Uniswap v3 still facing potential copycats? DeFi legal advisor warns: Forked protocols may encounter legal risks, making it difficult to attract investment

Uniswap v3 upgrade has attracted attention from various sectors. Some believe that the introduction of "customizable liquidity" has killed protocols that focus on specific trading pairs with low slippage, such as Curve. Others think that the introduction of the "Business Source License (BSL)" will lead to more anonymous development teams copying the protocol, but Compound's legal advisor has a different opinion.

Compound's legal advisor Jake Chervinsky has provided a series of opinions on DeFi copyright issues, but he emphasizes that when faced with problems, one should really seek legal advice instead of trying to find answers on Twitter.

Regarding doubts about whether the introduction of the "Business Source License (BSL)" in Uniswap v3 can truly prevent malicious code replication, his answer is Yes, but it will also come with some costs.

Advertisement - Please scroll down for more content

The Misstep of Uniswap V2

Chervinsky pointed out that V2 was launched under the General Public License (GPL), which means that clients can freely copy, modify, and distribute it. This led to the birth of SushiSwap and PancakeSwap.

Evidently, Uniswap V3 is no longer willing to face any vampire attacks. The "Business Source License" allows developers to decide who can draw inspiration from their protocol code.

However, crises can also be turning points. The emergence of SushiSwap forced Uniswap to issue governance token "UNI," further accelerating the development process of V3. Introducing the "General Public License" may also bring a turning point for malicious forks.

Why is BSL Useful?

The crypto community has pointed out that with V3 introducing BSL, malicious plagiarism could lead to legal action, resulting in more anonymous development teams. Chervinsky has a different perspective on this:

1. Complete Anonymity is Difficult

Chervinsky believes that it is difficult for a development team to remain completely anonymous, especially when a project becomes popular.

2. Third Parties Subject to Lawsuits

BSL allows Uniswap to sue any third party that adopts, integrates fork protocols, or supports its assets, even if the third party did not contribute code.

Chervinsky refers to DeFi protocols, aggregators, exchanges, and strategic investors being restricted by the BSL terms, possibly unable to strongly support fork protocols.

3. Deterrent Effect: Fork Protocols Struggle to Gain Strategic Investments

Chervinsky emphasizes that even with enforcement difficulties, the deterrent effect provided by BSL alone makes anyone considering forking V3 shudder. He quotes the opinion of Brookwood Partners:

Legal force is effective. For example, even if the developers of fork protocols are excellent, how many major investors would be willing to strongly support a team openly violating the law?

Chervinsky concludes with two points:

1. The "Business Source License" can prevent protocols from being forked.
2. The "Business Source License" can also prevent fork protocols from gaining widespread adoption.

Drawbacks of BSL

Chervinsky initially mentioned the usefulness of BSL but also highlighted some costs. The hallmark of DeFi protocols, "free and open-source," is compromised, focusing too much on copyright maintenance and erasing the spirit of decentralization. However, he stated:

Uniswap will revert to the previous V2 version's "General Public License GPL" in two years. I think this strikes a balance between copyright protection and protocol openness, which I personally like, especially since UNI holders can vote on governance and decide on the terms conversion timeline.

Chervinsky concludes that it is premature to require every DeFi protocol to introduce BSL now, but Uniswap has taken the lead, which does not mean that every protocol is suitable for implementing BSL. It requires a wide-ranging and well-calibrated legal strategy.