\n<\/p>\n
While we\u2019ve all heard the well-trod mantra that \u201cbear markets are for builders,\u201d until very recently, it felt like hardly anyone in crypto was building anything very interesting these days.\u00a0<\/span><\/p>\n All the NFT drops have used the same old recycled concepts. DeFi still hasn\u2019t recovered from the <\/span>Luna PTSD<\/span><\/a>. And to top it all off, the <\/span>Tornado Cash sanctions<\/span><\/a> have us wondering if the risks of building in DeFi are higher than we anticipated.\u00a0<\/span><\/p>\n But when I was doomscrolling a few weeks ago, I finally found the excitement and the new new thing I\u2019ve been looking for. It began when I stumbled into a spirited debate between the crypto influencer Cobie and what looked like the entire population of NFT Twitter. Cobie had triggered NFT collectors when he referred to NFTs as \u201caltcoins with pictures.\u201d\u00a0<\/span><\/p>\n It\u2019s extremely simple. They are altcoins with pictures. Anything suggesting otherwise is larp and cope.<\/p>\n \u2014 Cobie (@cobie) August 14, 2022<\/a><\/p>\n<\/blockquote>\n<\/div>\n What many saw as a low-blow insult I saw as a reset of my <\/span>Overton window<\/span><\/a> and a litmus test of my cognitive biases. It changed my perspective on NFTs. If you ignore all the nuance, and strictly consider the smart contract, <\/span>altcoins with pictures<\/span><\/i> is indeed what NFTs really are.\u00a0<\/span><\/p>\n That simple but provocative idea is part of why <\/span>Sudoswap<\/span><\/a>, which just <\/span>announced a governance token<\/span><\/a> (SUDO), is quickly becoming the \u201cit\u201d place for NFTs these days.<\/span><\/p>\n Sudoswap launched in July\u2014its name is a riff on Uniswap for reasons that will soon become apparent\u2014 and it\u2019s the first, honest-to-god, working decentralized NFT exchange with an on-chain <\/span>automated market maker (AMM)<\/span><\/a>.\u00a0<\/span><\/p>\n In other words, Sudoswap is a <\/span>protocol<\/span><\/i>, and as such it’s meant to work in conjunction with other protocols. The liquidity it provides via its AMM can be accessed by other protocols, dapps and even marketplaces. By contrast, a massive NFT marketplace such as OpenSea is a closed ecosystem with a closed order book; though the customers provide liquidity, the platform gets to take transaction fees.\u00a0<\/span><\/p>\n Removing the middleman, as always, is a big idea. Though others have tried to solve the NFT liquidity problem, Sudo\u2014created by the pseudonymous team of <\/span>Statelayer<\/span><\/a>, <\/span>0xmons<\/span><\/a>, <\/span>0xHamachi<\/span><\/a>, and <\/span>boredGenius<\/span><\/a>\u2014was the first to actually solve it. Platforms like OpenSea and LooksRare are marketplaces, but Sudoswap operates more like an exchange.<\/span><\/p>\n The way I see it, Sudoswap is doing for the NFT space what Uniswap did for DeFi.\u00a0<\/span><\/p>\n Part of why Uniswap was a big deal when it launched was because it took the fees usually kept by centralized exchanges, and gave those fees to the liquidity providers, which removed the need for traditional market makers.<\/span><\/p>\n In fact, I think this could<\/span> be the spark that finally brings the excitement of 2020\u2019s <\/span>DeFi Summer<\/span><\/a> to the NFT world. Call it NFT Autumn. One of the moments that turbocharged DeFi was when AMMs created liquidity for trading altcoins. NFT Autumn could follow the same trajectory\u2014but it\u2019s altcoins with pictures and AMMs.<\/span><\/p>\n This isn\u2019t to say that Sudoswap\u2019s ascent into the heavens is assured. The community <\/span>has been roiled by a debate <\/span><\/a>about another feature of the marketplace\u2014namely, royalties. It\u2019s been the practice thus far for some marketplaces to allow creators to charge royalties (as much as 10% in some cases) whenever their NFTs change hands on that marketplace. Indeed, this has been one of the things that has made crypto so exciting to creators\u2014theoretically, they get paid forever as long as there are new buyers for their art.<\/span><\/p>\n Sudoswap nixed royalties. Instead, the protocol takes a 0.5% \u201ctrading fee\u201d and lets NFT collectors trade for significantly cheaper.\u00a0<\/span><\/p>\n Statelayer (one of the Sudoswap founders) told me that he and his team aren\u2019t surprised about the backlash regarding royalties. The real surprise (initially) was the creators who came to the platform specifically to mint their projects.<\/span><\/p>\n \u201cWe didn\u2019t expect that,\u201d Statelayer said.<\/span><\/p>\n It turns out that the advantage to the creator is they get to be the artist, seller <\/span>and broker<\/span><\/i>, if they do it right. In other words, the artist can act as an entrepreneur, launching her project on Sudo, putting up liquidity, and taking the trading fees from the pool. That can amount to more than they might make in a traditional NFT sale.\u00a0<\/span><\/p>\n The most successful collection to attempt this approach so far was Sudonauts, by <\/span>Brentsketit<\/span><\/a>. By launching through Sudo\u2019s AMM, every sale of a Sudonaut NFT added liquidity to the pool, creating a more liquid, and dare I say it, less volatile market. That\u2019s great for collectors, giving them confidence that there will always be a buyer for their Sudonaut.<\/span> Right now there is 315,000$ of liquidity backing an nft collection with a circulating MC of 590,000$<\/p>\n Liquidity basically locked (on 2\/2 Multisig w\/ matty and I)<\/p>\n will be interesting to see how this collection does w\/ this liquidity <\/p>\n think is most liquid nft collection rn AAAA<\/p>\n \u2014 Brent 🟪 (@Brentsketit) August 17, 2022<\/a><\/p>\n<\/blockquote>\n<\/div>\n The total market cap of the collection is $590,000\u2014and there\u2019s now $315,000 liquidity backing that. <\/span>Along the way, he\u2019s helping to create a safer and healthier market for his collectors, with a system that\u2019s designed for longevity rather than hype.\u00a0<\/span><\/p>\n Brentsketit pronounced the experiment a “definitely viable” alternative to royalties, though he told me that it “needs to be made easier to use.\u201d\u00a0<\/span><\/p>\n Another bold explorer venturing into the depths of Sudoswap is John Patten, CEO of <\/span>Treasure DAO<\/span><\/a>. John recently published a <\/span>blog post<\/span><\/a> outlining an upcoming NFT project called <\/span>DAO Cats<\/span><\/a> that plans to launch via SudoAMM. DAO Cats refers to itself as \u201can experiment in DAO-owned IP,\u201d but I\u2019m most interested in its plans for \u201cprotocol-owned liquidity\u201d. They\u2019re locking 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) into liquidity pools, only to be removed if holders vote to do so.\u00a0<\/span><\/p>\n John’s goal with DAO Cats is \u201cto create an NFT where a lot of the supply is held back by the protocol to provide liquidity, and hopefully create a more reliable floor price.\u201d\u00a0<\/span><\/p>\n I believe that sooner or later, creators will come to understand that \u201cNFTs are just altcoins with pictures\u201d is a perfectly fair summation\u2014and that\u2019s okay.<\/span><\/p>\n I\u2019m not trying to troll NFT collectors. Seeing NFTs in this framing opened my mind to an entire realm of new possibilities for NFTs.<\/span><\/p>\n I\u2019ll end with a question: If you could go back in time to before DeFi Summer, knowing what you know now about what worked and what didn\u2019t, what would you build? <\/span>Answer that question, then go and build it\u2014but add pictures.\u00a0<\/span><\/p>\n\n
Sudoswap is the next new thing<\/span><\/h2>\n
Sudoswap is to NFTs what Uniswap is for altcoins<\/span><\/h2>\n
<\/span>Liquidity is a crucial financial building block, a necessary element of any successful token (fungible or not). It\u2019s also a building block that was missing from the NFT ecosystem until Sudo\u2019s AMM launched. And a small portion of Sudoswap\u2019s SUDO supply will be <\/span>distributed to people who have provided liquidity<\/span><\/a> for the platform in the past (a la Uniswap), a move that might draw more liquidity to Sudoswap and its AMM because it will lure speculators.<\/span><\/p>\nThe thorny royalty question<\/span><\/h2>\n
Why Sudoswap might be better for creators than royalties<\/span><\/h2>\n
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<\/span>The Sudonauts project is only two weeks old. But so far, the results are encouraging. Yes, its current floor price is a modest 0.23 ETH, but it generated a sales volume of 563 ETH. And that gave the artist a tidy 40 ETH in trading fees from his liquidity pool. He also retained 200 of the 2000 NFTs for him and his team to \u201cshowcase how artists can profit while providing deep liquidity for their collection.\u201d<\/span><\/p>\n\n
\u201cAltcoins with pictures\u201d is a feature, not a bug<\/span><\/h2>\n