Unichain is Live! What This Means For The Future of DeFi | Hayden Adams

Scalable singular chains like Solana are very successful, has been that like, you know, there's two approaches to scaling. There's going vertical, there's going horizontal. They both have validity, but of ultimately you need horizontal scaling to reach like true mass scale. And so that will require many chains running in parallel. And we need to figure out how to make that user experience completely seamless. The internet runs at massive scale. It doesn't do it by running everything on one massive server. It does it by running many, many servers that can just seamlessly connect to each other. And we have to do that for blockchains. And so we have to figure out how to make different blockchains feel like one experience. With UniChain, a lot of our focus is on what we call interop, which is how to make multiple blockchains feel like one cohesive experience.

Welcome to Banklist, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, and how to front run the opportunity. This is David Hoffman here to talk to you about the launch of UniChain. Unichain, the Uniswap Labs built layer two, is live today. On the show, we go through the release of Unichain with Hayden Adams, the creator of Uniswap and CEO of Uniswap Labs, to talk through some of the bells and whistles that the Uniswap Layer 2 is bringing to the table. Some people out there, I'm sure, are saying something along the lines of not another layer two.

Well, UniChain is bringing some novel tech to the table that no other layer two has. They have built some new kind of sequencing process that helps decentralize the sequencer in collaboration with Flashbots. They've been pioneering full stack native interoperability with the Optimism Collective. And they've also built the UniChain validation network that allows uni token holders to stake their uni and check the validity of the output of the unichain sequencer and also earn the fees accrued by the Unichain block space. I think that's pretty cool. And of course, these are the subjects that I get into with Hayden. In addition to everything UniChain related, I also talk with Hayden plenty about Uniswap V4, which just got released last week. Uniswap v4 has this new singleton contract design, which means that the entire state of Uni V4 is contained inside of a single contract. This lowers interpool trading gas costs and new pool deployments down by 99.99%. That's four nines, as well as enables this idea called Uniswap hooks. And Hayden and I spend a bunch of time talking about the possibilities that Uniswap V4 hooks unlocks for the world. So let's get into it. But first, a message from our friends and sponsors, Uniswap. Let's go hear from them right now. Bankless Nation, I'm here with the creator of Uniswap, the founder of Uniswap Labs, and the man responsible for burning almost a quarter million of ETH. Hayden Adams, welcome back to Bankless.

Great to be here. Thanks for having me.

So Hayden, UniChain is launching their OP stack layer two. And I think it's one of the more uniquely constructed layer twos that I think everyone needs to understand and digest, including myself. So there is a new sequencing mechanism built with flashbots. There is some of the fastest block times on the OP stack, and from what you tell me, they are quickly going to become faster. There's also this brand new thing called the UniChain Validation Network to stake our uni tokens. Hayden, first, congrats on the release. There's a lot to unpack. How should we start this conversation? Maybe just at the highest of levels. How would you summarize the significance of the release of UniChain upon the layer two landscape and just broader Ethereum?

Awesome. And that's a great summary. What I would say is that, you know, we at Uniswap Labs, we built, you know, the Uniswap protocol, which is one of the, no, it's the most used protocol in Ethereum full stop. And then we also built the Uniswap web app and Uniswap wallet, which are some of the top user-facing products built on top of decentralized protocols and blockchains. And I think that has given us a very unique perspective and lens and approach. And going into building UniChain, you know, the thought was how can we advance and accelerate the Ethereum space and the blockchain space to build better applications, you know, full stack. And you know, so when we think about building products, we, you know, we're we're now thinking not just at the front end level, but also at the back end level, also at the protocol uh, you know, smart contract level, also at the chain level. And that allows us to really, you know, I think sometimes what a problem that our space has is people will build at a very narrow layer of the stack and they kind of offload their problems to a different part. And for us, because we're building you know at every layer of the stack, it it allows us, it gives us a very unique insight. And so when we when we you know started building Unichain, we were thinking,

What does DeFi need to be, you know, to be better, to to onboard more users, to create better user experiences, to create more efficient markets, et cetera? And so, you know, Unichin, we are with Unichin we're leaning very

hard into

You know, faster block times. Uh people want transactions to happen very quickly. And you know, 12 seconds on L1 isn't cutting it. Honestly, even two seconds at the L2 level isn't really cutting it. Uh, you need really fast blocks. And so for Unichain at launch, uh, we'll be the fastest OP stack chain uh with one second block times. But then you know, later in the year, we are or in you know, in in the coming months, we'll give we're gonna be working towards 250 millisecond sub blocks. Another problem

for DeFi is MEV and the amount of value that gets lost by users to MEV. And you know, just for example, Uniswap users.

End up missing out on about a billion dollars per year uh based on MEV. And you know, we think that that's value.

Burning so much ETH.

Yes. And and you know, as much as we like burning ETH, we actually also like returning value to our users even more. Sorry. Sorry, ETH people. No, I I am also an ETH person, but still

we really do build with users, end users in mind. And I think that ultimately what's better for end users will be what's better for Ethereum, uh, for what it's worth. And so, you know, some of this this sequencing stuff that you talked about at the builder layer that we're partners partnering with FlashBots on.

Really will allow us to uh rebate MEV or allow us to, you know, allow not just us, but other DeFi developers and even like you know, et cetera, to have Mev be returned to users. And that but both works for Uniswap liquidity providers, it works for swappers, et cetera. And then, you know, I think that the final thing I want to get at here is really interop. And the the you know, when I when I look at our products today.

The user experience of L2s has become very fragmented. And part of what even has made like very scalable, you know, scalable single singular chains like Solana very successful has been that like that has been that

you have one chain that can process a lot of transactions. And I think that, you know, in my mind, there's you know, there's two approaches to scaling. There's going vertical, there's going horizontal. They both have validity, but of ultimately you need horizontal scaling to to reach like true mass scale.

And so that will require many chains running in parallel. And we need to figure out how to make that user experience completely seamless. When I look at what's like truly possible there, you just can look at the internet, right? The internet runs at massive scale. It doesn't do it by running everything on one massive server. It does it by running many, many servers that can just seamlessly connect to each other. And we have to do that for blockchains. And so we have to figure out how to make different blockchains feel like one experience. And so with Unichain, a lot of our focus is on what we call interop, which is how to make multiple blockchains feel like one cohesive experience. And there's multiple approaches that we're taking, and we have to layer them all the same way that the internet has multiple ways to feel seamless. And

One of them is native interop through the uh o through Optimism Superchain, which might be the you know, the the fastest, cheapest version of Interop, the most seamless, the the one that makes you feel like

Liquidity is essentially fungible between the two chains. And then on top of that, we also have what we call intense-based interop, which is essentially using markets and trading to kind of quickly convert assets across chains using various bridging systems and liquidity systems. And so we're working on both of those for unicain. And the end result that we hope to build is a really you know uh amazing uh really just like uh an amazing platform on which you can build amazing products.

Okay, so in this release, in this like tech release, I think there's something here for everyone. So if you are a person who is concerned about the centralization of layer twos because of centralized sequencers, well, that is the part of the conversation that's going to interest this person is this flashbots, flashbots block building mechanism that we're going to talk about, the part which is going to be like the execution of the layer two.

And the UniChain validation network. Yeah,

And the end chain value approach.

we have two things we're doing here.

Okay. If you are an Ethereum person who is worried about layer two fragmentation, there's a conversation here when it comes to native interop, which is some of the rigor that you guys of Uniswap Labs have been putting into creating this like full stack native interop mechanism that's coming to the super chain. So we're gonna talk about that. And maybe if you're just like a uni token holder, and maybe there's something here for you because now with the Unichain validation network, we're gonna be able to stake our uni. And so I think this is kind of downstream of what you were talking about with your position at Uniswap, Uniswap Labs, where uh because you guys are building end-to-end on the stack from an application on the layer one, you guys have a wallet, you guys are a full stack company, and it gives you a unique perspective to innervate at different parts of the stack and kind of create a full stack solution. So I'm pretty excited for this episode. Before we dive into each one of those areas in detail in specific, I also want to touch on Uniswap v4 because Uni V4 just got released not too long ago, last week, and many, many people are talking about that. And so I think some listeners are probably coming into this episode saying, Oh, Hayden on Bankless. Clearly they're talking about Uniswap v4. We're actually going to be talking about Unichain, but I do want to talk about Unicain, Uniswap V4. How do these two releases relate to each other? Is this a coincidence that they're happening within like a week of each other? These two different announcements, how do these things fit together?

It's like both a coincidence and not. I think like, you know, we've been grinding on both for a pretty long time. These are, you know, two that I would say these are the two biggest projects we've done. And we did ship them both within a two-week period of time, which is kind of insane. That was partially a coincidence, but actually in some ways the timing is really nice because there's kind of like it's a good moment for like new ecosystems to form.

By the way, we forgot in our there's something for everyone. Like swappers and liquidity providers will also greatly benefit from both of these releases. And that's part of where I can even talk about this convergence. So Uniswap V4 launched.

Uh Uniswap V4 is the latest and greatest edition of the Uniswap protocol. There were there were really two areas of focus. One was around

You know, cost, gas efficiency, et cetera. And the other was around what we call hooks. So cost, really simple. You know, we we have a bunch of uh improvements to the the efficiency of using the protocol. And so that means deploying pools are like 99.9% cheaper.

And we you know, we're doing that with our new, you know, single contract architecture. And that that actually does make a big difference, right? There's thousands of pools being created. And sometimes people think, well, pool creation, that can be expensive. Uh on mainnet today, it goes it's gone from $55 down to $4, something like that. Uh

Uniswap v4 has brought pool creation from fifty five dollars down to four dollars.

Something like that.

Right.

But on L2s obviously gets even lower and it maybe is in a matter of like cents or less than cents, like fractions of cents. And so

pool creation much cheaper, which is really nice. We also have just

we we you know in the in the early days we we used wrapped ETH under the hood, uh but that adds an additional cost. And so we have native E support. It all boils down to like transact uh swapping is maybe 15% less gas cost for when you're swapping against ETH.

We also have because all the tokens live in a single contract, when you do like these more complex split routes and multi-hop routes, uh there's a compounding benefit to the more of those pools that are in v4. Uh, because

essentially, you know, before you used to like need to transfer tokens between pools and these like multi fra, you know, and each of those transfers incurred a cost. For v4, you put in the input token, you can have like a complex series of routes and hops that are just all like internal accounting uh rather than real token transfers, and then you spit out a token on the other end. And

You know, that that ends up being just like a much more efficient way to do multi-op routing.

And

you know,

and it's and then yeah, so the so gas, like just like across the board, gas is cheaper. And I think that it will compound the more liquidity moves into v4. And we're even seeing very early on that uh Uniswap V4 is getting you know the majority of small swaps through our UI. Even it the the liquidity is a tiny fragment, right? Because it just launched and so liquidity hasn't had full time to build up.

But even at much lower liquidity for small trades, the gas savings outweigh the you know the increased amount of liquidity. And so

v4 is is already performing very well there. So that's like the one half of v4. The other half of v4 is what we call hooks. And hooks are really you know turning the Uniswap protocol into a developer platform. And the Uniswap protocol was always a developer platform. People could always build things on top of it.

But there were very strict limits on how you could modify your pools. Right? The the pools you couldn't really modify your pools. There was a a single implementation of a of you know concentrated liquidity, et cetera.

And then a single implementation of how fees could be done.

And then any modifications had to be done like externally or through the token contract itself. Uh with USW4, people can really modify. We we've, you know, we allow people to

somewhat arbitrarily modify the logic of pools, but in a way that creates very like

consistent

standard, you know, very consistent experience and gets to benefit from this like

low, efficient routing.

Against everything else within Uniswap. And so from that, we've already seen like a like even day one, like I didn't even know about this project, but like the the most the like the highest trading volume or the most assets for Uniswap v4 on day one actually came through a third party hook project that launched at the same time as us uh called Flaunch, which you know, people were trading.

People it's it's essentially you know the equivalent, it's like a a system that uses hooks to

More fairly distribute, you know, like to more fairly issue new tokens. Kind of similar to like

Fucking launch pad.

Yeah, it's like a token launch platform, but that like natively integrates with Uniswap P4 hooks. And we saw like a lot of activity there. They want to I didn't even know about it.

Yeah. And and so like, you know, that that's sort of an ex like a teaser of what is possible with Uniswap P4, but it goes like well beyond that, right? There's there's you know, yes, it's good for token launching, but it's also good for you know creating, you know, for all sorts of like special designs for different and new asset classes. It's good for

Honestly, just improving and optimizing Uniswap fees. And maybe since you asked about the convergence of the V4 and Unicain, this is a good ex I can give like a really good example here. The builder that we're working on with flash blocks

will enable is essentially it will create very fair priority ordered blocks.

And