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Blog post experiment #2: Royalties, NFTs & SudoSwap
Most of us are familiar with OpenSea, the #1 NFT marketplace on the planet with about 55% market share. The platform allows people to discover, create, buy & sell NFTs. OpenSea charges 2.5% on every sale and willingly enforces NFT royalty payments automatically each time a NFT is traded. It is important to note that the marketplace is not obliged to enforce the royalty but all marketplaces have been honoring them. (so far)
Enter SudoSwap. The new kid on the block, disrupting the NFT space and changing the way people trade NFTs. What makes SudoSwap different is the fact that it is a permisionless AMM (automated market maker) protocol, allowing anyone to;
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Trade an NFT in exchange for another NFT
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Trade an NFT in exchange for a fungible token (ETH)
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Batch buy or sell NFTs
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OR be the NFT marketplace by creating a trading pair of a set of NFTs & fungible tokens & earn trading fees as the liquidity provider.
(Check out this 10 minute video for a breakdown of SudoSwap)
Now SudoSwap charges a 0.5% trading fee, but what it doesn’t do is enforce royalties which has caused quite a stir the past couple of weeks. What most people do not know is that royalty fees are not automatically enforced within the smart contract (the piece of code that was written to deploy the NFT). This video from Blockchain Gandalf is an excellent explainer AND if you’re into additional technical stuff, check this video for an explanation of the NFT royalty standard.
Sudo’s move caused shockwaves across the NFT space & outcry from artists & creators, but also surfaced voices of wisdom & advice on how creators can look for alternative funding & revenue models. One being the fact that NFT creators can hold on to a fraction of the maximum supply of the NFT collection, releasing them at later stages as community rewards or bug bounties. The creators of cryptopunks for instance did not instill a royalty fee however, they held on to about 1000 punks which turned out to be quite a lucrative strategy. A second option is for creators to harness SudoSwap AMM to their advantage and create their own pools & earn trading fees. A third and final option is for creators to approach this from a web2.0 stance & contemplate customer life cycles where simply, each NFT drop has an expiry date. Check out the concept in more detail 👇
Obviously there are countless other options out there for monetization & depending on the type of NFT in question, solutions & options vary.
We have barely scratched the surface on this hot topic, but it does make us all think more about the greater NFT & NFT-Finance space, creator royalties, incentive structures and the relationships between creators, collectors, traders & platforms. There is still so much room for innovation.
Additional info
Check out this thorough breakdown of SudoSwap
or watch this video for a complete breakdown & a simple guide demonstrating the different ways you can use the platform.
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Artist: XCOPY