Overview

The growth of new chains and the enhancement of bridge solutions that allow for seamless movement of assets across chains is drastically altering the blockchain economy by making block space more accessible, plentiful, connected and ultimately cheaper.

Furthermore, the deployment of popular dApps, such as Uniswap, to multiple networks has led to the creation of multiple pools representing the same assets on different networks but with different volume and liquidity depth. This presents new opportunities for trading and for exploiting inefficiencies through MEV to reduce discrepancies between networks.

Problem

The changes in the basic market structure of blockchain economies with a decreasing cost of block-space has the potential to alter the balance between different actors in the ecosystem.

Additionally, as L1s and L2s chains mature and new chains (such as L3s) are emerging, the growth of cross-chain MEV opportunity the various es will continue to increase and expand.

The potential effects and opportunities for decentralized applications like Uniswap, as a result of these trends, are yet to be fully explored and understood.

In the specific case of Uniswap, particular attention should be focused on the impacts of these trends on traders, liquidity providers, and the overall Uniswap Protocol.

Solution

Through this request for proposal, the Uniswap Foundation aims to support research on cross-chain market structure dynamics and the opportunities/threats it carries for the Uniswap ecosystem.

Scope

Possible topics for investigation:

• Identify and quantify cross-chain MEV extraction taking place within the Uniswap ecosystem (considering Ethereum, Polygon, Optimism, Arbitrum and Celo).
• Analyze the cross-chain arbitrage landscape:
  1. Determining the Key Players involved (LPs, Validators, Searchers, Bridges, etc.) and analyzing where and how the value is accrued.
  2. Illustrating the current methods used to capture MEV cross-chain.
  3. Highlighting potential alternative approaches to minimize differences across different Uniswap implementations (including an a analysis of Cross-chain Arbitrage via Slot Auctions or via Pricing Premiums as introduced in this paper and other possibilities)
• Analyze how cheaper block-space could be used to improve order flow routing, focusing on the implications for traders, liquidity providers and the overall Uniswap Protocol.
• Highlight what are the opportunities and threats that the change in market structure could bring to the Uniswap Protocol, focusing on the impacts on traders, liquidity providers and the overall protocol. Examine potential actions that can be taken by Uniswap to mitigate risk, including but not limited to: running its own block builder, implementing a search module to detect and capture arbitrage opps (and share value with users), funding research into and implementation of cross-chain routing, and more.

Deliverables

As part of the project scoping, the team is expected to define the detailed list of deliverables for their proposal. Deliverables should include (but are not limited to) a research on cross-chain market structure dynamics and the opportunities/threats it carries for the Uniswap Ecosystem.

The research should suggest concrete actions for further investigation or, ideally, provide directions for implementation.

Timeline