[OP-ED] SUDOSWAP or the Reign of Greed
Once upon a time in a faraway decentralized land, there was a tiny kingdom named NFTs.
Where struggling artists who used to barely be able to feed themselves found a haven, where creative project developers were able to shed the rules of old and make their visions come true.
A land brimming with promises, full of camaraderie, built with and for a community, open to all.
A Brand New World.
Then came the coldest winter they have ever known.
When many chose to leave, they stayed and kept on fighting, believing that it was a world worth fighting for.
Then came Sudoswap.
And they asked themselves if it was still worth fighting for.
Chapter 1: The End of Time
Sudoswap proponents love to say that with its automated market-making (AMM) algorithms and liquidity pools, Sudoswap has “shaken up” NFT trading.
What it is doing today is shaking off the space out of its creative, passionate and safe inhabitants!
Sudoswap is finding favor with (RICH) NFT traders and that’s about that. They elicit a very different kind of response, more along the lines of horror, among the very backbone of the NFT industry: the ones who create them.
Here is why:
Sudoswap Allows Traders to Side-step Royalties and it Threatens NFTs Very Existence
In short, nobody pays royalty fees to NFT creators when they are sold on Sudoswap (Full Sudoswap 101 here).
NFT owners create their own pools bypassing the artist and creator entirely and can even collect trading fees in passing.
An earthquake of epic proportions, with apocalyptic undertones, for existing and upcoming NFT projects whose ability to at least survive and at best thrive is built on royalties.
The OG NFT Royalties System
Unless you are born with a golden spoon in your mouth, the first thing you will gain from trying to launch an NFT collection is debt.
A lot of them.
Most projects do not have enough funds to finance their project, the artist, the devs, the discord team, the community managers, promotional mediums,….Everyone’s pay and due are put on standby until the collection is, hopefully, sold-out. If not they’re left with hefty debts that could take years to pay back.
Although the habit of launching an NFT project in a very short time frame serves the FOMOing, it serves first and foremost to save money.
Once the debts and the vertiginous taxes are out of the way, here comes the day-to-day expenses!
Let’s take the most basic thing without an NFT collection can not exist: Discord!
Even in a very little community, you usually have an admin & collab’ manager who works full time, and most of the time you have much more staff working on it. Paid staff.
We have not even started covering the cost linked to a roadmap that is usually built on a very long time frame. Sometimes months, often years. And the implicit idea that these communities and projects do not have a finite time, they can & will live forever after.
Let’s add to that the unspoken contract between creators and buyers that had been the rule until now: NFT creators will launch their collection at an entry price that will allow almost all walks of life to get into a project they love and support, usually under 500$. In exchange, royalties are put into place to make this project viable and sustainable in the long run.
Let’s not forget the projects that are free and which rely solely on the royalties to support their projects!
An unspoken deal also shared by 1/1 artists. Maybe more than anyone they need royalties that act as passive income and allow them to reach a larger public by selling their NFTs at a democratic price.
All of them are people who give and bring more value to their NFTs than its eth price tag.
A System Without Royalties
Saw in passing that the answer to Sudoswap rugging projects and artists out of their lifeline is for them to “get better”.
Well, what they will get better at is rising tremendously the price at which they sell their NFTs.
An entry price so high that it will dissolve everything good and true in this space in seconds.
1. You can cross NFT Mass Adoption out of the picture.
Each and every one of us had a chance to belong to this space. Rising NFT’s entry point will make this space inaccessible to a vast amount of people. It will become nothing more than a very rich bro club.
2. It will nurture intense bitterness, resentment and entitlement in communities.
The NFT space is already tough as it is for its builders. But what will happen if they have to raise their mint price to make their project doable? It will raise the stakes as much.
Holders are sometimes fickle. They understand at a basic level that building a project, hence building its value, is a waiting game, but at the same time expect immediate (monetary) gratification.
And when the price doesn’t moon immediately or the utilities are yet to be seen,-because not yet built-, it tends to become a bit turbulent among holders and among builders and holders. And depending on the situation (ex: intense grizzly market), the project, certain holders’ personalities,… it can become downright ugly.
Imagine this situation maxed out. The fickleness, bitterness, and aggressiveness maxed out! Because that’s what’s going to happen if you x10 the mint price.
You will just make communities a very ugly place to hang out in.
This is not how you build a community.
This is how you destroy it.
As if this perspective was already not disastrous as it is, Sudoswap will make this space even more hostile and unattractive, thanks to another lovely feature:
The Race to the Bottom
Sudoswap operates a true race to the bottom through the way it manages the value of the NFTs traded through its pools:
“The platform uses bonding curves to automatically increase and decrease the bid and ask on each collection depending on how many NFTs are bought or sold.
Depending on the delta value selected by the pool’s creator, the more NFTs sold, the lower the price per NFT becomes until market forces find its fair value. On the other hand, buying an NFT from a pool incrementally increases the cost of subsequent purchases, keeping the asset’s price in line with demand. “ (source)
In other words, the floor price of a collection is determined by an algorithm that we know nothing about. Allegedly, thanks to Sudoswap we now know what is a collection’s “fair value”!
As if there was not an already efficient process.
It’s called “the human corrective”!
And no algorithm could be as exact as it is at defining what is a collection’s “ fair value”.
Why?
Because NFTs are at their core a human project.
Holders, outside of degen, are very careful with defining the floor price.
They have invested their money, but more than that, their time; have built strong relations with people belonging to the community and their creators, shared their ideas, maybe even been part of decision-making about it. Even if now, they want to sell their NFTs, the idea is not to destroy the project they invested so much of themselves into by dumping the floor price, alongside getting back what they consider as being the fair value for their NFTs!
They can even refrain from listing in situations like the one we’re going through where the market is 99% down! Because they know it will sell at an insanely low price and it will just kill a project although the project has intrinsic value.
An NFT floor price is determined by its community.
An algorithm could never be a true representation of an NFT Project “fair value”, because an NFT Project value lies elsewhere than its selling frequency.
There are so many more intangible variables that have to be taken into account to define a floor price, and only the holders have the true measure of it.
The effect of this Sudoswap race-to-the bottom strategy can already be felt!
What is the most extraordinary about this Sudoswap controversy, is how a too large number of people expect artists and creators alike to adapt to a system that will screw them over and build an NFT space that will be everything but the holy land promised.
Well, you know what? They do not intend to take it lying down!
Chapter 2: Rise of the Resistance
Nothing has kindled the fire of outrage in the community as X2Y2 (an NFT Marketplace) did when choosing to tread in Sudoswap’s footsteps.
By announcing that they will set 0% royalties, they really enforced the idea that the no royalties policy would become the new inescapable status quo!
And this acted as a needed wake-up call for the whole NFT creator community !
The community raised as one man, and X2Y2 had to track pedal, announcing that “0% royalties is not the way forward” and that “its royalties policy is still in the very making”.
Making X2Y2 give up (albeit temporarily) was the first step.
Well if NFT marketplaces want to go to war, they are going to be served:
Denying Access to 0% Royalties Marketplace in the Contract’s Code
Cygaar, also known as Azuki’s developer gave a way out to creators who refuse to abdicate to Sudoswap’s New Rule of Law:
A way to enforce royalties on-chain that could have huge consequences.
Opening the Legal Pandora Box
Let’s say that by using a trick or two a holder successfully bypass this contract-engraved stipulation that, for example, it’s forbidden to sell this NFT on the Sudoswap platform. A disposition that you can also find in their terms of service.
The NFT Collection owners who will monitor this website will see one of their NFTs on it.
What could happen?
When a person becomes a holder he “signs” a contract, and by choosing to sell on Sudoswap he breaks the terms of the contract.
So we can imagine that the NFT collection owners would be in their rights to sue the holder for breach of contract for example. And maybe they could even go on suing the platform for not implementing a control-check process that ensures that the only NFTs available on the platform are the ones allowed to.
Building an NFT Paradigm where Creator’s Rights are Enforced not Flouted
By expressing their rightful outrage and finding ways to circumvent a system that is ringed to kill the industry, NFT builders are sending a strong message: either you’re going to respect our rights or we will take ourselves away from this space.
As X2Y2 had apparently forgotten, the bread maker of the NFT space is its builders, not the marketplaces.
While, in the name of greed, people and projects are stripped of their rightful due, other platforms are coming to do the very opposite!
The Artists Rights Society has launched their New NFT Platform Arsnl:
“The vision for Arsnl is to carry the Artists Rights Society ethos of protection and promotion into the NFT and digital art space, […] Arsnl will guide artists and partners through the creation of digital projects and works of art on the blockchain — while also championing artist-first policies, including built-in royalties and resale rights.” (source)
The biggest Solana-based NFT marketplace Magic Eden has launched MetaShield, a new tool aimed at deterring NFT buyers who bypass creator royalties by enabling creators to flag an NFT or blur the image if the listed or traded NFT bypasses creator royalties.
Not only creators will fight back by implementing on-chain royalties, with potential legal consequences, turn their back to marketplaces too happy to sacrifice them for a bigger purse, but they will choose, promote and push entities that will serve them and their community first.
Because the only status quo that must and will prevail in the NFT space is one respectful of its creator’s rights.
Is the NFT space that is being built by Sudoswap the one we want to see?
A space that won’t only be exited by its current builders but also stop newcomers full of ideas and creativity to get in?
People who directly benefit from Sudoswap tactics, love to say that THIS is what decentralization is about.
No, decentralization is just an acceptable, beautiful mask to hide pure, undiluted greed.
In truth, the very last thing that this fragilized space, going through an extremely challenging time for all parties involved, needed was Sudoswap.
When Sudoswap threw down the gauntlet, it triggered a sequence of events.
Only time will tell if it was for better or for worse.
Author: Iman K.
This article is an OP-ED. The opinions expressed are solely my own.
About us:
Nefture is a WEB3 Cybersecurity Company that allows brands to tap into web3 through 360° support on their blockchain project.
We specialize in blockchain technologies to make your project come to life and cybersecurity to completely secure your web3 journey: from building Smart Contracts, Audits, Minting websites, Dapps, Discord Audits and Securing,… to Security Breaches Investigation and Management!
Start your web3 journey with us: https://agency.nefture.com/
Keep Your Wallet Safe with our Metamask Extension: https://www.nefture.com/
Book a call with our team: https://nefture.calendesk.net/
