Why are DeFi protocols launching their own blockchains?

Some of the biggest DeFi names are betting on dedicated chains as the next step in scaling their products beyond shared networks.

DeFi began as smart contracts on shared, general-purpose networks, led by Ethereum and later expanding to other chains. That model worked until usage and competition for blockspace became a product constraint: fee spikes, congestion and limited control over execution rules and sequencing.

Over the last couple of years, more protocols have started shipping their own execution environments instead of staying as ‘just a dApp.’ Sometimes that’s an app-specific L2, sometimes a sovereign appchain, sometimes a full L1. Examples include dYdX moving to the Cosmos-SDK-based dYdX Chain, Frax launching the OP-Stack-based Fraxtal L2 and Uniswap introducing Unichain as a DeFi-focused L2 within the Optimism Superchain. MakerDAO has also discussed a future ‘NewChain’ in the context of its Endgame roadmap.

What “launching a chain” actually means today

Most protocols are not spinning up a brand-new base layer from scratch. They usually pick one of three paths:

• App-specific L2 (rollup): Ethereum-aligned L2 built on a standard rollup stack. Unichain is an OP Stack L2 designed for DeFi. Fraxtal is also an OP Stack rollup. 
• Sovereign appchain (often Cosmos SDK): runs its own validator set and customizes execution heavily. dYdX chose this route, with a decentralized off-chain orderbook and matching engine design. 
• Purpose-built L1: less common, often aimed at high-throughput, low-latency execution. Hyperliquid is a perps DEX built on its own L1. 

Scalability and performance stop being “nice to have”

On shared networks, every app competes for the same limited resource: blockspace. When demand spikes, DeFi actions tend to become more expensive, with more variable inclusion and latency.

Running a dedicated execution environment lets a protocol prioritize blockspace for its own workload and tune parameters like block time and throughput around product needs:

• Unichain emphasizes one-second block times at launch and plans for sub-second confirmations via “sub-blocks,” framing speed as a requirement for better onchain markets.
• dYdX argues that a first-class orderbook requires throughput beyond what typical L1s or L2s can reliably support and designs the dYdX Chain around that constraint.
• Hyperliquid runs on its own high-performance chain to deliver a CEX-like, non-custodial trading experience.

Control and customization across the full stack

On a shared chain, a protocol inherits the chain’s upgrade cadence, fee market, ordering rules and governance dynamics. A dedicated execution environment makes it possible to move more of those choices into the protocol’s control.

• Execution and UX choices: dYdX Chain uses a decentralized, off-chain orderbook and matching engine, with activity ultimately settled on-chain, aligning the system with orderbook style trading flows. 
• Transaction ordering and MEV policy: Unichain separates sequencing from block building via a verifiable builder built with Flashbots, running inside a trusted execution environment. The design is framed around fair ordering rules and reducing failed transactions.
• Fee model: dYdX states that trading does not require gas fees by default and instead charges trading fees, closer to how trading venues present costs.

This kind of tuning is difficult when a protocol is one of many applications sharing the same execution environment.

Capturing economics instead of donating them to the host chain

On shared networks, a meaningful share of the value created by user activity is captured by the underlying network through validators or sequencers, along with whatever fee burn or distribution rules that network enforces. For protocols with large volumes, this can mean that a portion of the economic upside is realized outside the protocol’s own ecosystem.

A protocol chain can route more of those flows into its own incentive and security loop:

• dYdX: by default, traders do not pay gas fees to trade. Instead, trading fees are charged per fill, and those fees accrue to validators and their stakers unless governance changes the setting. 
• Fraxtal: Flox is positioned as the chain’s recurring blockspace incentives system, rewarding both users and smart contract developers based on activity on Fraxtal. 
• Unichain: it frames this as “user aligned economics,” committing 65 percent of sequencer revenue to validators, with interim routing to a growth reserve while the validator network matures

Ecosystem building, not just scaling

Once a protocol has its own chain, it can shift from operating as a single application to operating as a platform other teams build on:

• Developer gravity: Unichain positions itself as a home for DeFi and cross chain liquidity, and it is paired with a Builder Toolkit plus programs like developer grants and ongoing builder initiatives. 
• Composable growth: stacks like the OP Stack lower the overhead of launching new chains while staying within a broader ecosystem. The Optimism Superchain explicitly targets interoperability across OP Stack chains, aiming to make multiple chains feel more like a single network from a developer and user perspective.

In other words, a chain can also function as distribution: build here, launch here, settle here.

Interoperability becomes a first-class feature

More chains can increase fragmentation, so newer “chain ecosystems” are trying to make many execution environments feel like one application surface.

Unichain explicitly flags liquidity fragmentation across L2s and frames native interoperability inside the Optimism Superchain as the path to smoother cross chain actions. For activity beyond the Superchain, Uniswap Labs also points to ERC 7683, a cross chain intents standard co authored with Across to make different intent based systems interoperate via a shared framework.

Cosmos based appchains like dYdX also lean on Cosmos’ cross chain capabilities as part of the rationale for going sovereign, with interoperability commonly implemented via IBC style transfers and integrations.

Security and risk isolation, with trade-offs

A dedicated chain can improve isolation from some shared-environment risks:

• Operational control: validator or sequencer requirements, monitoring, upgrade cadence and emergency procedures can be defined at the protocol level rather than inherited from a host chain.
• Performance isolation: application specific execution reduces “noisy neighbor” effects, where unrelated activity drives congestion, fee spikes or unpredictable latency.

At the same time, a new chain introduces new security surfaces and different failure modes:

Weaker or newer security assumptions: smaller validator sets, lower economic security or more centralized sequencing can increase the impact of bugs, misconfigurations or governance capture.

Cross-chain risk: even if execution is isolated, assets still move in and out. Bridging and cross-chain messaging expand the trust boundary and remain high-value targets.

Why not every protocol should launch a chain

Fragmentation risk

More execution environments can split liquidity, fragment order flow, and add routing complexity. Even teams launching new chains call out fragmentation explicitly and position cross chain interoperability as a core goal, for example Unichain’s focus on uniting liquidity across chains and Superchain native interoperability.

Operational and security cost

A chain is infrastructure. It requires upgrades, monitoring, relationships with validators or sequencers, incident response, security processes, and long term engineering ownership. This is a different workload than shipping smart contracts on a host chain.

Adoption uncertainty

Users tend to follow liquidity, best execution, and the smoothest UX. A new chain needs clear, persistent advantages or strong distribution to pull activity away from established venues, otherwise liquidity and developers may remain where depth and composability already exist.

When does a protocol chain make sense?

• Launching a chain tends to make sense when several of these are true, and at least one is a hard requirement:
• Performance defines the product (orderbooks, perps, latency sensitive execution, complex automation).
• Usage is large enough that fees and execution economics can sustainably fund incentives, security and maintenance.
• Customization enables features that cannot be reliably delivered as one tenant on shared blockspace.
• A credible interoperability plan exists (ecosystem native messaging and standards like intent interoperability).
• Infrastructure can be operated in house or through partners without undermining the intended decentralization and security model.

Either way, the direction is clear: in DeFi, “the chain” is no longer just where code lives. It is increasingly part of the product.

Stay tuned for upcoming guides designed to shed light on how DeFi works!