Key takeaways
- Bancor sues Uniswap for patent infringement, alleging unauthorized use of its smart contract technology for automated market making
- The lawsuit targets Uniswap Labs and the Uniswap Foundation, seeking damages for unlicensed use of Bancor’s patented innovations
- Bancor claims to have pioneered the technology in 2016, securing patents in 2017
- Uniswap dismisses the claims as “meritless”, arguing its code has been open-source and publicly available for years
- The case raises broader concerns in Decentralized Finance (DeFi), spotlighting tensions between open-source development and intellectual property rights
A significant legal battle has ignited in the decentralized finance (DeFi) sector as the Bprotocol Foundation and LocalCoin Ltd, the entities behind the Bancor protocol, filed a patent infringement lawsuit against Uniswap Labs and the Uniswap Foundation. The lawsuit, lodged in the U.S. District Court for the Southern District of New York, claims Uniswap illegally uses Bancor’s patented smart contract technology, which powers decentralized trading.
Core Technology at the Heart of the Dispute
Bprotocol Foundation, a non-profit promoting Bancor, and LocalCoin, the original developer of the protocol, allege Uniswap has infringed on Bancor’s patented technology since Uniswap’s launch in November 2018. Bancor states it invented this technology in 2016 and secured patents in early 2017. The technology helps eliminate traditional order books, opting for automated, algorithmic market making.
“Bancor’s patented technology marks one of blockchain’s most important innovations,” stated Mark Richardson, Bancor’s Project Lead. “We are exceptionally proud of its role in revolutionizing decentralized finance. However, when an organization continuously uses our invention without authorization and as a means of competing with us, we must take action.”
The lawsuit seeks damages from both Uniswap Labs and the Uniswap Foundation, citing unauthorized, unlicensed, and profit-driven use of the patented technology. Richardson emphasized that Uniswap’s actions not only infringe on Bancor’s intellectual property but also undermine the broader DeFi ecosystem by discouraging innovation through unchecked imitation.
A Timeline of Innovation
Bancor filed its provisional patent application on January 8, 2017, detailing smart contract structures for automated market making. This led to the grant of two U.S. patents. Bancor also released a white paper in February 2017 and launched the first fully decentralized exchange utilizing automated market makers on June 12, 2017.
Uniswap, widely recognized as one of the most successful DEXs, introduced its protocol in 2018 and recently announced the fourth version of its platform. Despite Bancor’s pioneering status, Uniswap currently significantly outperforms it in trading volume. Data from DefiLlama shows Uniswap handles nearly $3.8 billion in daily trades, while Bancor’s volume stands around $378,579, ranking it 142nd among decentralized exchanges.
Implications for DeFi Innovation
Richardson asserted, “If companies like Uniswap act unchecked without consequence, we fear it will hinder innovation across the industry to the detriment of all DeFi players. As innovators and inventors, protecting our intellectual property is fundamental to the health of the ecosystem.”
In response, a Uniswap Labs spokesperson dismissed the lawsuit, calling it “meritless” and a “wasteful distraction at a time of historic momentum for DeFi.” The spokesperson added, “The code for the Uniswap Protocol is public and has been for years.”
Uniswap CEO Hayden Adams posted a tongue-in-cheek tweet suggesting, “What if @mikedemarais is behind the Bancor suit, still trying to get out of the tattoo?” He was referencing a 2018 tweet by Rainbow CEO Mike Demarais, in which Demarais pledged to get a tattoo of the “Unigod” if Uniswap’s exchange volume surpassed Bancor’s in 2019.
Indeed, the unfolding battle highlights growing tension within the decentralized finance industry between open-source principles and intellectual property enforcement. The case’s outcome could significantly shape the future of innovation and competition across the DeFi landscape.
Read more: Understanding Decentralized Finance (DeFi) in 10 Minutes
