Long Take: Evolution of NFT markets with automated market making (Sudoswap) and collateralized lending (BendDAO)

Gm Fintech Architects —

Today we are diving into the following topics:

• Summary: Today we revisit the 2022 inventions in NFT financial infrastructure. Just like AMMs and collateralized lending developed for fungible tokens in 2019-2021, we see growth in comparable protocols for the NFT space. There are unique challenges and opportunies when building such machines for NFTs given the inherent differences in underlying assets. Yet fully onchain mechanisms for creating and running markets and leverage are an important step forward, and pose some fundamental challenge to centralized NFT marketplace models.

• Topics: decentralized exchange, collateralized lending, NFTs

• Tags: Sudoswap, Uniswap, OpenSea, Genie, Gem

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Long Take

Preamble Ramble

I am traveling out of London, through the United States this week. East Coast, West Coast, jet lag, the whole deal. It’s good to be out in the world, experiencing this movement. We spend so much time inside, staring at the digital guts of some factory, or some arcane logic machine. The world is full of texture, of things made by people. We are the lifeblood of it. To be in and and among the world is good for the mind and body.

And yet, so many signs point to software ascending. The fault lines have gone from being words and pictures in the media, to the design decision of large software engines. I’m reading Matthew Ball’s Metaverse. There’s the buzz about Balaji’s imagined rise of digital network states. This futurist techno dream is everywhere. And we are hallucinating it together. On the margin, investment is still going into the bits. Calories and labor flow into technology.

Is this good? Is it bad? Who cares. You do you, while there’s still time.

And the time we have today is to jot down some notes about the types of software machines we find novel, exciting, strange, beautiful even. Make money, lose money, whatever. Look instead at how its angles reflect the digital sunlight!

NFT Markets

Are people still trading around NFTs? Let’s look at some data collected by the Block.

Source

Despite continuing to take up a lot of attention on Twitter, and in the news, volumes for NFT trading are not looking super good. Considering that the peak was around $1-2 billion of volume per month, punctuated by September 2021 and May 2022 (Yuga Labs), the current numbers of $50MM per month look rough.

You could correct for the drop in crypto assets values, and point to the fact that there is still something like 300,000 NFTs being traded every week.

That’s a lot until you consider the scale of the actual Internet. Here’s the number of emails sent per day — about 300 billion.

Source

Source

Or consider that over 500 hours of video are uploaded to YouTube every minute, with something like 500 billion video views from the platform’s user per day.

Maybe NFTs are a dead end? Maybe the fashion has faded.

There is evidence to cause doubt. For example, the Web2 content trends all grew in their change — i.e., new emails sent and new videos uploaded grew each period. Web3 content seems to be much more volatile, because it is subject to pricing and speculative financial activity. This is perhaps what happens when you introduce markets into media.

It is too early to really tell. We do think NFTs are the continuation of the self-digitization process started by Geocities (websites), and continued via Facebook (photos), and TikTok (video). It is the uploading of the self into the digital world and its economy. Pixelate yourself anon.

NFT Automated Market Makers