December 9, 2021·3 min read
In a plan that may advance the idea that NFTs are tradable assets, Sudoswap, a marketplace for nonfungible tokens, plans to launch an automated market maker (AMM)-based decentralized exchange for swapping NFTs.
In a Dec. 7 tweet thread, Sudoswap developer “0xmons” announced the team is hoping to deploy its AMM to testnet before the end of the year, noting plans for a cross-chain deployment in the future.
0xmons describes the forthcoming DEX as a “capital-efficient, gas-optimized base-layer protocol for NFT liquidity” that supports both single and dual-sided liquidity provision.
The design for the AMM was first articulated in an August blog post from 0xmons, where the developer described providing a means for the “financialization” of NFTs without relying on fractionalization through “LSSVM” pools.
The AMM will host “many individual pools of NFTs,” with each pool managed by a single liquidity provider. Individual pools are set up to function in three modes, allowing liquidity providers to choose whether they wish to operate “sell-only” pools, “buy-only” pools, or pools supporting both purchases and sales.
Buy-only pools contain just ETH and exclusively offer quotes to purchase NFTs for Ether, while sell-only pools solely hold NFTs and offer quotes for their sale in exchange for ETH. Pools offering both NFT sales and purchases hold both assets.
Traders can select a single pool to trade against, or use an aggregator to trade across multiple pools. Price quotes are created using simple, linear, or exponential bonding curves, depending on if a pool is buy-only, sell-only, or both.
Liquidity providers can also use automated orders to trade NFTs at specific price ranges and take advantage of price spreads.
Sudoswap describes its protocol as reducing slippage and increasing the overall efficiency of NFT markets.
With liquidity providers able to launch as many individual pools as they desire, the developer seeks to address potential concerns regarding fragmented liquidity, which is typically associated with poor pricing. However, Sudoswap expects the use of aggregation will allow a multitude of smaller pools to operate akin to an “on-chain order book” for the platform.
Sudoswap expects its exchange will predominantly be used to trade floor NFTs — tokens that are more common and do not possess unique characteristics. It plans future iterations of the protocol to host additional “customization options” that will enable more advanced trading functionality.
0xmons also revealed the project’s plans to launch a token. “There WILL be a token,” Oxmons tweeted.
They emphasized that the protocol will “rapidly” move to structure itself as a decentralized autonomous organization (DAO) to fund future development. 0xmons stressed that the project is not backed by venture capital, meaning that both its team and community can expect “generous allotment” from the token’s supply.
The developer did not offer a firm timeline for the token’s distribution, stating the team will focus on building the AMM over the near term.
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November 28, 2021
- BlockchainA blockchain is an append-only digital ledger storing a set of time-ordered transactions grouped in blocks that are linked together using cryptographic hashes.
- CryptocurrencyA cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Cryptocurrencies are a subset of alternative currencies, or specifically of digital currencies.
- Decentralized Finance (DeFi)DeFi is short for "decentralized finance," an umbrella term for Ethereum and blockchain applications geared toward disrupting financial intermediaries.