1inch (@1inch): DeFi’s next era: why protocols are building their own chains (and when it makes sense)

DeFi’s next era: why protocols are building their own chains (and when it makes sense) Big DeFi players like Uniswap, dYdX, Frax and others are launching their own chains. Not just smart contracts anymore- they’re becoming full execution environments. Why? Congestion, fees, control, and economics. Is this the future of DeFi… or fragmentation risk? Let’s break it down. DeFi started on shared networks like Ethereum Smart contracts on general-purpose L1s worked great… until they didn’t. High usage → fee spikes, congestion, limited control over rules, sequencing, and blockspace competition. That became a real product constraint. Now protocols are shipping their own chains Over the last couple years, top names moved beyond being “just a dApp”: dYdX → Cosmos-SDK-based dYdX Chain Frax → OP-Stack-based Fraxtal L2 Uniswap → Unichain (DeFi-focused OP Stack L2 in Optimism Superchain) MakerDAO discussing “NewChain” in Endgame roadmap Hyperliquid → own high-performance L1 for perps What “launching a chain” actually means in 2025 Most aren’t building a new L1 from scratch. Three main paths: App-specific L2 (rollup) - Ethereum-aligned, built on standard stacks like OP Stack. Examples: Unichain (DeFi-optimized), Fraxtal. Sovereign appchain - Own validator set, heavy customization (often Cosmos SDK). Example: dYdX Chain with off-chain orderbook + on-chain settlement. Purpose-built L1 - Rare, for extreme throughput/low latency. Example: Hyperliquid for CEX-like non-custodial trading. Scalability isn’t optional anymore On shared chains, every app fights for the same blockspace. Spikes = expensive, variable latency. Dedicated chains let protocols: Prioritize their own workload Tune block times, throughput, etc. Examples: Unichain → 1-second blocks at launch, sub-second via “sub-blocks” for better onchain markets dYdX Chain → Built for orderbook throughput no shared L1/L2 can reliably deliver Hyperliquid → High-performance chain for CEX-like experience Full-stack control & customization Shared chains force you to inherit upgrade cadence, fees, ordering, governance. Own chain = protocol decides: Execution/UX: dYdX uses decentralized off-chain orderbook + matching engine MEV & ordering: Unichain separates sequencing via verifiable builder (Flashbots in TEE) for fair rules & fewer failures Fee model: dYdX charges trading fees (no default gas), closer to real venues Hard to do this when you’re just one tenant on someone else’s chain. Capturing value instead of donating it On shared networks, a chunk of user activity value goes to the host (validators, sequencers, fee burns). Protocol chains route more back in: dYdX → Trading fees accrue to validators/stakers (no gas by default) Fraxtal → Flox rewards users + devs based on activity Unichain → 65% sequencer revenue to validators (interim growth reserve) From app to platform: ecosystem building Own chain turns protocol into a foundation others build on: Developer tools/grants: Unichain’s Builder Toolkit + programs Composable growth: OP Stack lowers launch costs, Superchain adds interoperability It becomes distribution: build here, launch here, settle here. Interoperability as a must-have More chains = potential fragmentation. New ones fight it: Unichain → Native Superchain interoperability + ERC-7683 (intent standard with Across) dYdX → Leverages Cosmos IBC for cross-chain Goal: multiple environments feel like one surface. Security & isolation: pros and cons Pros: Performance isolation (no noisy neighbors) Custom operational control (validators, upgrades, emergencies) Cons / new risks: Weaker/newer security (smaller validators, centralization points) Cross-chain bridging risks (still high-value targets) Why not every protocol should do this Fragmentation - Splits liquidity/order flow (even launchers call it out and build fixes) Operational cost - Upgrades, monitoring, security, long-term ownership Adoption risk - Users follow liquidity/UX; new chain needs big advantages When does it make sense? Usually when several are true (at least one hard requirement): Performance is core to product (orderbooks, perps, low-latency) High volume to fund incentives/security Customization needed that shared space can’t deliver reliably Solid interoperability plan Can operate infra without losing decentralization Bottom line In DeFi, “the chain” isn’t just infrastructure anymore - it’s becoming part of the product. What do you think: is this the future, or will shared L2s win? Have you tried trading on dYdX Chain, Unichain, or Fraxtal yet?