Talking about the current situation of the crypto market, Blur is definitely the topic of most people. After a year of silence in 2022, this year’s Blur seems to have found an accelerator key, and it has set off an upsurge in the crypto market in just one month. Through several rounds of airdrops of $BLUR tokens, the entire crypto market became a hit. The emergence of Blur broke the dominance of Opensea, and with subsidy incentives, its trading volume once surpassed Opensea, and more people began to pay attention to the development status of the NFT Marketplaces. Various NFT trading markets have sprung up like mushrooms after rain. At the beginning, let’s sort out the current status of the NFT Marketplaces market.
NFT marketplaces Overview
Currently, there are 3 major types of NFT Marketplace:
1.Order Match: such as Opensea, this type of product usually adopts the development paradigm of off-chain matching and on-chain settlement. The seller needs to create an on-chain smart contract wallet, authorize the NFT to the wallet, and then create an off-chain order and sign it. The signature is used to prove the legitimacy of the off-chain order, and the order will be saved in the centralized database of the trading platform. After the buyer confirms that the order is suitable, the token will be executed through the on-chain matching system to complete the transaction.
Disadvantages: serious centralization. 1 it relies on off-chain matching, the process cannot guarantee fairness and credibility. 2 The trading platform can usually decide whether to list a certain NFT project or not at will, and the NFT projects’ interest cannot be guaranteed.
2.NFT Fragmentation: NFTX is the representative . NFT Fragmentation aims to solve the problem of poor liquidity of NFT assets by dividing NFT to FTs. NFT holders issue Fungible Tokens of equivalent value by staking NFTs, and then such FTs can be traded through the existing supported markets, AMMs. At the same time, the corresponding staked NFT assets can also be redeemed by using the same amount of corresponding FTs.
Disadvantages:1 FT has no way to truly reflect the price of NFT. 2 fragmented assets have no actual use value. 3 This mechanism is usually prone to governance risks, that is, malicious attackers permanently lock the staked NFT through different ways such as burning part of the FTs.
3.Sub-Pool NFT AMM: Sudoswap is the first AMM with limit order for NFT realized by creating an on-chain smart contract named Sub-Pool with AMM function. Traders can choose to trade directly in the corresponding Sub-Pool according to their own needs. There are two types of users in this market: Trader and Liquidity Provider (LP). Only buy and not sell or only sell and not buy), and LP can choose to create a two-way Sub-Pool (both buy and sell) to earn income by providing liquidity.
Disadvantages: 1 it lacks an effective liquidity incentive plan, and the provision of liquidity can only earn a small portion of handling fees as income. 2 LP market-making costs are high. LPs under the Sub-Pool mode are usually in a competitive relationship. In order to increase the transaction rate and obtain higher handling fees, LPs need to update the market-making period in a timely manner to ensure that the price is more recognized for quick transactions. This makes LPs have to face Higher gas.
In short, Opensea, Blur and other off-chain order matching platforms provide the infrastructure for the NFT marketplaces track. The traditional trading market model has tended to be perfected, and NFT fragmentation is also gradually developing. Next, let’s turn our eyes to another potential segment in the NFT market, NFT AMM.
NFT AMM Vertical
Before the emergence of NFT AMM, the centralized platform of off-chain order book type occupied most of the main NFT market. Opensea almost monopolized this vertical, but it could not further improve the liquidity of NFT. How to further improve the liquidity of NFT? It has always been a problem.
With the continuous development of NFT, related innovations around NFT have not stopped. NFT fragmentation, NFT lending, Perpetual Swap and other derivatives continue to emerge, and NFT AMM is a new star on the track.
“NFT AMMs are a decentralized alternative to off-chain order book centralized NFT marketplaces like Opensea, Magic Eden, or Blur, primarily leveraging liquidity pools for frictionless and low-cost transactions.” Add liquidity and earn a certain transaction fee.
NFT AMM is fully executed on the chain. For buyers and sellers, instant buying and selling can be realized through the pool, and pending orders similar to Opensea can also be used. For LPs, it is possible to provide NFT-token bilateral market making to earn income.
When the liquidity is sufficient, instant transactions can be completed, forming support for NFT, and helping long-tail NFT gain value. The goal of NFT AMMs is to become the liquidity layer of NFTs, complement traditional markets, and provide a series of decentralized financial services to all NFT users.
Compared with traditional order book matching NFT trading markets such as Opensea, the advantages of NFT AMM are:
1.Completely decentralized and highly executed on the chain: Compared with traditional NFT trading markets such as Opensea, NFT AMM is highly decentralized, and it is completely released, bid, and traded on the chain, which is safer.
2.Efficient and flexible: NFT-token’s direct participation in market making leads to higher efficiency and higher sales, and custom parameters make it more flexible.
3.New NFT Fi infrastructure: NFT AMM can be used as the underlying infrastructure of NFT Fi, providing a new path for the development of NFT Fi, so as to give full play to its composability and create NFT Fi Lego.
4.Flexible incentive methods: The emergence of NFT AMM has created more incentives for traders and LPs, and deeply binds NFT project parties and LPs to achieve long-term incentives and build a healthier community.
5.High liquidity, instant transactions: Since the liquidity provided in NFT AMM will be rewarded with service fees, compared with off-chain order book forms such as Opensea, NFT AMM has higher liquidity and can instantly complete NFT transaction.
6.Reduce costs and increase profits: Fortraders, in the traditional market, when they want to buy or sell multiple NFTs, they need to consume multiple gas fees. Batch buying and selling can be completed in NFT AMM, and only one gas fee is spent, which reduces the cost. For LPs, providing liquidity in NFT AMM can earn transaction fees and other rewards to increase income.
Pioneer — Sudoswap
In July last year, the emergence of Sudoswap broke the status quo of the traditional NFT trading market and brought NFT AMM into the spotlight.
The NFT AMM represented by Sudoswap applies the concept of decentralized exchange (DEX) in the DeFi project to the NFT field, introduces the DeFi AMM model, and creates a liquidity pool for NFT-Base Token through market makers to make it more convenient. The fast and decentralized on-chain limit order transaction replaces the cumbersome off-chain order book form to improve the liquidity of NFT.
It consists of many separate NFT liquidity pools, each of which is managed by an LP, which can control the pricing function curve, initial fee, incremental threshold, and transaction fee ratio. This mode is what we mentioned before: Sub-Pool (sub-pool).
SudoSwap launched on the Ethereum mainnet in early July 2022. With novel transaction methods, low transaction costs, zero royalties and airdrop expectations, it quickly attracted a large number of NFT users.
The emergence of Sudoswap ignited NFT AMM vertical, and then hadeswap, tensor, LinoSwap and other NFT AMMs emerged. These NFT AMMs are similar to Sudo, and the homogenization is serious. The NFT AMM track ushered in the first dilemma, innovation seems to be difficult indeed.
NFT AMM Game Breaker — Intswap
If Sudoswap is the “pioneer” of NFT AMM, then Intswap is the “breaker” of the NFT AMM dilemma.
Intswap is a NFT AMM that groundbreakingly adopted aggregated liquidity provider LPs (LP token), dynamic concentrated liquidity and LP incentives (LP Mining).
1.Aggregated Liquidity Providers (LPs): All LPs provide liquidity to NFT AMM in an aggregated manner, earn market-making fees in a compound way, and issue an interest-bearing LP Fungible Token as the Provider’s liquidity certificate.
2.Dynamic concentrated liquidity: The core is to set the price range of AMM to a specific range to reduce transaction slippage and boost capital efficiency. And the price range is allowed to be updated during the market-making process, which greatly increases flexibility.
3.Liquidity Mining for NFT LP incentive: A modular NFT LP incentive platform, and two specific incentive strategies have been designed. LPs can participate in profit sharing by stake LP Token to increase their own income. To put it simply, Intswap first aggregates LPs and uses the same standard to achieve effective quantitative contributions, while the similar NFTAMM only provides an NFT-Base token pool. LP-tokens are issued according to the contribution ratio, and LP-tokens are staked for mining to obtain incentives. Secondly, through the concentration of liquidity, the depth of the pool is increased, the transaction price is better, the gas is reduced, and fast transactions are achieved. Finally, the incentives for LPs through LP Mining.
As mentioned above, NFT AMMs such as Sudoswap and Hadeswap all adopt the Sub-Pool paradigm. Intswap is different, it abandons the Sub-Pool model and directly adopts trading pairs. Next, we will compare and explain the main differences between sudoswap and Intswap.
Difference 1: Sub-pool and single pool
Sudoswap: Sub-pool is adopted, which consists of many separate NFT liquidity pools, and each liquidity pool is managed by an LP. This is also currently the most common form of NFT AMM.
Since the parameter setting of each LP in the Sub Pool has no uniform standard and is in a discrete state, the liquidity provision of each Sub Pool is not the same (quotation, depth provision, etc.), so the contribution of LP to liquidity cannot be effectively calculated and quantified theoretically.
Secondly, the market-making cost of LP is expensive. Under this paradigm, LPs are usually in a competitive relationship. In order to increase the transaction probability and obtain higher fee income, LP needs to update the market-making related settings in time to ensure its Sub- Pool’s quotation is easier to be recognized by Trade, which makes LP have to face higher gas costs.
Intswap: Aggregate liquidity in an AMM Pool by aggregating LPs. Contrary to Sudoswap, a type of NFT in Intswap only allows one pool, and only the first person to create the pool can set the price, and subsequent users who add liquidity provide Base Token and NFT to the pool according to a certain ratio in the spot price.
All LPs of this type of NFT are a collective. When a buying and selling transaction occurs in the pool, the price of the NFT will change accordingly, and the handling fee generated at the same time will be distributed by the NFT LPs according to the contribution ratio. Therefore, there is no competition between LPs, and there is no need to spend high gas to adjust the market-making interval.
Each NFT pool will issue an ERC-20 Token as a liquidity certificate for LP, which is called LP Token. When the user successfully provides liquidity for NFT, a certain amount of LP Token will be minted in their wallet. According to LP’s contribution to the pool, a corresponding number of LP Tokens are obtained, and the contribution of LP is accurately quantified in order to do more incentive models.
Summary: Sub-pool cannot accurately quantify the contribution of LP, Sudoswap cannot do LPmining and cannot use a more flexible way to motivate LPs, while Intswap accurately quantifies the contribution of LP through LP Token, so it can use a more flexible way to motivate LP, implements LPmining. (In DeFi, by staking a Fungible Token used to record the share of liquidity provided by LPs and earning rewards, it is usually called Yield Farming or Liquidity Mining, which is a common liquidity incentive scheme.)
Besides, in Sudoswap, LP is an active market maker, who needs to customize quotations, curves, etc., and needs to be actively adjusted. On the contrary, Intswap changed active market-making to passive market-making. There is no need for competition between LPs, and there is no need to adjust the market-making interval, thus saving a lot of time, cost and gas.
Difference 2: Decentralized Liquidity vs Dynamic Concentrated Liquidity
Sudoswap: In Sudoswap, since each LP is an individual, it is a dispersed liquidity. The liquidity will be evenly distributed along the price curve in all price ranges between 0 and infinity, the liquidity at the edge is difficult to be utilized, and the liquidity LP that cannot be utilized will not be able to obtain benefits. This is a natural threshold for LP’s operation and awareness, and it is difficult for newcomers to earn income.
Intswap: Intswap adopts a method of dynamic concentrated liquidity, similar to Uniswap V3, and concentrates all liquidity in a reasonable price range to reduce transaction slippage costs and focus on maximizing capital efficiency.
Like Uniswap V3, Intswap uses the X*Y=K formula. Through calculations, it is found that when purchasing the same number of NFTs, users need to spend less Tokens to purchase in concentrated liquidity AMMs, and the average purchase price is lower. Conversely, when selling the same number of NFTs, users will get more Tokens in concentrated liquidity AMM sales, and the average selling price will be higher.
Therefore, in Intswap, concentrated liquidity is adopted to effectively utilize all liquidity, and the price range is around the floor price of the NFT. The price range does not require LP to actively adjust, and it is set by the NFT project party or creator to ensure the most suitable range. The so-called dynamic means that the price range will be adjusted in time as the price of NFT changes to ensure the best.
Summary: Through the comparison above, we found that concentrated liquidity has better capital utilization. For traders, the greater the depth, the faster the transaction, the lower the transaction slippage, the lower the cost, and the higher the selling price. For LPs, all the funds are utilized, without manually adjusting the market-making range, the market-making cost can be minimized and the market-making income can be effectively increased, and each transaction can get a share of the handling fee.
Difference 3: LP Mining
Sudoswap: As mentioned above, due to the Sub-pool model adopted by Sudoswap, it is impossible to accurately quantify the contribution of LPs, so the traditional Liquidity Mining incentive scheme of DeFi cannot be adopted.
Intswap: Create a unique LP Mining (Liquidity Mining) module and set up an effective incentive scheme for NFT LP.
Each created NFT-Base Token transaction pair has an exclusive staking pool, and any LP can pledge its LP Token to the corresponding staking pool to earn excess returns in addition to transaction fees.
Currently, Intswap has set up three incentive strategies: Royalty Reward Distribution, Yield Farming and Custom Incentive Strategies.
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Royalty reward distribution: This strategy allows NFT Creator to set a Ratio for its LP, and use the corresponding proportion of the royalties generated by each transaction as a reward, and distribute it to all LPs in all staking pools according to the proportion, and then complete the profit sharing , to achieve a win-win situation for creators and LPs.
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Yield Farming: This strategy allows NFT project parties or creators to lock a certain number of ERC20 Tokens as rewards, and set a reward cycle. The rewards are released every second and distributed to LPs in proportion.
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Customized incentive strategies: In addition to the above two established strategies, project parties are also allowed to design custom incentive strategies according to their own needs to improve flexibility.
Summary: We know the importance of liquidity and LP in the DeFi market, but in the NFT trading market, LP (market maker) has always been a neglected force. Although the existing NFT trading market is also going to motivate LP, the incentive strategy and the implementation plan adopted are not satisfactory. And if a new paradigm like Intswap can intensify the power of LPs by continuing to use the cornerstone of DeFi’s success-LP Minging, blood circulation can truly revitalize the liquidity of the NFT market. This is a new economic model that is win-win for all parties, because there is no royalty in defi, but in the economic cycle of NFT AMM. For LPs, LP Minging can earn more income in addition to handling fees. For creators, they can better motivate users, create incentive strategies and activities in line with their own communities, improve the flexibility of operations, and form a new paradigm that is very worth looking forward to.
The way forward for NFT AMMs
As the pioneer of the NFT AMM track, Sudoswap has attracted the attention of users, brought dawn to the NFT AMM track, and provided an innovative NFT liquidity solution. For more than half a year, Sudoswap has gained a place in this market full of powerful enemies by itself, which is obviously a success. Now, as a rising star, Intswap has found its own positioning and advantages in the NFT AMM track, took over the baton from Sudoswap, and continued to set sail.
Intswap broke the inherent model of Sudoswap and changed the market structure of NFT AMM through three innovative mechanisms. For ordinary users, the gameplay of this product is simple, and some novice users will not be blocked because of the high knowledge threshold. Fortraders, faster transaction speed and less transaction costs are very important. For LPs, the aggregation method makes the operation easier, the dynamic concentrated liquidity maximizes the capital efficiency, and the passive market making will save a lot of time, cost and gas, LPMining brings more benefits to LP. For NFT project parties or creators, a more flexible incentive model can better reward LP’s contribution and provide circular liquidity for the project.
LP Mining is an important part of the development of NFT-Fi. The previous simple and non-sustainable NFT business model may be changed. NFT project parties can be deeply bound with LP and use LP Mining as a new type of incentive.
As a new NFT-Fi building block, LP Mining can give full play to its flexibility and composability, create a platform-based underlying infrastructure, and gradually achieve a complete NFT-Fi system.
Sudoswap’s NFT AMM leading position has not been surpassed by any project so far, but this also reflects the exhaustion of innovation in the market from the side. Intswap broke the deadlock on the track, and the era of NFT AMM contention may come. Both Sudoswap and Intswap are contributing to the advancement of the NFT track.
Expectation: NFT-Fi Summer
The NFT track has been very popular in the past two years and has become an indispensable and important chapter in the crypto world. Although the downturn of the crypto market in 2022 will affect the progress of NFT, the NFT track is still active compared to other sectors.
Due to the lack of liquidity of NFT itself, the demand for NFT Fi has been derived. The market has begun to try and explore the financialization of NFT from the directions of NFT transactions, aggregators, lending, fragmentation and AMM. With more and more NFT empowerment, the territory of NFT Fi continues to expand, and is no longer limited to the main body of NFT. The future ecological sector will be more rich and extensible, and every prominent project will become NFT Fi of a building block.
In 2020, everyone knows about “DeFi Summer”. The concepts of “Liquidity Mining” and “Yield Farming” make DeFi crazy throughout the summer and accelerate the progress of the DeFi ecosystem.
Today, the concept of Liquidity Mining has once again entered our field of vision with NFT. Intswap hopes to use the new attempt of “NFT LP Mining” to usher in “NFT-Fi Summer” in 2023 and set off a wave of NFT-Fi.
About
A decentralized NFT AMM as well as a liquidity solution for NFTs. Compared to the existing NFT Marketplaces, Intswap has three core designs making it more competitive, including aggregated Liquidity Providers (LPs), Concentrated Liquidity and Liquidity Mining incentive for NFT LPs. Hence, as an innovative NFT AMM, Intswap has the characteristics of noncustodial, higher capital efficiency and better trading experience. In addition, it brings a more sustainable token economic model to NFT stakeholders.
🌐Website: https://intswap.io/
🐦Twitter: https://twitter.com/Intswap_amm
🔗Discord: https://discord.gg/cvPJAz2Bms
📔Github: https://github.com/Intswap-Labs/intswap-core-v1
📗Whitepaper: https://docsend.com/view/z53i4vmytmmj4f2b