How to Get Liquidity On Your NFTs
Dear Bankless Nation,
The rise of Bored Apes and CryptoPunks generated a lot of wealth for avid collectors. NFTs are now a multi-billion dollar asset class.
The problem is that getting liquidity on your NFT is a tough decision.
It’s an all-or-nothing endeavor. You either sell the piece or you don’t. There’s no luxury of slowly trimming or hedging your position as one can with fungible tokens.
Is there a solution?
And the platform has been in the spotlight in recent weeks as collectors swarm the marketplace to tap into this much-needed liquidity.
With it, Sudoswap has also sparked some controversy over creator royalties as the platform allows collectors to completely avoid paying them.
Want to learn more?
William’s got you covered.
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How to get liquidity on your NFTs
Sudoswap is a new NFT AMM that goes where no NFT marketplace has gone before. It implements innovative liquidity pools and bonding curves to bring much-needed liquidity to a rising multi-billion dollar asset class.
This Bankless tactic will show you how to launch your own NFT liquidity pool in this new emerging marketplace.
- Goal: Learn how to supply NFTs on Sudoswap
- Skill: Intermediate
- Effort: 30 minutes
- ROI: Owning and managing your own NFT liquidity
A Beginner’s Guide to Sudoswap
Launched in April 2021 by 0xmons, Sudoswap started out as an over-the-counter (OTC) NFT trading dapp.
A couple of months after the launch, 0xmons began developing a new NFT automated market maker (AMM) system, a.k.a. the SudoAMM.
Where other NFT AMM’s like NFTX rely solely on liquidity pools, sudoAMM was notably designed to add bonding curve features to its liquidity pools in order to offer superior flexibility around both buying and selling NFTs.
SudoAMM’s creators rolled the tech out as the new engine of the decentralized Sudoswap marketplace on July 8th, 2022. Since then, on-chain trading volume has surged as people have flocked to see the project’s unprecedented bonding curve possibilities and gas-efficient transactions.
How Sudoswap Works
Generally speaking, Sudoswap is in the same ballpark as NFTX, as it’s a protocol that also facilitates streamlined trading around “floor” NFTs.
That said, a router system that works across multiple uniquely-parameterized liquidity pools and customizable bonding curves are Sudoswap’s major points of departure from NFTX.
This means users can set up buy-only, sell-only, or buy-and-sell NFT pools according to predictable pricing targets. For example, 0xmons has explained in a previous blog post about sudoAMM:
“For liquidity providers, single-sided pools allow for DCA’ing in or out of a large NFT position. For example, a buy-side pool that buys its first NFT for 10 ETH, then 9 ETH, then 8 ETH, etc. (assuming linearly decreasing bonding curve). Or a sell-side pool that sells its first NFT for 1 ETH, then 1.5 ETH, then 2.25 ETH etc.”
The Royalties Controversy
A huge point of debate in the NFT ecosystem lately has been Sudoswap’s approach, or rather its lack thereof, to honoring NFT royalties.
Indeed, one of sudoAMM’s main selling points has been how its traders don’t have to pay royalty fees compared to using other NFT marketplaces. As a result, this saves collectors around 5-10% on every purchase.
To understand why this dynamic is controversial, you have to go back to 2020 when a group of now-legendary crypto artists demanded and won a minimum of 10% secondary sale royalties on any NFT resells from prominent NFT marketplaces.
Since then, 10% royalties have become a de facto standard for crypto artists on their pieces and are widely celebrated in the NFT space as a web3 repudiation of the historical status quo, wherein artists typically never received any secondary sale royalties upon the reselling of their works.
Accordingly, there’s a very strong pro-royalty culture throughout much of the old guard in the NFT ecosystem, and many in this camp see the downhill race toward zero royalties a la Sudoswap as backsliding, exploitative, and a red line not to be crossed.
On the other side of the spectrum, you have more cynical takes about how this race toward zero royalties is all but inevitable whether you love it or hate it, as typified by this recent Udi Wertheimer tweet:
Then there are those in the middle who say Sudoswap is mainly suited for offering liquidity flexibility around large PFP collections, more than a few of which have already experimented with their royalty approaches.
For example, two of the three most traded projects on Sudoswap to date have been Based Ghouls and 8liens. The Based Ghouls team set up their own Sudoswap liquidity pool to control their liquidity, while 8liens charges a 0% royalty fee on strategic grounds.
For these sorts of projects, Sudoswap makes a lot of sense in my opinion.
In any case, NFT aggregators like Gem are adding opt-in royalties for Sudoswap transactions, so it will soon be possible to trade on Sudoswap and honor royalties too.
How to Create a Sudoswap Liquidity Pool
I write Bankless’s Metaversal NFT column, and lately, I’ve been focusing on DIY solutions like how to create your own PFP collection, how to create your own minting UI, and how to create a minting allowlist.
In that vein, let’s say you’ve minted your own NFT collection, and now you’re ready to open it up to the world. Here’s how to create your own NFT liquidity pool on Sudoswap:
Go to Sudoswap.xyz
Connect your wallet
Click on the “Your Pools” tab and then on the “+Create Pool” button. You will arrive at this UI:
Click on the “Sell NFTs for tokens” or the “Do both and earn trading fees” button. For this example, we’ll go the former route and opt to just sell NFTs for ETH.
Select the NFT collection you want to deposit from and the token you want to receive in exchange (only ETH is possible for now), then click the “Next Step” button.
At this stage, you can set up your NFT’s price point, its bonding curve type, and the delta at which its price changes upon new transactions. Click on the “Next step” button again.
On the ensuing page, click the “Select Your NFTs+” button and go through and pick the NFTs you want to deposit, like so:
Next, fire off an approval transaction to let Sudoswap access your NFTs, and then deposit your NFTs with a final transaction. You’ll next arrive at your personal pool dashboard UI, which looks like this:
To manage your assets and track your sales, simply click the “Your Pools” button on Sudoswap to go to your liquidity pools command hub:
A New Experiment For NFTs
To be sure, Sudoswap isn’t right for every NFT project.
However, it may be right for you.
If you’re interested in experimenting with this NFT AMM, start small but whatever you do, don’t sleep on Sudoswap’s bonding curve possibilities.
That tech alone makes Sudoswap an incredibly interesting DIY liquidity application for one of the fastest-growing sectors of the crypto economy.
- 🔥 Check out sudoswap and review the sudoswap Docs
- 💸 Read my previous tactic The Essential Guide to GMX if you missed it!
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Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.
Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here.