Uniswap Layer 2 Addresses are Up 350% – But There’s a Catch

Uniswap’s Layer 2 user count is skyrocketing, setting new highs in both June and July – but there’s a catch. The protocol’s trading volume is on a steady downtrend and when subtracting one L2, addresses are actually down.

Users transacting on Uniswap on Ethereum’s Layer 2 scaling networks jumped by 350% in July versus June, with unique addresses growing from 1.82 million in May, to 4.93 million in June, and 8.93 million in July.

Uniswap’s dataset in Dune Analytics refers to its major L2s: Arbitrum, Base, Optimism, Polygon, ZkSync, and Zora. Uniswap is the largest decentralized exchange (DEX) by trading volume.

June and July both drastically outpaced the previous all-time high of 2.12 million set in April.

Despite the parabolic rise in unique users, monthly protocol volume has been on a downtrend since its all time high of $33.6 billion set in March. Volume declined by 31% to $23.2 billion in June, and fell another 12% to $20.5 billion in July. Overall, Uniswap had a 39% decrease in volume between May and July.

The spike in users coinciding with the fall in volume indicates a rise in low value users and is reminiscent of sybil activity.

Sybil attacks occur when users attempt to manipulate protocols, usually those that have an upcoming airdrop. Traders often trick protocols into believing that one user is actually dozens or even hundreds of unique users in order to receive mass airdrop allocations.

On July 25, TokenTerminal reported that 80% of Uniswap’s monthly active traders are on Coinbase’s L2 Base. The skewed user distribution suggests users could be mass-sybilling Base, speculating on a future token launch.

What’s more, when subtracting Base from the Dune Analytics’ query, Uniswap’s unique monthly addresses on L2s have been falling every month since April.

That said, it’s unlikely that all of Base activity is due to Sybil attacks, but it’s worth taking the 3x increase with a small grain of salt.