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Review Uniswap cross-chain debate, encryption unicorn is still the original intention?

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Although the Uniswap selection is done and dusted, caution should still be exercised when it comes to cross-chain scenarios, with multi-chain, cross-chain, full-chain storytelling and gaming still going on.

CryptoBricks

1. The origin of disputes: anti-bifurcation BUSL

Vampire attack

On 26 August 2020, Sushiswap added a SUSHI Token on top of a copy of Uniswap source code to decentralize protocol governance to community users.precursorIt has been argued that Liquidity Provider (hereinafter referred to as LP) is the core role of new liquidity pool to achieve growth flywheel [1], so Sushiswap has been referred to Uniswap since its launch. The core logic of LPs that attracted Uniswap's capital pool through SUSHI's Tokenomics design was to give SUSHI HODLers more equity in order to achieve retention.

Sushiswap's three-tier attack:

零成本套利 - 吸引用户：在 Uniswap 资金池提供流动性的 LPs 可以将其 LP Token 质押到 Sushiswap 合约中，以获得 SUSHI 代币，其套利成本几乎为零，因此 SUSHI 短时间内市值抬升至接近 $300 M，吸引了约 $1.6B 的 LP Token [2]。

Liquidity Migration - Converted Users: LPs could take its token pair that provided liquidity on Uniswap and migrate it to Sushiswap to continue providing liquidity, implementing LPs that converted external users into its own protocol, which at one point allowed Sushiswap's TVL to leapfrog Uniswap and approach $2B.

Token 激励 LP - 留存用户：Sushiswap 收取 0.25% 手续费供 LPs 分红，同时吸纳 0.05% 的资金激励 SUSHI 的持有者，使得用户在离开流动性池子后不仅仍然能够获得持续的协议收益，还能够获得项目的治理权，将转化来的用户留存成为协议的长期支持者。

Data source: DeFi Pulse, Coinbase

Commercial source code license

Despite Uniswap regaining its crown as head DEX with $26B of trading volume in early 2021 (Jan 1, 2021) through the issuance of Governance Token UNI and liquidity mining incentives for its pool, But Sushiswap was also close behind at $1.3B. Considering the increase of DeFi Summer at that time, Uniswap TVL's rise cannot exclude the presence of a large amount of money entering the Crypto component, and its market share is still eaten by Sushiswap. A forked protocol is still the fourth largest in terms of market share in DEX today (Feb, 2023) [3].

Therefore, in order to prevent such attacks from affecting protocol stability, Uniswap applied for V3 before it went liveCommercial source code license, except those licensed under GPL-2.0 or highercontracts/interfaces/andcontracts/libraries/And inMIT licenseOr unlicensed files, Uniswap V3's core code is all thereBusiness Source License 1.1 (Bus-1.1)Under the License [4], which states that "a Change License is available to any person from the date of change, or four years after the first Public distribution of a particular version of the licensed work under this License - GNU General Public License v2.0 or later, And the right to copy, modify, create derivative works, redistribute and non-productively use licensed works [5]. In short, after the Bus-1.1 license expires (Apr 1, 2023), anyone can deploy Uniswap V3 on any chain and profit. Thus, this is where Uniswap governance comes in. Uniswap urgently needs to deploy protocols on the BNB Chain to gain market share.

Two, cross-chain disturbance

Uniswap governance Process

As updated by devinwalsh in January 2023Community Governance Process Update [Jan 2023], Uniswap's current governance process is:

Stage 1: Request for Comment (RFC)

The second stage: Temperature Check

Stage 3: Governance Proposal

According toDeploy Uniswap v3 (1/0.3/0.05/0.01) on BNB Chain (Binance) Deploy UnisWAp V3 (1/0.3/0.05/0.01) On BNB Chain (Binance)As planned by the proposer ilia_0x, the process of this proposal is as follows:

1. Discussion on Governance Forum/ Twitter Space

2. Uniswap v3 + Governance Bridge Deployment on BNB Chain Testnet. Tests and Simulations.

3. Temperature Check

4. Governance Proposal

5. Uniswap v3 Deployment to BNB Chain mainnet

6. Subgraph Deployment

7. Uniswap UI integration*

However, when the community passed by a margin of 20M UNI, 80.28%Should Uniswap v3 be deployed to BNB Chain?After the temperature check vote, the community was divided on the choice of cross-chain tools. Unlike Sushiswap, Uniswap currently supports Ethereum and its Layer 2, so deploying the protocol at Layer 1 like BSC requires inter-chain information transfer, asset transfer, and other functions through community-selected cross-chain tools. The controversy also centers on Jump Crypto, Folius Ventures backed Wormhole, and a16z and Sequoia Investments' LayerZero.

Comparative analysis of tools across chains

Wormhole is a cross-chain data transfer protocol made up of verification nodes endorsed by 19 centralized institutions. Each node independently verifies cross-chain transactions issued by smart contracts on non-EVM-compatible blockchain networks, including Solana, and completes the final transaction on the target chain after passing 2/3 verification. Therefore, Wormhole's security design is essentially an interest game construction based on human nature, rather than the underlying design of "code is law" : the 19 organizations pay more attention to their brand and reputation than colluding with 2/3 verification nodes to do evil, so joint evil rarely occurs. In addition, the hacking incident of 22 years was not caused by the evil of the verification node, and after the attack, Wormhole's Jump Crypto invested US $300 million to cover the loss, and Wormhole also offered tens of millions of rewards to encourage white hat hackers to conduct vulnerability review.

However, Wormhole bridging requires the deployment of corresponding smart contracts on the two chains respectively. When the number of Bridges increases, the smart contracts increase exponentially. However, the vulnerabilities of smart contracts are the main objects for hackers to attack cross-chain Bridges. LayerZero solves this problem by allowing each application to deploy an Endpoint on a single contract and transmit transaction proof and payload information to the destination chain via a repeater and a prophet, respectively, to be validated by the Endpoint on that chain before execution. LayerZero deconstructs the Wormhole middle layer consisting of 19 nodes through a user-selectable repeater and a predictor, so the attack can only be launched if an attacker controls both the repeater and the predictor, and this attack only works between the repeater and the predictor. Other cross-chain communication is not affected. In addition, LayerZero gives a protocol more autonomy than a Wormhole because it can choose its own repeater and predictor.

Rethinking the cross - chain after the storm clears

In the face of opposition from a16z 15M UNI, Wormhole finally resisted the pressure and became the final choice of the community with 55.88M UNI, 65.89%. Even though LayerZero put forward the concept of Omnichain, cross-chain is no longer a one-to-one channel, but a one-to-many network, thus greatly reducing the risk of deployment contract. However, considering only the migration of Uniswap to a BSC chain, the risk level of a contract deployment is similar to Wormhole's, while LayerZero's benefits are more significant for Sushiswap's multi-chain ecosystem. Uniswap's selection of Wormhole and LayerZero's Sushiswap also form cross-chain tool risk hedging. In addition, LayerZero is actually "non-endorsing" compared to Wormhole, and instead leverages a kind of relationship withNostrSimilar logic shifts the risk to protocols, but with Uniswap's billion-dollar daily volume of DEX, the risk is less manageable than getting a few spam messages. Wormhole, which is endorsed by more than 13 top Crypto institutions (accounting for more than 2/3 of the verification nodes), may have no lower evil cost than LayerZero. And Jump Crypto, which spent $300 million to plug the hole, does add another layer of insurance to the Wormhole.

However, capital support cannot replace technology change. The ability to pay is a positive factor, but it is not the core of cross-chain tools. With the collapse of the FTX building, trust in centralised institutions is eroding. Even if the cost of combining a dozen top institutions is still terrible, it is not trustless. Wormhole's supporters, while criticizing LayerZero as a non-upgradable contract, should also be wary of the potential crisis in each upgrade. In addition, both Wormhole and Layer Zero still lack the ability to cope with 51% attacks of a single chain, which makes the risk that should be controlled on a single chain multiplied. So while the Uniswap selection is done and dusted, caution should still be exercised regarding cross-chain scenarios, with multi-chain, cross-chain, full-chain storytelling and gaming still going on.

3. Power game under decentralization

While the head-to-head head-to-head of two major investors was enough to get attention, what really brought the whole thing to a head was the 15M UNI held by a16z, causing the community to question how decentralised Uniswap was. Uniswap V3 is deployed on Ethereum, and the core logic and functionality of the contract cannot be modified, so even if a16z or any capital does have absolute power over community proposals, there is no way to break the Uniswap protocol itself, so from a protocol level, Uniswap's decentralized nature remains unquestioned.

However, as the public focused on the Uniswap team with members from Chainalysis, the New York Fed, the New York Stock Exchange, etc., even though the on-chain contracts weren't changing and oversight was limited to the front end, users were still able to bypass Uniswap's front end and interact with the contracts, FUD did emerge. From the vision for Uniswap V4: There was concern that Uniswap V4 might be more regulatory than V3 and take away some of the spirit of decentralization [6].

If we take a worst-case scenario, the regulatory and capital layout may be pretty much complete by now, and once the next generation of Uniswap protocol removes immutability, the chances are that UNI-holders will be in control, while the potential underwater whales will remain unknown to us. Although Uniswap V1-3 will continue to be put into use, if the control of UNI, that is, the control of the community, is centralized or even monopolized, Uniswap V4 will absorb the liquidity of the previous three versions to a great extent through liquidity mining, air drop, etc., on the one hand, the iron law of regulation, On the other side is tight liquidity. What will traders do?

Although there is indeed this level of risk, in terms of the actual situation of this storm, 15M of a16z and 8M of jessewldn are the two highest amounts of votes in the chain, but they did not change the final result. However, no one has a say until a thorough study has been made of the other coin addresses.