Since its official launch in February 2025, the Layer 2 network Unichain did not seem to cause a huge splash in the market at the first time. It coincided with the overall encryption market entering a period of adjustment, and its voice was once drowned.

However, the silence did not last long. On April 15, after Unichain and Gauntlet jointly launched a liquidity incentive event worth $5 million, Unichain’s cross-chain activities heated up significantly. In just 24 hours, 11 addresses cumulatively injected approximately $22.23 million worth of tokens into Unichain. The effect of this sudden “spreading money” activity was immediate. According to DefiLlama data, Unichain’s TVL saw an astonishing jump after April 15, soaring from approximately $9 million to $267 million in 2 days. This number quickly climbed to 4th place among many Layer 2s. Is Unichain’s incentive-driven TVL explosion just a short-lived “hair-raising” carnival, or is it an effective verification of Uniswap, the DeFi giant’s magnificent transformation from the protocol layer to the underlying public chain? Can Unichain take this opportunity to truly become the new home of DeFi?

Layer2 Built for DeFi

To understand Unichain’s recent surge, let’s look back at its fundamentals. Unichain is the result of UniswapLabs’ years of dedication to the DeFi sector. It is designed as a high-speed, decentralized Layer2 solution specifically for DeFi and cross-chain liquidity.

Performance-wise, Unichain is similar to other L2 solutions. According to official reports, it achieved a block time of 1 second after its mainnet launch and plans to achieve sub-second block times of less than 200 milliseconds using TEE (Trusted Execution Environment) technology developed with Flashbots, making transactions nearly instant. In terms of costs, Unichain’s transaction fees are about 95% lower than those on the Ethereum mainnet.

As of April 16, 2025, Unichain’s official website reports processing over 20 million transactions and having more than 371,000 wallet addresses. Additionally, during its testnet phase, it processed 95 million transactions and deployed 14.7 million smart contracts, demonstrating its brand strength.

In terms of ecosystem collaboration, Unichain received substantial support from industry giants right from its launch, with nearly 100 crypto projects and infrastructure providers, including major players like Circle, Coinbase, Lido, and Morpho, announcing their support or building on Unichain. Overall, Unichain appears to have assembled the essential elements for creating a DeFi Layer2: high performance, low cost, and early backing from industry leaders.

How $5 Million in UNI Leveraged $270 Million in TVL

Although Unichain has a solid foundation, the explosive growth in TVL was undoubtedly sparked by the liquidity incentive program launched by Gauntlet. This initiative planned to distribute a total of $5 million in UNI tokens as rewards to 12 specific liquidity pools on Unichain over the first two weeks. These pools primarily focused on mainstream asset pairs such as USDC/ETH, ETH/WBTC, USDC/WBTC, and UNI/ETH, as well as various LST/LRT and ETH pairings.

The effectiveness of this event in attracting liquidity can be attributed to two main factors.

Firstly, the “yield farming effect” – the $5 million UNI token reward concentrated on 12 pools and distributed over a short period (initially two weeks) could potentially offer high returns for liquidity providers.

Historical data from Gauntlet’s similar incentive programs on other chains suggests that $1 of incentive could bring in $35-50 in TVL. Based on this, the event could ultimately result in $175 million to $250 million in TVL growth for Unichain. Current data shows Unichain’s performance has already surpassed typical expectations.

What returns can this event bring? Based on the $267 million TVL growth, users investing $10,000 could receive about $181 in returns, a yield of approximately 1.81%. Of course, this calculation is based on the current TVL level, and the final TVL might be higher, resulting in relatively lower actual returns for users.

Secondly, behind the large funds chasing this yield farming effect is the deeper need for “stable returns” during a market downturn. In the first quarter of 2025, the crypto market experienced a correction, with prices of major assets like Bitcoin and Ethereum declining and market volatility increasing. In such an environment, substantial capital, particularly large sums, tends to seek relatively low-risk and stable-return safe havens.

As more funds pour in, the competition for limited opportunities intensifies. Blogger @0x_Todd criticized that such mechanisms force LPs to concentrate liquidity in extremely narrow price ranges. For instance, USDC/USDT is maintained between 0.9998-1.0000, resulting in tens of millions of dollars in ultra-high liquidity depth within this narrow range, but with a fee rate of only 0.01%, daily trading fee income is only $1K-2K. This competition also leads to significant waste of funds.

Overall, the surge in Unichain TVL results from high short-term incentives and the demand for stable returns during a market downturn. However, whether this short-term surge has lasting significance remains to be seen.

Uniswap’s Strategy: Can Unichain and V4 Bring Them Back to the Top of DeFi?

With Unichain’s mainnet launch and the initiation of incentive programs sparking market activity, Uniswap Labs’ comprehensive strategy is beginning to unfold. From deploying Uniswap V4 to resolving regulatory hurdles and advancing community governance proposals for fee switches, Uniswap is making a concerted effort to reclaim its leadership in DeFi.

In January, Uniswap V4 was deployed across more than 10 major networks, including Ethereum, Polygon, and Arbitrum. V4 introduced a “Hooks” mechanism, enabling developers to insert custom code at critical points in the liquidity pool lifecycle, significantly enhancing the protocol’s flexibility and transforming it from a DEX into a DeFi developer platform. As of April 17, Uniswap V4’s total value locked (TVL) has reached $369 million, surpassing that of the V2 version.

Moreover, a long-standing SEC investigation concluded in February 2025 without any enforcement action against Uniswap Labs, and a $175,000 settlement was reached with the CFTC regarding specific leveraged token trades. This has substantially reduced the systemic regulatory risks facing Uniswap’s core operations.

The advancement of Unichain and V4 relies heavily on financial backing. In March, the “Uniswap Unleashed” proposal was approved, granting approximately $165.5 million to support Unichain and V4’s growth, including $95.4 million in grants, $25.1 million in operational expenses, and $45 million in liquidity incentives. This funding is sourced directly from the UniswapDAO treasury.

The protocol fee switch is a critical concern for UNI holders. Although related proposals have passed initial and final votes with strong support, their implementation is pending the Uniswap Foundation’s resolution of legal entity issues. Once activated, it will provide direct protocol revenue to UNI holders who stake and participate in governance, marking a crucial step in capturing value for the UNI token.

Unichain appears to be a highly optimized “home field” crafted by Uniswap, with V4 acting as its most potent tool. While transferring most of the TVL to Unichain is a potential long-term objective, achieving this in the short term remains challenging. Currently, Unichain’s TVL (approximately $178 million) lags significantly behind the Ethereum mainnet (about $2.5 billion) and Base (around $600 million).

Nevertheless, Uniswap is likely to continue driving towards this goal through ongoing community incentives. The Uniswap DAO has already approved an initial $21 million liquidity incentive for Unichain (over three months) and anticipates needing about $60 million in incentive funds in the first year. Additionally, a grant budget of $95.4 million is allocated, with part of it designated for the Unichain ecosystem.

The recent surge in Unichain’s TVL, sparked by the liquidity incentive plan, is more than just a rush for short-term high returns; it’s a strategic move by Uniswap to draw attention back to this DeFi-focused L2 network and to test the feasibility of using substantial financial resources to jumpstart the ecosystem.

This initiative is part of Uniswap Labs’ broader strategic vision: to achieve vertical integration from application to infrastructure by launching Unichain and the V4 protocol, thereby creating a high-performance, low-cost, highly customizable chain dedicated to DeFi, and to secure its lead in the competitive landscape. However, transforming Unichain from a “protocol application chain” to the “new home of DeFi” presents numerous challenges. Can short-term incentives lead to long-term user engagement and true ecosystem prosperity? Will the innovative potential of V4 Hooks be fully realized? When will the eagerly awaited protocol fee switch be implemented to truly enhance the UNI token?

For Uniswap and its UNI holders, the future holds both opportunities and challenges. The success or failure of Unichain will significantly impact Uniswap’s standing in the next era of the DeFi landscape. Whether this ambitious transition from application to chain will succeed is something the market is keenly observing.

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