Sudoswap breaks out as NFT traders take advantage of royalty sales

The NFT ecosystem has relied on centralized marketplaces, most prominently OpenSea, for virtually its entire existence. Now decentralized alternative Sudoswap is gaining traction – fast.

Sudoswap aims to shake up NFT trading with automated market making (AMM) algorithms and liquidity pools, mirroring premiere Ethereum decentralized exchange (DEX) Uniswap.

Poor liquidity and slippage have long plagued the NFT markets. A CryptoPunk can sell for $100,000 in one day, but not get similar offers for weeks or months – leaving investors confused about exactly how much it’s worth.

With its own AMM token, Sudoswap allows NFT traders to buy and sell without having to wait for a quote. Sellers contribute their crypto as liquidity to facilitate smoother automated trades, with orders being settled with the pool rather than an individual, all in the chain.

“Each user who wants to sell an item deposits one or more NFTs into a pool over which they control the prices, and the actual purchases happen across all the pools,” Owen Shen, Sudoswap’s founder, explained on a podcast in May .

Shen added: “You can set a pool with a higher price, but it’s the same as posting an item at a higher price – users will buy elsewhere if there are cheaper items on the market.”

NFT traders are interested in the idea

Essentially, each NFT listing on Sudoswap is effectively its own pool, and each seller is solely responsible for providing liquidity to these pools. Users can set NFT values ​​and other parameters for their pools – for example, selling NFTs on a bond curve that slowly increases as the chips are purchased.

With Sudoswap, traders can quickly buy and sell NFTs across all pools, enabling more immediate price discovery and reducing the threat of being stuck with an illiquid asset.

NFT traders seem to be on board with the experiment; Over the past month, Sudoswap’s total value locked up in its liquidity pools has skyrocketed by 2,400%, from $120,000 to $3 million, DeFi Llama data shows.

Overall, the platform’s AMM has facilitated trades of more than 60,000 NFTs across nearly 29,000 transactions since the beginning of July, representing $16.5 million in trading volume, per a Dune Analytics dashboard.

At scale, OpenSea processed approximately $800 million in NFT trades during the same period. So there is still a ways to go for Sudoswap to catch up with the big dog.

But the power of Sudoswap is that it removes annoying intermediaries, for better or for worse. Centralized NFT platforms often bow to copyright attacks, stopping auctions in their tracks.

In fact, OpenSea sparked debate over the line between art, free speech and plagiarism when it banned “flipped” Bored Ape Yacht Club (BAYC) gatherings. The same has been done with overtly offensive NFTs, and so is the privilege.

Sudoswap could do similar filtering via its front-end web app, mirroring that of major DeFi protocols in the wake of the Tornado Cash sanctions.

Royalty free NFT trading on Sudoswap can undermine artists

Sudoswap pays no royalties to creators on NFT trades. Unlike OpenSea which pays an average of 5% to NFT issuers on secondary sales, while keeping an additional 2.5% for itself, Sudoswap charges only 0.5% on trades, funds it sends to the treasury, not to creators.

The platform’s low fees, on top of its liquidity pool structure, have become attractive to traders, but whether NFT creators and artists feel the same way is another story.

The bulk of NFT revenue typically comes from initial sales, but royalty payments on secondary trades have long been one of the primary selling points of the NFT ecosystem.

And when it comes to industry giants like Yuga Labs, they definitely don’t hurt. The floor price for their BAYC tokens is currently 77 ETH ($145,000), and the 2.5% royalties means that will bring in a minimum of around $3,600 per trade.

In the past 30 days, 368 BAYC trades have been recorded, according to CryptoSlam. So the back-of-the-napkin math turns out to be $1.3 million in BAYC royalties for Yuga Labs in the last month alone. (Yuga Labs declined to comment for this article.)

“I haven’t seen many individual artists or creators choose Sudoswap yet,” Derek Edward Schloss, co-founder of FlamingoDAO, told Blockworks.

“I think most of the volume so far has been NFT owners creating their own pools, bypassing the artist and creator altogether,” he said.

One artist Blockworks spoke to said they wouldn’t be phased if the entire ecosystem adopted royalty-free trading. They’ve sold dozens of items that they forgot to put royalties on, and aren’t too upset when one of them resells.

If Sudoswap and its royalty-free trading really take off, artists will likely have to adjust how they price their work — making the coins more expensive or just focusing on moving the volume themselves, Jake Stott, CEO of Web3 creative agency Hype, told Blockworks.

“My hunch is that royalty-free marketplaces will prove better suited for big-brand NFT collections, like Coca-Cola’s and NBA Top Shots of the world,” Stott said. “Unlike artists, brands may be more keen to forgo royalties as NFTs may be more of a community and branding tool for them – and not a direct revenue stream.”

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