So far, Trader A has been listing their assets for sale at a certain price on NFT marketplaces. If trader B is willing to pay that price, the trade takes place. The marketplace is more or less the middleman between merchant A and merchant B. Its job is to make the process seamless for them. It processes the payment, collects its creator fees and royalties (if applicable), and transfers the asset to the buyer’s account to match users’ buy and sell orders in record time.
This model is heavily dependent on a price agreement between both parties. If this does not happen, there is no trade. If an asset class doesn’t have many trades, we say it has low liquidity. This is something that is happening with the NFT market in general. However, Sudoswap attempts to change this by applying an AMM model to NFT trading.
An automated market maker (AMM) is the technology that powers a decentralized exchange (DEX). It allows trading assets using crypto liquidity pools as counterparties. A liquidity pool is a smart contract on which you typically have two assets: the trading pair. When interacting with a liquidity pool, a user can exchange one asset for another (swap) or be a liquidity provider (LP). To be an LP, the user must provide both assets of the trading pair. For example, in the NFT context, an LP provides the NFTs and ETH.
And why would anyone want to be an LP? The LP collects trading fees from the liquidity pool in which it has deposited its assets. In NFT trading, this means that he would receive a fee for that transaction and not the collection creator.
In this article we cover:
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What is Sudoswap
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Why is it different from OpenSea or X2Y2
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Metrics (number of users, daily transactions)
What is Sudoswap
Sudoswap is an on-chain decentralized NFT exchange that uses an AMM model. This brings the same trading conditions as DeFi to the NFT market by improving the liquidity of the NFT collection traded there. But for a user interacting with the protocol, it has the same features as a regular NFT marketplace. The user can choose and buy an NFT from a collection he likes. Another user can take their NFT and sell it for the price. These interactions take place on the page provided below.
The story goes on
Swap Interface – Source: Sudoswap
However, the main feature of Sudoswap is that it allows the NFT owner to become a liquidity provider by creating a trading pool. It is useful for collectors or dealers who own many pieces of the same collection and want to set a reserve price for them. The LP has control over the behavior of the price changes in his pool.
Pool overview – Source: Sudoswap
As a LP, the user can set the price changes after a buy or sell within the pool (this is known as the “lock curve”). This configuration lets the LP know how much ETH we will have if all NFTs are sold, or how many NFTs he will have if all ETH in the pool is used to buy NFTs.
Price Action Chart – Source: Sudoswap
How is Sudoswap different from the other NFTs marketplaces?
While keeping the basic features of a regular NFT marketplace, Sudoswap’s approach to the NFT market is to give control to the NFT owners. They can set the trading conditions, prices and earn fees for the trades that take place in the pool where they are a liquidity provider.
Another difference is that Sudoswap does not pay royalties to the creators of the collection. This is a feature that the marketplaces have in their smart contracts. It’s not on the smart contract used to mint the collection. So this is a decision every marketplace makes, as we saw in X2Y2 Decision to provide flexibility for this. Because of this, there is more incentive for the NFT owners to trade on Sudoswap.
The price action on Sudoswap is also different from a regular marketplace. Large pools have enough NFTs and ETH in them for the price to follow the commitment curve. This will mitigate the price fluctuations.
Collection Leaderboard – Source: Sudoswap
NFT owners of different collections are experimenting with this new concept as we can see some well known collections already available for trading there, like Azuki, Otherdeed and Pudgy Penguins.
NFT projects can also benefit from this model as they can create their “official pools” with items in their possession to start trading activities. Examples of this on SudoSwap are “Based on ghouls” And “LobsterDAO.”
metrics
Sudoswap started up its AMM 7th of July. Since then it has already had over 100,000 NFTs transactions.
Daily Transactions – Source: Footprint Analytics
The chart below cumulatively lists the top 25 NFT collections by number of trades. Since the LP controls the trading fees in the trading pool, several collections have a trading fee lower than the standard 2.5% royalty charged on the regular marketplaces, which makes trading on Sudoswap more profitable.
NFT Transactions, by Collection, Last 30 Days – Source: Footprint Analytics
The number of daily users is growing as more and more people become aware of Sudoswap and its similarities to DeFi DEXs like Uniswap or Sushiswap (high liquidity and low fees).
Daily Sudoswap users, last 60 days – Source: Footprint Analytics
Comparison with other marketplaces
Daily Users, Comparison between Opensea, SudoSwap, Looks Rare and X2Y2 – Source: Footprint Analytics
At the beginning of August, Sudoswap started to gain momentum and since mid-August has almost the same number of daily users as X2Y2 (around 1,500 daily users).
Marketplace Leaderboard – Source: NFTgo
Sudoswap shows 22 million total volume in the last 30 days which is ~$100,000 in revenue as the platform has a 0.5% platform fee. We see all the signs (increasing number of users, daily transactions) that the NFT community is ready to try this different trading model to better understand its pros and cons. While the AMM approach will soon be said to replace the traditional one, it does have appealing qualities for NFT owners.
Sept. 2022 Thiago Freitas
Data Source: Sudoswap – An AMM marketplace for NFTs
This piece is contributed by Footprint Analysis community.
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