Floor is Rising Ep 79: NFT AMMs - Spencer Yang
Primer: There are a number of NFT DEXes/AMMs on the market today. What are their strengths and weaknesses? In this episode of Floor is Rising, Spencer Yang speaks about his experiences running CryptoKitties campaigns, his thoughts on various NFT DEXes, and Collection, the NFT DEX he is building.
Background
Got into NFTs in December 2017
Found CryptoKitties very interesting
Reached out to the Dapper Labs team offering to help out
Worked with them to help launch CryptoKitties more broadly within the Asian and global region
Worked at CoinMarketCap and Coinbase
Started Gomu and Collection in the NFT space
Running CryptoKitties Campaigns
Worked with many influencers in the Asian region
First, they had to educate them on how digital collectibles work
Created an Asian-looking series of CryptoKitties that were tailored to the taste of the Asian market
Looked at many possible partnerships with companies in the region
The challenge was to get NFTs into app stores. Received some pushback from this
Thoughts On The Asian NFT Market
General Thoughts
During 2017, the Asian market was focused on the use cases of crypto and blockchain
Many influencers they spoke to came from a crypto mining background
The Asian audience was used to mining-related concepts. NFTs did not offer anything in this regard
When yield farming/liquidity mining started, crypto miners started to get more interested in it
Gamers are another category of participants. They were not comfortable to commit significant amount of cash into purchasing digital collectibles
Specific Asian Countries
Crypto marketing to the Chinese market is illegal
Many entrepreneurs and communities had to find innovative ways to get around some of these issues
Some Chinese migrated to other Asian countries in order to access crypto services
In general, the Chinese tend to purchase NFTs in large numbers, sweeping out entire collections
East Asia has a significant organic and natural population
There’s fragmentation in terms of regulations and friction to users in terms of language
Campaigns take a longer time to propagate across the market compared to the US market
Current Landscape In The NFT Trading Market
Oldest player is OpenSea
Over the past couple of quarters, other players have come up to compete in this area
However, it is still limited to an order book for each NFT that’s being sold on these platforms
Blur focuses on professional users who need to buy or sell thousands of NFTs
NFTX was one of the first that offered users the ability to exchange their NFTs for an ERC-20 token by depositing it into a vault
The ERC-20 token can be traded with other tokens like ETH or USDC in a separate liquidity pool on other DeFi protocols
The issue with NFTX is that people are not incentivized to put anything that is more rare/unique into the vault. Hence, many of the assets are floor NFTs
Sudoswap allows NFT holders to deposit their NFTs and ETH to create a liquidity pool that others can trade against
Sudoswap suffers from the same problem as NFTX — the less desirable pieces are put into the collection
Many marketplaces enabled users to make an offer for the entire collection. This helps reduce the bid/ask spread off the floor price of the NFT itself
When people think about the NFT space, it is important to:
Create a protocol that drives deeper liquidity for all the NFTs in a collection, not just the floor NFTs
Enable composability with other NFT finance protocols
Create adequate and right incentives for NFT creators
The Future Of NFT DEXes/AMMs VS P2P NFT Marketplaces
The market for NFT will be large enough to accommodate more than one liquidity venue
As things get more sophisticated, it’s important to figure out the trading use cases and each of the different products
Might have other interesting auction mechanisms that are better than order book marketplaces
AMMs will continue to play a part for slightly smaller collections. Their slightly lower floor price, good volume, and minimal price changes generates fees for the LPs
Order book marketplaces help highly opinionated users to focus on a particular NFT/class of NFTs that they want (e.g. Bored apes with a pink fur trait)
Passive Market Making VS Manual Intervention To Create Liquidity
Even with the best tooling/bots/strategies, it still takes so much more to manage order book marketplaces
Buyers who are using DCA strategies, have limited time, or have a strong and clear intent of what they want to do prefer AMMs for their automatic execution
NFT finance DEXes/protocols enable people to tap into the primitives of DeFi (e.g. mint NFTs in exchange for liquidity)
Collection is launching a vault product where users can deposit ERC-20 tokens or NFTs. Users can set specific parameters of what kind of liquidity they want to attract
Provisioning Liquidity To Help Launch A New Collection
Example of launching a collection with 1000 NFTs
NFT IDs from 1 to 900 are available for users to mint publicly, at a price of 0.1 ETH, for a total of 90 ETH
Deposit the remaining 100 NFT and 10 ETH into the vault, with the NFTs as a reward for liquidity
This incentivizes people to not just sit on their assets, but to contribute liquidity and make a more healthy market
Launching on Goerli testnet first. There is a testnet competition for people to try it out on
The user who is doing the minting can now be the market maker
Comparison Between Their Product And Sudoswap
They have been innovating significantly
Will be open sourcing in a similar standard to Sudoswap
Sudoswap charges 0.5% protocol fees
They are starting with 0% protocol fees
They allow LPs and vault creators to set the royalties they want to honor
They allow users to specify the specific token IDs that they want to accept or exclude from the pool itself
Favourite NFT Artist
Tyler Hobbs
Yuga Labs/Bored Apes
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