How to Trade on sudoswap, the NFT Market’s Answer to Uniswap
The central theses
- sudoswap is a decentralized NFT marketplace based on Ethereum.
- It uses an automated market model similar to Uniswap and hosts liquidity pools for NFTs instead of standalone listings.
- sudoswap’s design offers several advantages for NFT trading over other trading venues such as OpenSea, which explains why its popularity has surged in recent weeks.
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Learn how to buy and sell NFTs on Crypto’s first automated NFT market maker.
What is sudoswap?
sudoswap makes NFT trading even easier.
Launched in May 2022, sudoswap is Crypto’s first automated NFT market maker. The Ethereum-based platform works similarly to Uniswap, allowing users to trade assets with confidence through user-funded liquidity pools. However, instead of trading between two fungible tokens, Sudoswap users can trade between NFTs and ETH.
At first glance, it might be difficult to see the advantages sudoswap offers the average user over traditional NFT trading platforms such as OpenSea, the world’s largest NFT marketplace with trading volumes far exceeding all of its competitors. Unlike OpenSea, sudoswap’s pools are fully decentralized and user-funded. However, this does not mean that trading is free – the creator of the trading pool sets a swap fee of a few percent, which is paid to him by every successful NFT buy or sell.
Fees incurred when assets are traded across the platform’s pools go back to those providing the NFT and ETH liquidity. This also means that sudoswap bypasses existing royalties charged on collections by their creators. The lower the swap fees for a given pool, the more incentive users have to trade through it. This encourages a “race to the bottom” for pool builders to offer the lowest fees, resulting in better prices for end users.
A final benefit of sudoswap is that NFT owners can sell their assets instantly without having to wait for a buyer, which in turn improves liquidity and efficiency in the NFT market.
Arguably the most innovative part of sudoswap, however, is how it manages the value of the NFTs traded through its pools. The platform uses commitment curves to automatically increase and decrease the bid and ask on each collection based on how many NFTs are bought or sold. For example, if a user sells an NFT into a pool, increasing supply, the purchase price will decrease slightly. Depending on the delta selected by the pool creator, the price per NFT will decrease as more NFTs are sold until market forces find its fair value. On the other hand, buying an NFT from a pool incrementally increases the cost of subsequent purchases, causing the asset’s price to match demand.
In the past few weeks, the number of users interacting with sudoswap has exploded. According to Dune data compiled by 0xRob, the log had an average of 36 users per day in July. A month later, sudoswap has registered almost 2,000 daily users and a total trading volume of over $18 million.
Getting started with sudoswap
Trading NFTs on sudoswap is no more difficult than interacting with other automated trading platforms. As with interacting with any blockchain protocol, make sure you are on the correct website and connect your Web3 wallet using the on-screen prompts.
Once connected, navigate to the collections page to see which NFT collections users have created liquidity pools for. The largest and most active pools are for popular, established, and frequently traded collections – don’t expect to find pools for smaller and more obscure projects. After finding a collection to trade, click on it and then navigate to the Pools tab. This shows the user-created pools offering NFTs from the collection, how much liquidity there is for each one, the type of commitment curve used, and the delta value (how much sells and buys affect the price of NFTs in the pool). For this demonstration we will use the Webaverse Genesis Pass collection.
Most collections have a main pool where most of their liquidity is concentrated. However, it’s worth checking if other pools are available that offer lower swap fees – especially if you’re looking to buy NFTs from higher-end collections like Bored Ape Yacht Club or 0xmons. For Webaverse Genesis Passes, we consider the main pool with the liquidity of 226 NFTs and 16,522 ETH.
Here we can see the current price at which the pool is selling an NFT, the delta (the amount by which NFT sells and buys move the ask price), and the total swap fee charged by the pool’s creator. If we scroll down, we can also see a chart that gives a visual representation of the pool’s retention curve. By moving the sliders on the buy and sell side, it is possible to simulate how buying or selling multiple NFTs from the pool will increase or decrease the price and how much it would cost.
Because pools increase the price of NFTs when sold, it is often better to use multiple pools when purchasing multiple NFTs. Sudoswap’s built-in “sweep mode” can be used to find the best combination of purchases. For example, if we wanted to buy 10 Webaverse Genesis Passes, the cheapest option would be chosen for the first purchase. However, this would increase the price of other NFTs in the relevant pool, meaning it could be cheaper to buy from other pools before returning to the first pool.
The same principles for buying multiple NFTs apply to selling them. If we needed to quickly sell multiple NFTs from a collection, we could probably get a better overall price by selling individual NFTs to individual pools rather than selling them all to the same one.
It is also worth noting that users can choose the exact NFT they receive when purchasing NFTs from Sudoswap pools. While this isn’t particularly important for collections like Webaverse Genesis Pass Where each NFT is the same, it affects collections of different rarities. This is because it offers buyers the opportunity to purchase NFTs with rare traits close to the collection’s reserve price. Meanwhile, NFT holders looking to sell rarer pieces may find that they can get a better price for their grails on other marketplaces such as OpenSea.
While Sudoswap is still in its infancy, it could potentially revolutionize NFT trading. Members of the NFT community have already started experimenting with it various uses for the log from lottery systems to GameFi marketplaces. At the same time, speculators are hoping to capitalize on the hype with derivative projects like Sudo Loot and Sudo Inu. While it’s unclear if sudoswap will host larger collections in the future, that might not matter. It has already advanced NFT trading and has a bright future ahead.
Disclosure: At the time of writing this article, the author owned ETH and several other fungible and non-fungible cryptocurrencies.