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- 1 Sudoswap uses liquidity pools to create a decentralized exchange model for NFTs.
- 2 Sudoswap version 2.0 includes a creator setting which divides the transaction fee between the NFT creator and the liquidity provider.
What is Sudoswap?
Sudoswap is a decentralized exchange for Ethereum-compatible NFTs and tokens. It creates a ready market for NFTs through an automated market maker (AMM) protocol and liquidity pools. A liquidity pool is a smart contract that contains a pool of assets locked by users (who are called liquidity providers) to provide a market for these assets. Instead of waiting for a buyer or seller to determine when and at what cost a crypto asset is traded, liquidity pools use a protocol that creates liquidity for the crypto at a suitable price. A pool in Sudoswap can be created by the provider depositing the NFT and ETH (or an ERC token), this allows the user to both buy and sell in that pool. A liquidity provider can also deposit a single asset (either the NFT or ERC token) allowing users only to buy from or sell to the pool.
A Look Into SudoSwap Pools And Liquidity
When creating a pool, the provider sets a starting price (which is the floor price) and the bonding curve. The bonding curve is a function in the pool’s smart contract that automatically adjusts the price of the assets in the pool after every trade. There are three options for bonding curves to choose from. The linear bonding curve increases or decreases the price of the NFT by a specific amount (that is known as delta) each time the NFT is bought or sold. The exponential bonding curve increases the price of an NFT by a fixed percentage every time it is bought and decreases by that percentage every time it is sold to the pool.
If the liquidity provider sets the starting price at 2 ETH and chooses the linear bonding curve with a delta of 1 ETH, the floor price will increase to 3 ETH after the first NFT is bought from the pool or reduce to 1 ETH after the first NFT is sold to the pool. If two NFTs are bought before one is sold then the floor price will be 3 ETH. But if the provider chooses an exponential curve with the delta at 10% (which is 0.1 ETH), the NFT price will increase to 2.1 ETH after the first NFT is bought from the pool or reduce to 1.9 ETH after the first NFT is sold. Sudoswap also uses a concentrated bonding curve which allows liquidity providers to set a fixed amount of NFTs or ETH to be swapped. This amount is then readjusted after every trade.
Users can list, sell, or buy NFTs on the platform. NFTs are listed by creating liquidity pools. NFTs can be bought from or sold into pools. Sudoswap charges 0.5% as a trading fee. This fee is paid to liquidity providers as an incentive.
How Does Sudoswap Version 2.0 Work?
Sudoswap version 2.0 was launched in June 2023 and part of its update is the exchange’s support for royalties. NFTs minted with the ERC-2981 standard or through its supported platforms have their royalties enforced by default. Sudoswap V2 also features a creator setting that divides the trading fee between the NFT creator and the liquidity provider.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
