key blockchains.
Nadeau claimed Uniswap would “capture all that value,” which would be shared with UNI token holders, when Unichain launched. The corporation might also keep all Unichain MEV.
As it controls all validators on its Layer 2 blockchain, it prevents ETH stakers from extracting the greatest amount of value from a DeFi protocol.
Experts expect Uniswap's migration to Unichain to take a large portion of its more than 1.2 million daily active users and liquidity away from Ethereum.
Of the largest DeFi protocols, Uniswap had $4.7 billion in customer deposits as of Oct. 28, according to DefiLlama.
Since its introduction over six years ago, the system has handled $2.4 trillion in transactions, mostly on Ethereum.
Dune Analytics estimates that Uniswap represents 44% of Ethereum DEX trading traffic. Its lifetime fees were $3.8 billion, with UNI token holders demanding a portion.
Unichain launches as Ethereum income plummets. Token Terminal reports a 92% drop in Ethereum Layer 1 network income since March 2024.
Ethereum network fees surpassed $35.5 million on March 5, a 2024 high. After a blockchain update on Oct. 24, fees dropped to $2.6 million.
The update, which lowers ETH Layer 2 transaction costs, has spurred the development of competing scaling alternatives, like Unichain. Layer 2 analytics website L2Beats shows 116 Ethereum rollups.
DeFi researchers say Ethereum's status as a decentralized financial platform might decline if more applications use Layer 2.
Ethereum is already suffering as Layer 2 firms compete for cheap transaction costs. Gas prices, at $30, are driving users away from the blockchain.
Ethereum has greater issues. A 2021 Ethereum update termed “EIP-1559” is unsuccessful due to a sharp drop in income from sequencing rights (the authority to arrange transactions and extract MEV) and priority fees, according to Shaik.
The upgrade includes a “fee burning” method to control ETH supply and avoid inflation. Low transaction volumes on Ethereum have reduced demand for ETH, which pays gas costs.
