Unichain could raise $468m a year for Uniswap Labs and UNI token holders: DeFi Report

Michael Nadeau, founder of DeFi Report, concluded that Uniswap’s upcoming layer 2 solution, Unichain, could bring more value for Uniswap Labs and token holders.

In an Oct. 14 post, DeFi Report founder Michael Nadeau noted that Uniswap Lab’s latest layer 2 solution, Unichain, could earn around $500 million annually from settlement fees that would normally be paid to the Ethereum network.

He announced that the protocol will no longer have to pay a $368 million settlement fee to Ethereum (ETH) validators when they launch Unichain. Instead, the funds will go to Uniswap Labs and most likely UNI(UNI) token holders.

. @Uniswap Last year, approximately $1.3 billion in trading and clearing fees were generated across 5 major chains.

Protocol and token holders captured $0 of this value.

[100% went to Liquidity Providers, Ethereum Validators, MEV bots, and the L2 sequencers]

But with the launch… pic.twitter.com/vgpn7xjFky

— Michael Nadeau (@JustDeauIt) 13 October 2024

In addition to settlement fees, Uniswap could potentially benefit from staking maximum minable value, which is the maximum value miners or validators can gain from reordering and reordering transactions waiting to be added to the blockchain.

Since Uniswap owns all validators on the Unichain network, Nadeau predicts that MEVs will no longer go into the pockets of Ethereum validators. Thus, an estimated $100 million was added to Uniswap’s annual revenue based on last year’s MEV percentage.

“MEV is estimated at around 10% of total fees paid on Uniswap ($100 million last year). They will also have the option to share some of this with token holders,” Nadeau wrote in his post.

Nadeau also noted that last year Uniswap generated $1.3 billion from trading and clearing fees on five major chains: Ethereum, Optimism, BNB Chain, Base and Polygon. Unfortunately, none of the funds went to the protocol or token holders.

With the launch of Unichain, Ethereum validators may lose a large portion of the $368 million they would have received from settlement fees paid by Uniswap. Not only that, ETH token holders may also be negatively impacted as the protocol burns less ETH and settlement fees are distributed to UNI token holders instead.

“At the end of the day, Uniswap integrates into the technology stack so they can control more of the value they create through their interface and smart contracts,” Nadeau said.

In September 2022, Ethereum co-founder Vitalik Buterin criticized Uniswap’s idea of ​​creating a layer 2 blockchain. He stated that the Uniswap chain or aggregation does not make sense to him because it contradicts Uniswap’s selling point.

“Uniswap’s main value proposition is that you can go and execute a transaction within 30 seconds without even thinking about it. Uniswap chain or even aggregation makes no sense in this context,” Buterin said in an X post.

On October 10, Uniswap Labs announced plans to introduce its new open-source Ethereum-based layer-2 network called Unichain. In a press release shared with Crypto.news, Uniswap Labs explained that the Optimism-backed project will address scalability challenges that have hindered wider adoption of Ethereum.

At the time of this writing, the layer 2 solution is available on a live private testnet, with a public mainnet launch planned for later this year.