DeFi’s most well-known proprietary license is getting put to the test.
A new project, Holaswap, has forked Uniswap’s V3, despite a license theoretically protecting decentralized exchange’s code from use in production settings.
It’s the first major test of Uniswap’s license. The team deployed it to protect their code and encourage the Uniswap community “to be the first to build an ecosystem around the Uniswap v3 Core codebase.”
On Jun. 7, Uniswap V3 facilitated $1.24B in trades, more than 100,000 times more value than Holaswap. Holaswap launched a week ago, so the massive discrepancy between the two may change. Indeed, the forked exchange’s volume is over 29 times higher than it was two days ago.
Holaswap forked Uniswap’s code despite the latter’s Business Source License 1.1, which states a party “must purchase a commercial license,” if their “use of the Licensed Work does not comply with the requirements currently in effect.”
The Business Source License (BSL), allows non-productive use of the code and comes with a “change date,” a time at which the software will move to an open-source license. Uniswap’s V3 core codebase is set to become open source on Apr. 1. 2023, according to the exchange’s implementation of the license.
The legal situation is such that Carol Goforth, a professor of law at the University of Arkansas and author of the 2020 textbook “Regulation of Cryptotransactions,” told The Defiant that her gut feeling is that Uniswap could viably pursue legal action. “The problem is this isn’t a legal issue that fits squarely within crypto regulation,” she said. “Instead it depends on how international copyright laws are going to apply.”
Holaswap runs on Binance Smart Chain (BSC), which uses permissioned nodes to verify the blockchain’s transactions. This means that, unlike with Ethereum, a centralized organization controls the nodes’ section, potentially making it easier to shut Holaswap down.
DeFi is littered with forks. BSC, Holaswap’s deployed-to chain, is itself a modified fork of Ethereum. And Uniswap, perhaps DeFi’s flagship project in terms of market cap at $12.58B, suffered one of the most important forks ever when Sushiswap copied Uniswap’s code and added token incentives. Sushiswap rewarded liquidity providers with their SUSHI token on top of normal trading fees, siphoning liquidity from its victim in what was termed a “vampire attack.” The fork is now the stuff of legend.
Sushiswap has gone on to boast a $1.75B market cap and $303M in daily volume. It’s no stretch to guess that Uniswap issued the license in response to the vampire incident. The license’s creators, David Axmark and Michael Widenius, aimed to strike a balance between the benefits of open-source software and the protection of the business models of software developers.
“I can completely understand why the Uniswap team did what they did.” Dermot O’Riordan, partner at blockchain-focused venture capital firm Eden Block and former lawyer, said about the proprietary license. Though he added the caveat that he’s not sure it was necessary, given that the core team knows the code better than anyone else in the world.
“They are best equipped to leverage Uniswap v3’s new capabilities to create a crypto-native moat against competitors that doesn’t rely on meatspace,” O’Riordan said.
With regards to litigation, O’Riordan believes that “the Uniswap team can do very little in practice unless they can find someone to sue.” Holaswap’s team is pseudonymous, meaning that Uniswap may well have difficulty in pursuing litigation.
Looking forward, Holaswap’s traction is worth watching. While the project now has science project level usage, if it starts generating millions of dollars in trades a day, the stakes for litigation would become much higher. Plus, Holaswap hasn’t deployed a token yet, which would be distributed with the aim of increasing protocol usage.
For now though, Uniswap’s V3 still appears to be the only version of its code with any traction.