Game Changers - The Daily Gwei #223

Once in a while, something magical happens.

Every so often in the Ethereum space there’s something that comes along and “changes the game” for the entire industry. We’ve already seen plenty of these over the years including things like Maker’s DAI (the first decentralized stablecoin), Compound’s liquidity mining program (which led to DeFi’s explosive growth in 2020), Yearn/YFI launch (pioneered the “fair launch”) and more.

I believe the next game-changer for the entire ecosystem will be when Uniswap deploys onto a layer 2 on Ethereum and I believe this for a few reasons. The first reason, and arguably most important, is that I think that Uniswap on layer 2 will be the first layer 2 app to get mass adoption (relative to layer 1 DeFi). Think about it - which other app on Ethereum has anywhere near as much brand awareness as Uniswap? It’s pretty much the first DeFi app anyone ever uses when they onboard to Ethereum and it is also one of the most frequently used since its a decentralized exchange. On top of this, Uniswap still accounts for 60% of all DEX volumes on Ethereum which shows you just how deep its moat is. This means that Uniswap will most likely be the first app that most people use on layer 2 and of course, first impressions matter!

If Uniswap is successful in its move to layer 2 (and there’s no reason it won’t be), then I think that it’ll “derisk” the move for other major DeFi protocols. If we look at which top 10 DeFi projects have moved to a “true” mainnet layer 2 today, it’s really only Synthetix that’s live on Optimism’s mainnet. Other projects like Aave have deployed on Polygon, Curve Finance has had a zkSync testnet implementation live for a while and SushiSwap has taken a shotgun approach by deploying to a bunch of EVM-compatible chains. So as you can see it’s really just a bunch of experimentation going on right now with scalability solutions in general - which isn’t a bad thing for now.

We all know that narratives can change incredibly quickly in the crypto ecosystem - one minute a project is on top of the world and everybody loves it and the next it seemingly disappears completely out of the conversation. This is of course because the ecosystem is so hyper-sensitive to price movements - if a token is going up in value then that must mean that the protocol/product that it’s apart of is amazing. If the token is trending sideways or going down then the product/protocol is dead, a scam, a rug pull etc. Same is true for something like scaling - since Ethereum has high fees today, people say that it’s dying, an extortionist scam, going to be flipped by some other chain etc. I believe that as soon as Uniswap goes live on layer 2 this narrative will completely change in a matter of weeks (if not days).

All of the above isn’t to say that the projects already live on layer 2 (dYdX, Loopring, DeversiFi etc) aren’t having an impact but the reality is that they are no where near as big as Uniswap (yet?). True game-changers in the crypto ecosystem only come around once in a while because they take time to manifest and require a bit of luck to really make an impact. I hope to see Uniswap on layer 2 soon - possibly in May since that’s when v3 is going live - then we can really show the doubters that yes, Ethereum can scale, and no, Ethereum is not “dead”.

Have a great day everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.