How did the rising star sudoswap come to be?

Written by: Karen, Foresight News

After acquiring the NFT aggregation market Genie, Uniswap announced that it would implement NFT trading through sudoswap. Just half a month before Uniswap officially announced this partnership, sudoswap, which initially started as an NFT over-the-counter trading platform, launched the on-chain market protocol sudoAMM for NFTs.

According to Dune data, as of the time of writing, sudoAMM has achieved a trading volume of $8 million one month after its launch, with a total of 4,879 users. This article will interpret the sudoswap team, features, token issuance plans, and more.

sudoswap Development and Team

sudoswap was built by the anonymous developer @0xmons, who first launched the alpha version of a peer-to-peer trading platform designed specifically for NFTs in Q2 2021. This version was supported by 0x V2, allowing users to exchange assets among ERC-20, ERC-721, and ERC-1155 types, with asset transfers occurring only upon completion of the exchange. In simple terms, User A creates an exchange request and sends the exchange link to a specified User B (or allows anyone to purchase), and then User B accepts the trade, completing the asset transfer.

The recently launched sudoAMM is actually a significant upgrade of the NFT AMM protocol (i.e., LSSVM) that @0xmons envisioned from the beginning. The LSSVM prototype consists of many individual NFT pools, each managed by a liquidity provider and parameterized by custom joint curve parameters, allowing traders to trade within a single NFT pool or across multiple pools.

In addition to 0xmons, the initial development team of sudoAMM also includes smart contract lead BoredGenius and backend developer 0xhamachi. BoredGenius is also a builder of protocols such as Timeless Finance, 88mph, and Astrodrop.

In December last year, 0xmons stated that their team does not have VC funding. By the end of March this year, they mentioned that the development and audit costs of sudoAMM have been self-funded, and the smart contracts have been audited by Spearbit and ABDK, with plans to open-source them on GitHub afterward.

What are the Features of sudoAMM?

Currently, sudoAMM only supports ERC-721 NFTs, with plans to release support for ERC1155 and ERC20 token routing in the future. It currently offers the creation of NFT single-sided pools (for buying or selling NFTs) and ETH and NFT two-sided pools, but only liquidity providers in two-sided pools can earn trading fees. The main features of sudoAMM include low platform trading fees (only 0.5%), on-chain liquidity pools, no royalties, and low gas fees. Additionally, sudoAMM has further optimized the user experience, including series quotes, shopping cart, and floor price sweeping functions.

sudoswap stated that the logic and code of sudoAMM have been specifically optimized to save gas fees for traders. When trading NFTs in bulk, sudoAMM can save up to 40% on gas fees.

Regarding liquidity pools, liquidity providers can only deposit tokens (currently only ETH) and specify the NFT series, quantity, starting price, and pricing function for buying or selling. sudoAMM has two very simple pricing functions: linear curve and exponential curve. Each time someone trades with a pool that has a linear curve, the pool's pricing will increase or decrease by a fixed amount. Each time someone trades with a pool that has an exponential curve, the pool's pricing will be multiplied by a fixed amount.

Source: https://blog.0xmons.xyz/83017366310

Here, we focus on the price setting of sudoAMM. Users can choose either a linear curve or an exponential curve and then set the Delta value, which can also be 0. After the pool creation is completed, users can also choose to continue depositing NFTs or change the price data.

For example, when creating a pool to sell 5 NFTs with a starting price of 2 ETH, if a linear curve is chosen with a Delta value set to 0.5, then the price of the first NFT will be 2 ETH, the second will be 2.5 ETH, the third will be 3 ETH, and so on; if an exponential curve is chosen with a Delta value set to 50%, then the price of the second NFT will be 3 ETH, and the third will be 4.5 ETH.

The series quotes in sudoAMM are essentially equivalent to creating an NFT purchase pool. Users can choose either a linear curve or an exponential curve. Unlike OpenSea, since sudoAMM is an on-chain liquidity protocol, the tokens used for quoting will be held in the pool contract owned by the user, and they can withdraw from that contract at any time.

In two-sided pools, liquidity providers can set their own fees and customize the maximum number of NFTs that can be bought and sold in that pool. For example, in an exponential curve pool that initially has 10 ETH and 10 NFTs with a Delta value of 10%, the price will change when buying or selling an NFT, but the change will be smaller than that of the x*y=k curve. The price when selling the last NFT in the pool will be 2.358 ETH, rather than infinity.

Starting from a sudoAMM pool with 10 ETH and 10 NFTs, the ETH required for traders to buy or sell an NFT

In an xy=k pool, the ETH required for traders to buy or sell an NFT*

Additionally, the slippage in sudoAMM is also fixed. Due to the narrow price fluctuations, if multiple NFTs are bought or sold at once, the average price of the transaction will also be lower. For specific comparisons, refer to the previous posts by 0xmons comparing sudoAMM and constant product (x*y=k).

From the perspective of smart contracts, when creating a new pool, since each liquidity pool has a unique smart contract associated with and owned by the creator, no tokens representing liquidity positions will be received.

According to the official documentation of sudoswap, when instant selling NFTs on this protocol in the future, efforts will be made to sell at the best possible price to the joint curve. However, there is currently no function for instant selling NFTs.

Perhaps the most critical question is, will sudoswap issue a token?

In fact, 0xmons stated as early as the end of last year that they would release the SUDO token, and after the launch of the NFT AMM, they would gradually transition to a DAO, putting the token on the agenda. Since there is no VC, it is expected that there will be a generous airdrop allocation for the team and community, primarily considering XMON holders and 0xmons NFT holders. When announcing sudoAMM, sudoswap also emphasized that the sudoAMM protocol will be governed by the SUDO governance token, with details on the distribution of the SUDO token and its utility for XMON holders to be announced later.

At the end of 2020, 0xmons released a digital collectible series called 0xmons, inspired by Pokemon, SCP, and Lovecraft, which includes NFTs and the XMON token. The total supply of 0xmons NFTs is only 341, with a current floor price of 20 ETH. The maximum supply of the XMON token is 10,000, with a current price reaching $34,000, having increased nearly 5 times in the past month and over 15 times in a year, with a fully diluted valuation of $340 million.

It can be speculated that the priority for the sudoswap airdrop will be given to 0xmons NFT holders, XMON token holders, users of the sudoswap over-the-counter trading platform, and new users interacting with the recently launched sudoAMM. Currently, the operations available on sudoAMM include providing liquidity, listing NFTs, and (series) quoting.

Conclusion

In summary, sudoAMM has made significant improvements in liquidity provision, trading flexibility, and efficiency, such as allowing single-sided liquidity pools for NFTs or ETH, pairing NFTs with ETH, adjustable liquidity pool parameters at any time, customizable fees for two-sided pool creators, and the choice of pricing curves.

However, since sudoAMM operates entirely on-chain, operations such as listing or delisting NFTs, bidding, and accepting bids all require gas fees. Although sudoswap claims to effectively reduce the required gas fees, it can still be a considerable expense for frequent NFT traders or during periods of congestion on the Ethereum network.

Additionally, in sudoAMM, the corresponding ETH and NFTs must be deposited in escrow when listing or bidding for NFTs. Setting aside security issues, this is particularly unappealing for NFTs with additional utilities (such as governance, potential airdrops, service access, or even display). For NFT buyers, the capital efficiency of sudoAMM is far lower than that of OpenSea. More importantly, the vast majority of popular NFT series have rare attributes, making reasonable pricing a significant challenge for sudoAMM.

As for Uniswap's previous announcement about implementing NFT trading through sudoswap, the extent to which this will drive the depth and liquidity of sudoAMM remains to be seen.