The end of an Era – Introduction
On April 1, Uniswap V3’s Business Source License (BSL), which prohibited third parties or competitors from using its code without permission, expired, as shown by the protocol’s documentation.
Uniswap v3’s license was released in 2021 with a two years duration. While a BSL allows anyone to use and modify the codebase for non-commercial uses,
it also preserves the author’s right to profit from their creation.
However, since the BSL expiration, the code is now open source for all purposes.
The only requirement for developers who want to leverage Uniswap’s code is to use an “Additional Use Grant”, a product exemption that allows for limited production use.
After its launch, Uniswap V3 took less than 20 days to reach and surpass $1B of TVL, according to DefiLlama. Uniswap V3 currently has $2.78B locked into the protocol, with $2.3B only on Ethereum.
Uniswap V3’s Total Value Locked. Source: DefiLlama
With the introduction of Concentrated Liquidity, which enables LPs to provide liquidity into specific price ranges, Uniswap V3 disrupted the liquidity provision mechanism, previously based on the traditional AMM model.
By providing liquidity into price ranges, LPs can accrue way more fees, while trades suffer less from slippage, overall greatly improving the whole process.
At the same time, the protocol can provide a better trading experience to its user, since concentrated liquidity allows for improved liquidity depth on trading pairs, while relying less on unsustainable incentive campaigns that only attract mercenary capital, since LPs are attracted by higher organic APYs.
For instance, if we compare the fees generated by Uniswap and Bitcoin in 2023, we’ll see how the DEX constantly outperformed the Bitcoin network, ranking second after Ethereum.
Uniswap, as a DeFi pioneer, paved the way for other protocols to provide solutions based on concentrated liquidity, such as Trader Joe’s Liquidity Book.
Nevertheless, now that Uniswap V3’s BSL expired, we’re already seeing protocols forking its code and proposing lower fees, starting what could become a long series of vampire attacks against Uniswap.
Good projects copy, Great projects steal – Pancakeswap V3
Two days after Uniswap V3’s license expiration, Pancakeswap launched its V3 by forking Uniswap code.
The leading BNB Chain’s DEX, which currently has around $2.2B of TVL, didn’t lose time and rolled out its new iteration which features a new fee tiers model and leverages concentrated liquidity.
At the time of writing, Pancake V3 has reached $126M in TVL in just a couple of days, confirming its popularity within the DeFi space.
The V3 fee tiers model offers fee tiers of 0.01%, 0.05%, 0.25%, and 1%, against the 0.05%, 0.30%, and 1% proposed by Uniswap, confirming the suspicion of a potential vampire attack, in which protocols try to steal market share to competitors by proposing similar products or services with lower fees.
Pancakeswap V3’s vampire attack could be seen as a countermeasure against the recent deployment of Uniswap V3 on BNB Chain, which could have endangered Pancakeswap’s leadership on the chain.
Fun fact: also Pancakeswap V2 was developed by forking Uniswap V2.
You know how they say: a leopard can’t change its spots.
Conclusion
While the expiration of Uniswap V3’s BSL could allow for the spread of concentrated liquidity on minor chains and protocols, it also poses risks, such as the standardization of the DeFi landscape.
Even for forks, it’s important to remember that, apart from the codebase, there is a lot of improvement that can be done, especially in terms of UX, which is still far from being as simple as it needs to be to achieve mass adoption.
While composability is without any doubt one of DeFi’s most important features, as DeFi lovers and as a blockchain development agency, we hope that it will be used to leverage other developers’ work to create better and better products for the user base and not to create forks that fail to provide value to the final users.
Article by: Gioele La Morgia
