Can UniSwap and Flashbots solve the MEV problem?

Yesterday, Uniswap announced a partnership with Flashbots to launch Unichain, an Ethereum L2 designed specifically for DeFi. This is an Optimistic Rollup based on the OP Stack that aims to address some of the challenges facing DeFi. It is worth mentioning that Uniswap, Flashbots, and Optimism have all received investment support from Paradigm.

The current block time of Ethereum L1 is 12 seconds, and the slow transaction speed limits the user experience. In addition, the MEV problem also needs to be solved. The existing block construction mechanism causes some participants to obtain unfair benefits by manipulating the order of transactions, thereby reducing market efficiency. In response to these problems, Unichain launched "Flashblocks" with a 1-second block time and 250 milliseconds, combined with a verifiable priority sorting mechanism and a trusted execution environment (TEE), which greatly improved the transaction speed, while increasing the transparency and fairness of transaction sorting, injecting new vitality into the DeFi ecosystem of Layer 2.

Technical Features of Unichain

1. Verifiable Block Building

This is a new block building mechanism introduced by Unichain, implemented by Rollup-Boost. It aims to improve the transparency of transaction sorting on the blockchain, reduce unfair MEV extraction, and increase transaction processing speed. The basic idea is to use TEE to perform the block building process and provide a transparent and trusted sorting mechanism. Rollup-Boost is a verifiable block building platform developed by Flashbots to upgrade Rollup performance, which optimizes the block building process through TEE. Unichain is its first practical application case. Rollup-Boost is integrated on Unichain as a sidecar software, using its technical features (such as Flashblocks' fast confirmation and verifiable priority sorting) to enhance Unichain's performance and user experience.

How verifiable block building works:

• Block building with TEE: TEE is a hardware security technology that can perform computing tasks in an isolated environment, ensuring that the external environment cannot be tampered with or interfered with. In Unichain, block builders run in TEE to ensure that the building process is safe and reliable. TEE simulates transaction execution, detects whether any transactions will fail, and removes failed transactions, thereby preventing users from paying high fees for failed transactions.

• Generate Flashblocks: Unichain generates a block every 1 second, and introduces a pre-confirmation mechanism Flashblocks, which divides each block into four flash blocks (i.e., a pre-confirmation is generated every 250 milliseconds) and transmits it to the sequencer in real time. Users can get early confirmation before the transaction is officially packaged, preventing transaction rollbacks due to block reorganization and other reasons, and reducing additional costs caused by uncertainty. This mechanism speeds up transaction settlement and reduces the chance of MEV extraction.

• Priority and Verifiability: Rollup-Boost provides a verifiable transaction sorting method that enables users to verify the order in which their transactions are executed in the block. By building blocks in TEE, transaction prioritization can be transparently carried out according to specific rules (such as priority fees paid), and verification proofs can be used to confirm whether block construction complies with these rules. This mechanism not only prevents block builders from abusing sorting power, but also internalizes MEV, that is, setting rules (such as MEV taxes) to allocate a portion of MEV revenue to protocols or liquidity providers.

2. Unichain Validation Network

Unichain Verification Network (UVN) Through staking and distributed verification, it solves the risks existing in the single sequencer architecture and accelerates the economic finality of the blockchain.

UVN consists of multiple nodes, each of which can independently verify the status of the block to ensure that all transaction records are legal and have not been tampered with. It can prevent the risk of conflicting blocks (Block Equivocation Risk) or invalid block risks (Invalid Block Risk) in a single sequencer, thereby enhancing the security of the network. Operators who become UVN verification nodes must stake UNI tokens on the Ethereum mainnet. The more nodes staked, the greater the weight they have and the more chances they have to become active verification nodes.

In addition, UVN provides a faster economic finality mechanism, which reduces the potential delay caused by a single sequencer through multi-node parallel verification. Each verification node confirms the validity of the block during the verification cycle and publishes the verification information on the network to increase the credibility of the chain state. Once the block is verified, the transactions are considered to be irreversibly completed (i.e. economic finality). The validator needs to verify the block and issue a notarization during each verification cycle, otherwise he will not receive the corresponding reward.

What does the community think of Unichain?

Ryan Watkins, co-founder of Syncracy Capital, put forward the view that "RollApps are FatApps", believing that the RollApp represented by Unichain has higher control and flexibility, similar to fat applications, with greater control and management capabilities over infrastructure, and can better control the value it creates. He divided the application structure into three types and compared their control scopes:

1. Standard Application: These applications only control the application logic and application fees, and rely on the blockchain infrastructure for execution, settlement, consensus, and data availability. The application has a relatively small control scope.

2. Smart Contract RollApp: The application's functionality and control scope are extended through smart contracts, covering the execution level. The application can manage its own execution logic and fees, but still relies on the consensus and data availability of the underlying blockchain (such as Ethereum).

3. Sovereign RollApp: This type of application can control almost all aspects (except data availability), is more independent in infrastructure, and can provide users and developers with higher customization control and functions.