[Disclaimer - This proposal is powered by the Uniswap Accountability Committee. kpk did not receive compensation for posting this proposal.]

Summary

• Create the v4-core-license-grants.uniswap.eth subdomain to track BSL license exemptions;
• Grant Uniswap Foundation a blanket license exemption to deploy v4 on target chains;
• Create v4deployments.uniswap.eth subdomain to create an onchain registry of official v4 deployments;
• Grant the UAC permission to write to the v4deployments.uniswap.eth subdomain;
• Populate the text records of v4deployments.uniswap.eth with the 13 existing v4 deployments done by Uniswap Labs.

Background

Uniswap DAO successfully expanded v3 to an aggregate 40 chains. It streamlined the deployment process with help from partners like Oku and Reservoir, who have set up v3 instances and user interfaces for LPs and traders. These deployments have been supplemented with incentive programs and growth initiatives, all of which have been initiated by the DAO and its target chain partners.

With Uniswap v4 having launched in February and the Business Source License (BSL) in place, the DAO has an opportunity to maximize v4’s impact using the lessons it has learned from v3 expansion. As the BSL represents a competitive advantage for Uniswap, the DAO needs to prioritize driving adoption of v4 pools and hooks over the coming months, in supplement with the programs that the UF is actively pursuing. The first step in growing Uniswap v4 across multiple chains begins with laying the operational groundwork around the BSL.

Growing Uniswap v4

Uniswap v4’s potential is tied to its flexible hook-driven architecture, which can reshape the DEX landscape and further strengthen Uniswap’s dominance. If v4 reaches a critical mass of hooks and liquidity, it could outcompete standalone applications by integrating their features into Uniswap’s ecosystem, acting as a sink for liquidity and talent.

This also means that, as opposed to previous versions, v4’s success depends not just on the core AMM design but also on external developers building useful hooks. In this context, strong incentives for developers and liquidity providers are key to success.

Uniswap v4 presents two main challenges:

1. Attracting enough liquidity. Traders will only use v4 if its pools offer the best prices, which requires deep liquidity. This means convincing LPs to migrate funds from v3 and other DEXs.
2. Offering compelling hooks. Without compelling hooks, users have little reason to switch to v4. As more developers build innovative hooks, v4 becomes increasingly attractive, creating a cycle of growth that solidifies Uniswap’s dominance. As per the below figure, the current trend in hook launches largely favors vanilla pools as opposed to “hooked” pools. It will take a concerted growth effort from the DAO and associated entities to help facilitate creative hook deployments and growth.

While it is less apparent with v3, v4’s success depends heavily on timing. For Uniswap to dominate across chains, adoption needs to happen quickly and broadly. For this reason, we propose to deploy v4 on as many chains as early as possible. This allows us to tackle a broader audience and enables hook developers to compete and innovate across different ecosystems rather than being limited to just one.

Hooks that gain traction on Ethereum or Arbitrum might look different from those that succeed on chains like Ink, Sonic, or Celo. Smaller or newer chains provide a testing ground for developers to experiment without directly competing with established hooks on larger networks. On the other hand, larger ecosystems provide access to a broader and more varied audience. Over time, similar hooks may emerge in different environments but appeal to their users in unique ways.

For example, Uniswap v3 often struggles to compete with native DEXs on new chains. But v4 is different—it can work as a behind-the-scenes platform, allowing native projects to build their own branded hooks on top of it. By partnering with new chains early and encouraging developers to build on v4 from the start, Uniswap has a much better chance of becoming the dominant DEX across multiple ecosystems.

Accelerating v4 Adoption

To accelerate v4 adoption across as many chains as possible, we need to act promptly. DAO-affiliated groups like the Foundation, UAC, and external teams like Oku and Reservoir—if they choose to partake in v4 growth—have the opportunity to drive this initiative.

The v4 license is effectively a strategic advantage. With v3, cross-chain growth only took off after the BSL expired. This time, we should use the license to maintain a competitive edge before it eventually transitions to an open-source MIT license.

On the Business Source License

Uniswap v4 is governed by the Business Source License (BSL) 1.1, which is a temporary source-available license that allows users to view, modify, and experiment with the code but restricts commercial use unless explicitly permitted by the licensor. Over time, BSL-covered software transitions into an open-source license, in this case, MIT, meaning that after a predetermined period, the software will be freely usable by anyone.

• Commercial Use Restriction: Uniswap v4 cannot be used for commercial deployments unless a special exemption (called an Additional Use Grant) is granted.
• Change Date: The license is set to expire by June 15, 2027, or earlier if the Uniswap DAO decides to transition it sooner.
• Automatic Transition to MIT: After the expiration date, the Uniswap v4 Core will become fully open-source under an MIT License, meaning anyone can freely use, modify, and deploy it. We see no reason to enact an early transition to MIT, but if the DAO were to decide this to be the best route, we’d have to create an onchain proposal to deploy a subdomain titled “v4-core-license-date.uniswap.eth” detailing the early conversion date. This present proposal will not be deploying the change date subdomain.

The first step is setting up a clear process for managing deployments, including a system for granting license exemptions to launch official v4 instances. Details follow.

How the BSL Strengthens Uniswap’s Moat

Uniswap v4’s BSL provides an essential competitive advantage by limiting unauthorized commercial use of the protocol. This creates a temporary moat in several key ways:

1. Prevention of Immediate Forks: The BSL prevents competitors from launching unauthorized forks of v4, ensuring that Uniswap maintains exclusivity over its novel hook architecture for a defined period of time.

2. Ecosystem Incentive Opportunities: The licensing framework allows Uniswap to selectively grant exemptions to chains that align with its strategic goals, potentially in exchange for incentives. The UF was granted an incentive budget for v4 deployments in proposal 82. That budget will not cover incentives on all chains where v4 will be deployed. There will be opportunities to negotiate with chains to contribute to incentive budgets for a v4 deployment. The UAC and UF will work together to negotiate those opportunities. Negotiations are more likely to be fruitful during the first year of v4 going live.

3. Encouraging Ecosystem Buy-in: Since third-party deployers need a license exemption, chains and DeFi projects are incentivized to engage with Uniswap governance rather than creating unauthorized alternatives. Granting license exemptions to a variety of deployers requires an onchain vote for each individual Additional Use Grant, so we recommend using a smaller group of authorized entities that will deploy on a given chain, starting with the UF.

Erosion of the Moat Over Time

The BSL offers a temporary advantage, and its effectiveness will diminish over time due to the following factors:

1. Expiration of the BSL: The BSL is set to expire by June 15, 2027. This means that competitors will be able to freely fork and deploy v4 without restrictions in just a few years.

2. Replication by Competitors: Even before expiration, competitors may develop alternative DEX architectures with similar capabilities, reducing Uniswap’s technical lead. This happened very quickly with the concentrated liquidity benefits ushered by v3.

3. Gradual Loss of Novelty: As hooks become more widely understood and replicated, their competitive differentiation will weaken, and the perceptual novelty will wane. Other protocols may introduce comparable or even improved features to rival v4’s architecture, and developers may not hold v4’s customizability as unique as it may have initially seemed.

SEE FULL PROPOSAL ON THE FORUM

https://snapshot.org/#/uniswapgovernance.eth/proposal/0xfbaf8a48bc110a815e6b8cfaaf6c73451cb0c6e5e3d48e10e72893bf95911740