What is Unichain

On October 10th, Uniswap announced its plan to build an L2 solution on Ethereum, constructed using Optimism’s OP Stack and named Unichain. Unichain aims to address the current limitations in DeFi, such as cost, speed, and interoperability, by enabling faster, cheaper transactions and improved cross-chain liquidity to unlock new markets and use cases.

What problems does Unichain aim to solve?

Ethereum has made significant progress in building a powerful, permissionless, and trustlessly neutral network. However, as blockchain technology has gained popularity, various issues have emerged.

• One of the most pressing issues is the high gas fees and slow execution speed during network congestion, primarily due to throughput limitations. In this context, Layer2 solutions have been proposed as the main strategy to improve the overall processing capacity of the underlying network. Currently, the most popular Layer2 solutions rely on technologies developed by companies such as OP Labs (the developers of Optimism) and Offchain Labs (the developers of Arbitrum). Most of these solutions require users to trust that the sequencers will follow their declared block construction protocols.
• Another issue is that the block production environment, which allows users to extract the maximum extractable value (MEV) from other users, limits the efficiency of the markets and applications that can be built.

Verifiable Block Construction

Block construction plays a crucial role in determining MEV leakage and latency characteristics. Unichain adopts an innovative block construction protocol that optimizes user experience and value retention while maintaining neutrality. The Rollup-Boost, developed in collaboration with Flashbots, makes this possible.

Separation of Sequencers and Builders

TEE Architecture

Unichain separates the role of block construction from sequencers through a verifiable block builder, developed in collaboration with Flashbots. The block construction operation is carried out within a Trusted Execution Environment (TEE), allowing external users to verify compliance with the prescribed sorting rules. Compared to alternative servers, TEE provides enhanced trust and security guarantees.

The initial TEE builder will run an open-source construction codebase on Intel’s TDX hardware, providing private data access and verifiable execution through its computational integrity attributes. Execution proofs will be publicly released, allowing users to verify that blocks are constructed within the TEE according to the specified policies.

TEE block construction is a powerful foundation for aggregators, mitigating the risks of discretionary block ordering and providing a framework for transparent incremental improvements.

Flashblocks

Flashblocks are block pre-confirmations issued by the TEE block builder. Shorter block times reduce the adverse selection costs for liquidity providers, minimize user delays, and promote more efficient on-chain markets.

As transactions flow into the TEE builder, it progressively commits to generating Flashblocks, which are ordered sets of transactions that will be included in the final proposed block. The sequencer then broadcasts these Flashblocks as pending blocks, providing users, applications, and integrators with a block time experience many times faster than the default. In most current aggregator architectures, block proposals face high fixed delays due to serialization and state root generation, making sub-second block times unfeasible. Flashblocks bypass this overhead on shorter time scales, enabling low-latency blockchain interactions.

The TEE prioritizes each Flashblock and supports a type of Flashblock bundling, allowing users to include specific Flashblocks. The combination of these two features, by allocating MEV to users through applications (such as MEV taxes), facilitates the realization of user benefits.

Trustless Rollback Protection

The verifiable builder implements trustless rollback protection, reducing the risk of users paying fees for failed transactions. When building blocks, the TEE simulates transactions and is programmed to detect and remove any rollback transactions. Rollback protection reduces friction for users, improving the efficiency of Automated Market Makers (AMMs) and intent-based systems, as participants can have greater confidence in the success of their transactions.

Areas for Future Improvement

The verifiable block builder serves as the foundation for many future improvements that can be built on Unichain, such as:

• Encrypted Mempool: Users can encrypt transactions, enhancing privacy before transactions are executed.
• Timed Transactions: The TEE can be programmed to allow users or smart contracts to submit automatic transactions for scheduled or recurring operations.
• TEE Co-processors: TEE can enable smart contracts to request private and verifiable computations.

Unichain Validation Network

Unichain addresses the risks associated with a single sequencer architecture by introducing the Unichain Validation Network (UVN). UVN is a decentralized network of node operators that independently validate the latest blockchain state. While aggregators benefit from the strong security of the underlying blockchain, the behavior of sequencers can impact the blockchain’s liveness, MEV dynamics, and finality.

Cross-chain Interaction Process

UVN is a scalable platform with an initial focus on validating blocks to achieve faster finality.

In single-sequencer aggregators, two major risks specifically affect the speed of cross-chain settlements:

• Block Conflict Risk: The possibility of sequencers proposing multiple conflicting blocks at the same height, causing uncertainty about which block will be confirmed.
• Invalid Block Risk: The risk of sequencers publishing invalid blocks, leading to a chain rollback when submitting failure proofs, further delaying settlement.

These risks extend the waiting time for blockchain finality, hindering the seamless flow of cross-network liquidity. UVN addresses these challenges by allowing validators to confirm the standard chain when blocks are proposed, providing faster economic finality.

Staked Validators

The Unichain whitepaper mentions that to become a validator in the UVN (Unichain Virtual Machine), node operators must stake UNI tokens on the Ethereum mainnet. The staking status is tracked in Unichain’s smart contracts, which receive notifications of staking and withdrawal actions through native bridging. Unichain blocks are divided into fixed-length epochs. At the beginning of each epoch, the current staked balance is snapshot, and Unichain chain fees are collected and used to calculate the reward value for each staked token.

Participants can also stake and vote for validators, increasing the staking weight of the validator. A limited number of validators with the highest staking weight are considered part of the active set and are eligible to publish proofs and earn the designated rewards for that epoch. Ideally, in this economic model, $UNI tokens will enter a deflationary state, with added utility beyond voting.

Ultimate Goal

Low Cost, Further Decentralization \
Unichain’s execution moves to L2. Compared to Ethereum L1, Unichain will reduce transaction costs by about 95% in the short term, with further reductions over time. While Unichain relies on a single sequencer to increase efficiency, it further decentralizes by allowing full nodes to help validate blocks.

Fast Speed, Near-Instant Transaction Completion \
Unichain’s current block time is 1 second, with a 250 millisecond block time expected to launch soon. By increasing arbitrage frequency and reducing value loss caused by MEV, reducing latency can significantly improve market efficiency.

Seamless Cross-Chain Liquidity \
Unichain is designed to support seamless transactions between dozens of chains, making liquidity easily accessible to users regardless of which chain they are on. Built on the OP Stack, Unichain will be part of the OP Superchain, supporting native interoperability, while Uniswap Labs continues to lead the way for seamless interoperability across all chains. \
Increased Utility of $UNI Token \
The $UNI token has often been criticized for lacking practical utility, and its price movements have not matched the growth of the protocol. After the launch of Unichain, staking $UNI tokens on the mainnet will become a fundamental requirement for node validators, increasing the practical utility of $UNI tokens.

Conclusion

With the continuous advancement of blockchain technology and technical innovation, many established protocols are seeking ways to adapt to market changes. Evolving from a protocol to an application chain is one way to pursue change. From last year’s announcement of dydx V4, which built the DYDX application chain based on Cosmos SDK, to the launch of Gravity by Galxe, Blast by Blur, the recent rise of Apechain, and future plans for application chains by projects like MakerDAO, the main goal is to enhance user experience through technological innovation and provide additional utility for tokens.

As the largest DEX in the cryptocurrency industry, Uniswap has also followed suit by launching the Unichain application chain. For traders, the most obvious benefits are the reduction in transaction fees and increased speed. For developers, Unichain provides a foundation to build DeFi contracts.