Opensea, the largest NFT marketplace by volume, charges a 2.5% “Service Fee” for NFT sales on their platform. In addition, Opensea charges a “Creator Fee” which varies by collection. As I understand it, on-chain royalties allow NFT creators to tie royalties to an NFT collection. However, these can be circumvented by marketplaces choosing not to honor them or through over-the-counter NFT trades/sales without a marketplace.
Based on my experience, most NFT collections have a creator fee set to between 2.5% – 7.5%, but I have seen collections charging up to 10% in creator fees. This can result in significant cuts to the final sale price received by the end-user, the consumer, who usually has no say in the determination of these creator fees.
Enter Sudoswap, an NFT marketplace with several unique features which challenge the existing model of NFT royalties charged by other marketplaces. Firstly, Sudoswap is entirely royalty-free and charges just 0.5% in service fees. This is significantly cheaper than Opensea’s 2.5% and even cheaper than other decentralized marketplaces like Looksrare which charge 2% in service fees in addition to royalties.
Secondly, Sudoswap functions as an automated market maker (AMM) for NFTs, allowing NFT holders to create liquidity pools for NFTs and collect a portion of the 0.5% service fee. Not only does this result in lower floor prices for a collection compared to other marketplaces, the liquidity pool feature automatically calibrates the price of the NFTs in a pool based on supply and demand metrics. For example, with each NFT purchased from a liquidity pool, the floor price automatically rises based on the bonding curve (linear or exponential) chosen by the liquidity provider.
Technicalities aside, Sudoswap: (1) eliminates artists royalties for NFT collections; (2) generally provides a cheaper NFT purchase option to the consumer: and (3) gives liquidity providers (sellers) back a portion of the 0.5% fee that is charged on each transaction.
Several prominent marketplaces have started to follow Sudoswap’s lead. For example, Magic Eden, the largest Solana NFT marketplace, announced a decision last week to both waive its platform fees and to give users “optional royalties“, citing changing market dynamics. In this model, it is the buyer that has the option to decide whether or not to pay royalties to the creators.