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Forget About DeFi Summer: NFT Autumn is Arriving

Forget About DeFi Summer: NFT Autumn is Arriving

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While we’ve all heard the well-worn mantra that “bear markets are builders,” until very recently it felt like hardly anyone in crypto was building anything very interesting these days.

All NFT drops use the same old recycling concepts. DeFi still hasn’t recovered from the situation PTSD equivalent. And to top it all off, Tornado Cash Sanctions makes us wonder if the risks of building in DeFi are greater than we expected.

But after being convicted a few weeks ago, I finally found the excitement and the new I’ve been looking for. It started when I came across a lively conversation between crypto influencer Cobie and the entire population of NFT Twitter. Cobie had started NFT collectors when he referred to NFTs as “picture altcoins”.

What many saw as a minor insult, I saw as a reset Overton window and a litmus test of my cognitive biases. It changed my view of NFT. If you ignore all the nuances and carefully consider a smart contract, altcoins with pictures is indeed what NFTs really are.

Sudoswap is the next new thing

This simple but provocative idea is part of the reason Sudoswapwhatever reported the administration ID (SUDO), is quickly becoming the “it” place for NFTs these days.

Sudoswap was launched in July – the name is a riff on Uniswap for reasons that will soon become apparent – ​​and is the first honest-to-God decentralized NFT exchange on chain. automated market maker (AMM).

In other words, Sudoswap is a protocol, and as such it is intended to work together with other protocols. The liquidity it offers through AMM can be accessed by other protocols, dapps and even marketplaces. In contrast, a massive NFT marketplace like OpenSea is a closed ecosystem with a closed order book; even though customers provide liquidity, the platform has to take transaction fees.

Removing the middleman, as always, is a big idea. While others have attempted to solve the NFT liquidity problem, Sudo, created by a pseudonymous group Statelayer, 0xmons, 0x Hamachiand bored genius– was the first to actually solve it. Platforms like OpenSea and LooksRare are marketplaces, but Sudoswap works more like an exchange.

Sudoswap is to NFT what Uniswap is to altcoins

In my opinion, Sudoswap is doing to the NFT space what Uniswap did to DeFi.

Part of the reason Uniswap was a big deal when it launched was because it took the fees normally held by centralized exchanges and gave those fees to liquidity providers, eliminating the need for traditional market makers.

In fact, I think this could be the spark that finally brings the excitement of the 2020s Defi Summer to the NFT world. Call it NFT Autumn. One of DeFi’s turbocharged moments was when AMMs created liquidity for altcoin trading. NFT Autumn could follow the same trajectory – but it’s altcoins with images and AMMs.

Liquidity is an important financial building block, a necessary element in any successful token (fungible or not). It’s also a building block that was missing from the NFT ecosystem until Sudo’s AMM launched. And a small portion of Sudoswap’s SUDO supply will be distributed to persons who have provided liquidity Previously on the platform (a la Uniswap), a move that may bring more liquidity to Sudoswap and its AMM as it attracts speculators.

Difficult royalty issue

That doesn’t mean Sudoswap’s ascension to heaven is certain. Community has teased the conversation from another feature of the marketplace – namely royalties. Until now, some marketplaces have had a practice of allowing content creators to collect royalties (in some cases up to 10%) when their NFT companies change hands on that marketplace. Indeed, this has been one of the things that has made crypto so exciting for creators – in theory, they get paid forever as long as there are new buyers for their art.

Sudoswap nixed royalties. Instead, the protocol takes a 0.5% “trading fee” and allows NFT collectors to trade for significantly less.

Statelayer (one of the founders of Sudoswap) told me that he and his team are not surprised by the royalty backlash. The real surprise (initially) were the creators who came to the platform specifically to pitch their projects.

“We didn’t expect that,” Statelayer said.

Why Sudoswap can be better for creators than royalties

It turns out that the advantage of the author is that they become an artist, a seller and an intermediary, if they do it right. In other words, an artist can act as an entrepreneur, launch their project on Sudo, invest liquidity and take trading fees from the pool. That may be more than they could do in a traditional NFT sale.

To date, the most successful collection to try this approach was Sudonauts, by Brent skets. When Sudo was launched via AMM, every sale of Sudonaut NFT added liquidity to the pool and created a more liquid and dare I say less volatile market. It’s great for collectors and gives them confidence that there will always be a buyer for their sudonaut.

The Sudonauts project is only two weeks old. But so far, the results are encouraging. Yes, its current price floor is a modest 0.23 ETH, but it had a sale volume of 563 ETH. And it gave the artist a cool 40 ETH trading fees from his liquidity pool. He also kept 200 of the 2000 NFTs for him and his team to “showcase how artists can make a profit while providing plenty of liquidity for their collection.”

The collection has a total market value of $590,000 – and now has $315,000 in liquidity behind it. Along the way, he helps create a safer and healthier market for his collectors with a system designed for longevity rather than hype.

Brentsketit declared the experiment a “preventively viable” alternative to royalties, though he told me it “needs to be facilitated.”

Another intrepid explorer venturing into the depths of Sudoswap is John Patten, CEO Treasure DAO. John recently published a blog post let’s outline an upcoming NFT project called DAO cats which is going to launch via SudoAMM. DAO Cats calls itself “an experiment in DAO-owned IP”, but I’m most interested in its plans for “protocol-owned liquidity”. They lock up 40% of the total supply of Cats and Catcoin (a token that NFT holders can get by depositing their Cat NFTs into the DAO’s vaults) in liquidity pools, but will only be removed if the holders vote to do so.

John’s goal with DAO Cats is to “create an NFT where the protocol blocks much of the supply to ensure liquidity, and hopefully create a more reliable floor price.”

“Altcoins with pictures” is a feature, not a bug

I think sooner or later the creators will realize that “NFTs are just altcoins with images” is a perfectly fair summary – and that’s okay.

I’m not trying to cover NFT collectors. Seeing NFT in this framework opened my mind to a whole host of new NFT possibilities.

I’ll 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’t, what would you build? Answer this question and then go build it – but add pictures.

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