While we’ve all heard the well-worn mantra that “bear markets are for builders,” until recently it felt like hardly anyone in the crypto space is building anything very interesting these days.
All NFT drops used the same old recycled concepts. DeFi still hasn’t recovered from this PTSD manager. And to top it off, the Tornado Cash Sanctions we wonder if the risks of building in DeFi are higher than we expected.
But while I was at Doomscrolling a few weeks ago, I finally found the excitement and novelty I was looking for. It started when I stumbled into a lively debate between crypto influencer Cobie and what appeared to be the entire populace of NFT Twitter. Cobie had sparked NFT collectors when he referred to NFTs as “altcoins with pictures.”
What many took as a deep insult, I saw as a reset of mine Overton window and a litmus test of my cognitive biases. It changed my view of NFTs. If you ignore all the nuances and strictly consider the smart contract, Altcoins with images is in fact what NFTs really are.
Sudoswap is the next new thing
This simple yet provocative idea is part of the reason Sudoswapwhat announced a governance token (SUDO), is fast becoming the “it” place for NFTs these days.
Sudoswap launched in July – its name is a nod to Uniswap for reasons that will soon become clear – and it is the first honest, working, on-chain decentralized NFT exchange Automated Market Maker (AMM).
In other words, Sudoswap is a protocol, and as such it is intended to work in conjunction with other protocols. The liquidity it provides through its AMM can be accessed through other protocols, dapps, and even marketplaces. In contrast, a huge NFT marketplace like OpenSea is a closed ecosystem with a closed order book; Although customers provide liquidity, the platform has to charge transaction fees.
Removing the middle man is, as always, a great idea. Although others have tried to solve the NFT liquidity problem, sudo – created by the pseudonymous team at state assassin, 0xmons, 0x HamachiAnd bored genius– was the first to actually solve it. Platforms like OpenSea and LooksRare are marketplaces, but Sudoswap works more like an exchange.
Sudoswap is to NFTs what Uniswap is to altcoins
The way I see it, Sudoswap is doing for the NFT space what Uniswap did for DeFi.
One reason Uniswap was a big deal when it first launched was that it took the fees typically withheld by centralized exchanges and passed those fees on to liquidity providers, eliminating the need for traditional market makers.
In fact, I think this is possible Be the spark that finally brings the excitement of the 2020s DeFi summer into the NFT world. Call it NFT Fall. One of the moments DeFi was supercharged was when AMMs created liquidity to trade altcoins. NFT Autumn could follow the same path – but it’s altcoins with pictures and AMMs.
Liquidity is a crucial financial building block, a necessary element of any successful token (fungible or not). It’s also a building block that was missing from the NFT ecosystem until Sudos AMM came to market. And a small part of Sudoswap’s SUDO offering will be distributed to people who provided liquidity for the platform in the past (a la Uniswap), a move that could bring more liquidity to Sudoswap and its AMM because it will attract speculators.
The tricky royal question
This is not to say that Sudoswap’s rise to heaven is assured. The community was stirred up by a debate about another feature of the marketplace – namely royalties. Traditionally, some marketplaces have allowed developers to collect royalties (up to 10% in some cases) when their NFTs change hands on that marketplace. In fact, this was one of the things that made crypto so exciting for creators – in theory, as long as there are new buyers for their art, they’ll get paid forever.
Sudoswap nixed royalties. Instead, the protocol charges a 0.5% “trading fee” and lets NFT collectors trade significantly cheaper.
Statelayer (one of the Sudoswap founders) told me that he and his team weren’t surprised by the setback in terms of royalties. The real surprise (at first) was the creators who came specifically to the platform to imprint their projects.
“We didn’t expect that,” Statelayer said.
Why Sudoswap could be better for developers than licensing fees
It turns out that the benefit to the creator is that he’s the artist and seller and broker, if they do it right. In other words, the artist can act as an entrepreneur, start her project on sudo, provide liquidity and take trading fees out of the pool. That can mean more than they could earn from a traditional NFT sale.
The most successful collection to date that has attempted this approach has been Sudonauts by Brentsketit. Introduced via Sudos AMM, each sale of a Sudonaut NFT added liquidity to the pool, creating a more liquid and, dare I say, less volatile market. This is great for collectors and gives them the confidence that there will always be a buyer for their Sudonaut.
The Sudonauts project is only two weeks old. But so far the results are encouraging. Yes, the current floor price is a modest 0.23 ETH, but it generated sales volume of 563 ETH. And that earned the artist a whopping 40 ETH in trading fees from his liquidity pool. He also kept 200 of the 2000 NFTs for himself and his team to “show how artists can benefit while providing high liquidity for their collection”.
The collection’s total market cap is $590,000 – and it now has $315,000 in liquidity available for it. Along the way, he helps create a safer and healthier market for his collectors, with a system designed for longevity rather than hype.
Brentsketit called the experiment a “definitely viable” alternative to royalties, though he told me it “needs to be made more user-friendly.”
Another brave explorer venturing into the depths of Sudoswap is John Patten, CEO of Darling DAO. John recently published a blog entry Outlining an upcoming NFT project called DAO cats which plans to start via sudoAMM. DAO Cats bills itself as “an experiment in DAO native IP,” but I’m most interested in its plans for “protocol native liquidity.” They lock 40% of the total supply of Cats and Catcoin (a token that NFT holders can get by depositing their Cat NFTs into the DAOs vault) in liquidity pools that will only be removed if the holders vote for it.
John’s goal with DAO Cats is to “create an NFT where much of the supply is held back by the protocol to provide liquidity, and hopefully create a more reliable floor price.”
“Altcoins with images” is a feature, not a bug
I believe that sooner or later creators will understand that “NFTs only altcoins with pictures” is a perfectly fair summary – and that’s fine.
I’m not trying to troll NFT collectors. Seeing NFTs in this framework opened up a whole realm of new possibilities for NFTs.
I’ll end with a question: if you could go back to before the DeFi summer and knew what you know now about what worked and what didn’t, what would you build? Answer that question, then go and build it – but add pictures.
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