sudoswap NFT Automated Market Maker

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Automated Market Makers for NFTs are the hottest new thing @sudoswap is the first ever NFT AMM Uniswap v3, but for NFTs, they say If you understand the fundamental design, you can see why $SUDO is the talk of the town Deep Dive Thread 🧵👇

TL;DR: The SudoSwap protocol enables anyone to create and trade with an independent AMM pool for any #NFT Traders will be able to: • Swap NFTs for $ETH • Swap $ETH for NFTs

TL;DR continued: Liquidity providers will be able to: • Deposit $ETH and receive NFTs as traders swap with your pool • Deposit NFTs and receive $ETH as traders swap with your pool • Deposit both $ETH and NFTs and receive trading fees as traders swap with your pool

Before we get started... You can read the unrolled version of this thread on our Substack: momentum6.substack.com/p/sudoswap-nft-automated-market-maker?sd=pf

NFTs and #DeFi are both sub-sectors of the #Crypto industry Both sectors share a common objective: To eliminate middlemen and create a business model that is much more decentralized But because both sectors are still in their infancy, they also have their own problems

There is an untapped potential for the NFT market to tap into DeFi innovations in order to make the NFT market much more efficient and liquid than its current state @sudoswap is the first of its kind to utilize DeFi innovations to address issues in the NFT sector

Currently, NFT marketplaces (like @opensea) are the major centralized exchanges to buy and sell your NFTs There hasn't been a decentralized NFT marketplace that uses an Automated Market Maker mechanism to match orders Why? B/c AMMs are being used only for the DeFi sector

These centralized NFT marketplaces use their off-chain order books to match orders between users The off-chain order books are stored in the exchange's database So, these off-chain order books are subject to downtime and centralization risk issues

• WHAT IS SUDOSWAP? @sudoswap is a protocol that enables anyone to create individual, customized NFT liquidity pools to buy or sell their NFTs SudoSwap consists of many pools of NFTs that are managed by liquidity providers that set their own price parameters

Rather than having liquidity providers deposit into the same AMM pool, it creates individual ETH/NFT pairs for each depositor This allows LPs to handle $ETH and NFTs natively, thus providing a gas-optimized swapping and independent liquidity provisioning experience

Liquidity providers also have full control over their pool's pricing and can adjust the price parameters at all times Traders can pick the best pool to trade with or trade across multiple pools with the help of an aggregator

• WHO IS ON THE TEAM OF SUDOSWAP? The initial development team of sudoAMM consists of: • @0xmons (smart contracts/front-end) • @boredGenius (smart contracts lead) • @0xhamachi (back-end) In addition, they are advised by: • @statelayer • @mewn21

• HOW DOES SUDOSWAP WORK? SudoSwap matches trades between users using an AMM model It uses an on-chain AMM model rather than an off-chain order book The on-chain marketplace enables true decentralization while being censorship-resistant

The sudoAMM is a concentrated liquidity AMM protocol designed specifically for NFTs A SudoAMM pool is a contract managed by a single address that holds some amount of $ETH or NFT in it

There are 3 types of sudoAMM pools: 1. BUY-ONLY POOL: A buy-only pool contains only $ETH in it Users will have to deposit $ETH in their pool to buy NFTs from other pools The pool is always ready to give a quote to buy NFTs with its $ETH

2. SELL-ONLY POOL: A sell-only pool contains only NFTs in it Users will have to deposit NFTs in their pool to exchange them for $ETH from other pools The pool is always ready to give a quote to sell its NFTs for $ETH

3. BUY AND SELL POOL: A buy and sell pool contains both $ETH and NFTs in it Users will have to deposit both NFTs and $ETH to earn trading fees as traders buy and sell using the pool The pool will give quotes for both buying and selling purposes

But how are the QUOTES determined? The quote that a pool gives is determined by a "bonding curve" that is specified during pool creation SudoAMM facilitates the trading of whole NFTs with the help of bonding curves, unlike @NFTX_ where NFTs are fractionalized into tokens

3 types of bonding curves are employed by the SudoAMM: 1. Constant (always quoting the same price) 2. Linear (increasing/decreasing price linearly with buys/sells) 3. Exponential (increasing/decreasing price by X% with buys/sells)

This allows users to get immediate quotes on either the buy or the sell side for their NFTs AMMs that use x*y=k method generally require a large amount of liquidity to avoid slippage NFT fractionalized tokens AMM will thus suffer from slippage during massive token swaps

But SudoAMM gives better slippage than the existing AMM NFT fractionalization methods since it deals with individual multiple liquidity pools Sudoswap also charges a low 0.5% fee versus the usual 7.5% (2.5% + 5% royalty) fee on other platforms

SudoAMM allows liquidity providers with single-sided pools to DCA in or out of a large NFT position Ex: A buy/sell side pool that buys/sells NFTs at a linearly decreasing/increasing bonding curve First NFT to be bought at 10 ETH, then 9 ETH, then 8 ETH...

First NFT to be sold at 1 ETH, then 1.5 ETH, then 2.25 ETH... But there are some downsides to this SudoAMM model: 1. SudoAMM model requires users to pay gas to list their NFTs 2. @sudoswap doesn’t have a royalty fee program (individual LPs can only earn LP fees)

3. Since there are multiple SudoSwap pools, it will be hard for other people to find the cheapest pools available in SudoSwap 4. Using aggregators and setting up their own pools might be a complex task for users who are new to the NFT sector

5. Deploying a new SudoAMM pool is around 180k gas which might be expensive for people who wish to buy cheap NFTs 6. The SudoAMM will be supporting only $ETH in the beginning (But they plan to support the creation of any arbitrary ERC721/ERC20 pool in the future)

• $SUDO TOKEN: The $SUDO token has not yet been launched The SudoAMM protocol will be governed by the $SUDO governance token The token will be non-transferable, with a transferability vote being deferred to on-chain governance after launch

According to @0xmons, 0xmon NFT holders may be eligible for the $SUDO token airdrops Full $SUDO distribution and tokenomics details will be released in the near future!

VERDICT: SudoSwap is basically Uniswap v3, but for the NFT sector There hasn't been much innovative integration from DeFi into the NFT sector thus far However, SudoSwap is the first of its kind to leverage DeFi's AMM model for NFTs

Although the NFT community is not particularly interested in the DeFi sector, SudoSwap is in a very strong position to benefit from network effects and liquidity from both the NFT and DeFi sectors since every trader enjoys low-slippage swaps between NFTs and tokens!

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