[Feature] Sudoswap's airdrop? Checkout this OpenSea Killer

The largest decentralized exchange (in terms of total value locked) Uniswap had acquired genie.xyz, a decentralized NFT marketplace last month. In just less than 3 weeks after the acquisition, a marketplace protocol ’sudoAMM’ (automated market maker) was released and adopted by the latest decentralized NFT marketplace ‘sudoswap’. Without drilling into too much technical details, basically it is a DeFi version of the NFT marketplace. The features of DeFi such as price curve, liquidity pool, TVL, etc are all migrated to this protocol designated for NFT trading. It seems pretty cool and innovative, but the real question is, does this actually work?

Before I delve into the topic, we have to know that NFT and cryptocurrency are two different things. NFT aka non-fungible token in full, is a unique token that can’t be split or replaced. Most of the NFTs in the Ethereum blockchain are ERC-721 tokens. Fungible tokens like Bitcoin, Ethereum and Dogecoin, are interchangeable and can be swapped around freely. These fungible tokens in the Ethereum blockchain are ERC-20 tokens, e.g. WETH, ApeCoin, DAI, etc.

Let me show you 2 scenarios here. In the first scenario, imagine that Elon Musk sent me an NFT with his signature, this NFT will be 1 of 1 and recorded in the Ethereum blockchain, there is no way to duplicate this NFT. While in the second scenario, Elon Musk sent me 10,000 Dogecoin instead. It was deposited in my wallet together with the existing Dogecoin that I am already holding. There is no way I can differentiate which of the 10,000 coins was sent by Mr. Musk. Now we have a good picture of what’s fungible and non-fungible tokens.

After using sudoswap for a few days, it gives me a very strong first impression that it tends to recreate the success of Uniswap’s DeFi model. Most of the DeFi platforms out there we saw are created out of Uniswap’s source code. Uniswap learned the hard lessons and thus employed a new license agreement in their latest v3 protocol to prevent copycatting. In fact, Uniswap is an easy-to-use and user-friendly DeFi platform, which made it the largest DEX with the largest TVL. On the other hand, sudoswap failed to give me the same user experience. While everyone is talking or tweeting about how innovative sudoswap is, how sudoswap is going to beat OpenSea, or even how sudoswap is the game changer, I am here to give you a reality check. I am not trying to be harsh to sudoswap as it has just publicly launched less than a month, however, this DeFi protocol is not as ‘killer’ as many claimed. As an experienced NFT enthusiast and also a flipper myself, or ‘degen’ you might call, let me tell you why.

Explanation of ‘degen’. Comic by xuanling11.

The Nays

1. 0% Royalty Fee

This might be the best feature ever for all the NFT flippers. But to me, this is actually the worst. I have written a lot of articles about free-mint projects, say ill poop it, WAGDIE, Goblintown, The Saudis, etc. One of the main reasons that these projects choose to go free-mint is because secondary sales can generate royalty fees for them to sustain the operation. Even for projects that require a minting fee, royalty fees are important to them as an incentive as well as continue developing the roadmap. Many artists adopted NFT because it can generate a stream of income if their artwork is resale on the secondary market.

Now I know how they can afford to give out free burgers during the NYC NFT fest

Without royalty fees, there would be less and less free-mint projects I would say. Well, I am willing to sacrifice some of my profits in exchange for the sustainability of the NFT ecosystem, would you?

2. No Traits

I explained what is a fungible and non-fungible token by giving the Elon Musk example. It is actually to emphasize that NFT should not be treated as a fungible token. Every NFT has its own traits, from common to uncommon and rare. Traits is one of the most notable features of NFT, it makes every NFT different from each other.

The floor price of golden laser eye Saudis is 10x the basic one

3. Great Concept but Unrealistic

Instead of the ‘X * Y = K’ formula that Uniswap uses for its AMM protocol, sudoswap offers linear and exponential curves. Their concept is similar: each time you buy or sell an NFT, the floor price will increase or decrease according to the pool’s delta (flat if delta is set 0). For example, the floor price of Genesis Box NFT is 0.238 ETH as you can see below.

When I selected a piece of NFT, the price of the second NFT increases as delta is applied in this pool. The more NFTs I select, the higher the price increases.

The floor price of Genesis Box jumped to 0.3 ETH if you buy a bulk of 5, while it takes 29 listings on OpenSea to reach this floor price. Also, not to mention listings on other marketplaces like Looksrare and X2Y2.

This might be the solution if we are swapping for crypto with a low liquidity pool. However, it is pretty unrealistic to implement this protocol into all kinds of NFTs.

4. Takes Forever to Load

There are over 320 NFTs in my wallet, sudoswap failed to load my NFT collections after waiting for 20 minutes. I guess the devs might need to work on this.

5. No Statistics

I believe the whole idea of sudoswap is to attract flippers to use their platform since they remove the royalty fee feature. However, the platform doesn’t provide any kind of statistics. Real-time statistics, such as trading history and volume, are crucial to flippers as they need to know if a project has enough liquidity and popularity. Anyway, this might not be as crucial as it seems as there are plenty of NFT analytic tools out there.

You can view the history of these activities in OpenSea

6. Gas fee

The optimized gas fee is one of the big features that Sudoswap is pretty proud of, however, I can hardly feel it. If you are buying one or a few NFTs, you didn’t get to save much gas fee. If you are buying a lot, then yes, you are saving quite some gas fees but the problem is, the floor price is constantly increasing too (refer to point 3).

The Yeas

1. Create Your Own Pool

If you are buying or selling NFT in a bulk, you can always create your own pool and delta. It is a great feature for collectors who are busy to monitor the market but not so much for flippers as the setting for delta is pretty tricky. Somebody might take advantage of you if the delta is not set appropriately.

2. Be the Market Maker

Let your NFT make money for you. In sudoswap, you can buy and sell NFT and also earn trading fee at the same time. You can select the fee amount and delta you desire. Again, there are underlying risks if the figure is not set correctly.

3. Arbitrage Opportunities

Some of the NFTs listed on sudoswap are cheaper than other marketplaces as it only charges 0.5% sales fee. You might find arbitrage opportunities if the spread of floor prices between different marketplaces is large. Say an NFT collection listed on sudoswap for 0.1 ETH while the floor price of the same NFT collection on OpenSea is 0.12 ETH. After deducting 10% (2.5% sales fee + 7.5% royalty fee) of sales charges, there is a profit of 0.008 ETH.

4. Viable for selected NFT collections

The uniqueness of NFT is that every NFT has its own traits. However, for some NFT collections, they can be fungible and interchangeable. For instance, the adidas Originals Into the Metaverse and RTFKT X NIKE MONOLITH NFT collections. The sudoAMM protocol fits perfectly for these ERC-1155 collections if the liquidity pool is large enough.

The Neutral

Trading of Stolen Assets

Why do I classify ‘stolen assets’ as neutral, isn’t it unethical to do so? In my opinion, everyone is responsible for their crypto assets in the world of web3. Often I saw hacking cases whereby people mint without using a burner wallet or simply sign Metamask approval transactions. If you are in the NFT scene for long enough of time, you might purchase a stolen NFT unintentionally. OpenSea being the most popular NFT marketplace as of current, ban stolen assets from listing on it. Trust me, you will be extremely pissed off if your NFT was marked as ‘suspicious’ one day.

MAYC #4244 was reported stolen and was given a 'mark'

Once an NFT is reported for suspicious activity, it can no longer be listed on OpenSea until the mark is removed. The chance to get it to unmark is extremely low, thus nobody is willing to buy stolen NFT sometimes even at a discounted price. While you can still list it on other marketplaces (the mark is still there), nobody is going to buy it unless the discount is tremendous.

MAYC #4244 is listed at 14.99 ETH, way below the floor price of 17 ETH in OpenSea

As a decentralised platform, sudoswap does not mark stolen assets, which is good news to those who unintendedly bought stolen assets, as well as hackers, unfortunately. To the pool owners then it is bad news as they might be the exit liquidity of stolen assets.

All in all, I have mixed feelings for sudoswap. It brings innovation to the NFT scene, also trying its best to fight against the so-called ‘decentralised’ giant (yes, looking at you OpenSea). However, it is hurting the NFT ecosystem and removing NFT biggest feature at the same time. At the current stage, I do not recommend this marketplace to trade your NFT. It may be too early to make a conclusive judgment, let’s see what can sudoswap offers to the NFT community in the coming days.

Update:

Sudoswap has just announced the outlines of the distribution of SUDO, the governance token of the sudoAMM protocol.

The initial supply distribution of SUDO is as follows:

Initial supply: 60M SUDO

XMON holders: 25.12M, 41.9%

0xmons NFT holders: 0.9M, 1.5%

Retroactive LP airdrop: 0.9M, 1.5%

Treasury: 15.08M, 25.1%

Initial team members: 9M, 15%, vested over 3 years with a 1 year cliff

SudoRandom Labs: 9M, 15%, vested over 3 years with a 1 year cliff

Fore more details, check it out here:

https://blog.sudoswap.xyz/sudo-distribution.html