[Thoughts #83] Sudoswap Pt. 1 and Feature

The fight for creator royalties ⚔️ And Feature is way bigger than I thought

If you’ve been tuning into the pulse of NFT Twitter and Twitter Spaces, you know that creator royalties has been a hot topic over the past week. A new tool, Sudoswap, has been making waves particularly around the fact that Sudoswap transactions bypass creator royalties.

Because of that, one of the recent newscycles has centered around ensuring creator royalties vs. traders maximizing profit. I mean, if we’re buying/selling NFTs without royalties for the creators, aren’t we back to Web2 in a sense?

The general consensus and right thing to do is to support creators. But wait a second…

If you haven’t seen “We’re the Millers”, it’s a fun, lighthearted movie. There are also some meme nuggets like the one above. I channel Kenny (the character above) vibes at times heh.

I won’t go in too deep on the technical points of Sudoswap, but I do want to synthesize the various conversations and thoughts from people in the space. There’s a lot of interesting thoughts and opinions here.

But first what’s Sudoswap? Their website explains it simply.

Great, another marketplace. Yup, another one. But one that doesn’t have creator royalties, as previously mentioned.

For those that haven’t bought or sold NFTs (yet 😉), there are fees associated with selling.

When you sell a Clone X NFT on Opensea for example there are two fees:

• Platform fee: Think eBay seller fees.

• Creator fees: The beauty of Web3 and NFTs. Creators continue to get paid for the life of the asset, even after the initial sale. One of the primary draws of Web3 for creators! Usually ranges between 5-7.5%

For Clone X

• Platform fee: 2.5%

• Creator fees (the royalty everyone’s talking about): 5%

In the case of this CloneX, if the user sold it right now at 7ETH, they would take home 6.475 ETH because of the Opensea and Creator fees. The fees hurt (~$1,000), but it’s great at the same time because:

1. The platform fee is way cheaper than Web2 incumbents like eBay

2. You’re supporting the creators of the project, RTFKT (and their parent company Nike, which I personally don’t mind as a Nike fan).

So what does Sudoswap do again?

For Clone X

• Platform fee: 2.5% 0.5%

• Creator fees (the royalty everyone’s talking about): 5% 0%

Woah…if you’re selling to maximize profit, that’s a lot. You just clawed back 7%, or ~$925 of the $1,000 in fees.

THAT’S what everyone’s clamoring about.

So what does the pricing look like for Clone X on Sudoswap?

The floor price on Sudo is considerably lower than Opensea, but what does the net back to the seller look like?

That’s a 0.133 ETH difference, or ~$250. That adds up over time.

That leads us to another point, which I’ll reference from Zeneca’s piece around this topic.

Zeneca learned about this in October 2021.

TPan learned about this on August 13, 2022, when Zeneca published his post. I guess it’s just something I’ve never thought about. I mean, as the meme stated earlier, I didn’t even know people got paid for this stuff (jk jk).

So we’re basically here right?

Before answering that question, two things:

1. The guy on the left really needs to pull up his pants. If there was an emergency, it’d be difficult to run 😔

2. I’m proud of the sign on the right because I came up with it on the fly. I’d give it a solid C+

Yes from a creator royalties standpoint, but also…no!

As a creator myself, I 1000% believe creators should get compensated for their hard work. However, creators have always adapted and will continue to in the battle for earning their due. No compensation or royalty framework will be perfect and loopholes will always be uncovered.

The reality is you can’t really shut down Sudoswap…unless you’re the Dept. of Treasury and put them on the Sanctioned list with Tornado Cash (ooooh sick burn TPan). Traders are gonna trade.

Gigabrains and some of the biggest artists have chimed in on this topic.

The legendary 6529:

6529 @punk6529

1/ On Royalties tl;dr ✅Royalties are a social convention, not a technical convention ✅They are not perfect as structured ✅They will behave differently for different types of art ✅No-royalty people are mostly self-serving ✅Artists need a backup plan in any case

The legendary Beeple:

beeple @beeple

i think the creator royalty argument is actually a lot simpler than people make it out to be. There is ZERO way to FORCE royalties technologically so creators will have to build a collector base that WANT to honor these royalties…. It’s really that simple. 🤷

The legendary XCOPY:

XCOPY 🏴 @XCOPYART

We had 0% royalties before. I kept half the supply, worked out OK. Don’t panic.

Beeple and XCOPY are arguably two the biggest digital artists today. Their opinions are blunt and straight to the point. You can even say their opinions are pretty unempathetic to the situation.

Beeple started his Everydays (creating a piece literally every. single. day. which is way crazier than what I’m doing with this newsletter) on May 1, 2007.

XCOPY started posting his work on Tumbler in August 2010. Guess when he sold his first piece.

Source

Great. That means I’ll need to write for 7.5 more years before I can make my first $1 😭

Are Beeple and XCOPY assholes? No.

Beeple and XCOPY have seen the movements come and go and probably have a level of wisdom and insight (along with the fame) that almost all artists haven’t seen. Because of that, they’re able to look at this situation differently and think around the problem, not just straight at it.

IMO Beeple’s tweet response is a version of “when you point a finger there are three fingers pointing back at you”. How can you turn this situation to your advantage and provide value to a point that your collectors want to support you, irregardless of the 5 or 10% of profit maximization.

And XCOPY’s response is about winning getting compensated in a different way, by withholding supply. This is another way NFT creators and teams compensate themselves — by creating mutually aligned incentives with their holders.

Another gigabrain in the space, in the form of Azuki dev @cygaar_dev shared his thoughts on royalties and potential solutions from a technical POV:

cygaar @cygaar_dev

Circumventing NFT royalties has always been possible, but it was never done consistently until Sudoswap started gaining traction. So with the rise of zero-fee trading platforms, here are some ways artists/projects can continue to earn royalty payments 🧵:

To summarize his thread:

• Enforce a flat fee (vs. a % fee) on every transfer. Cons of this are that the fee doesn’t scale if the value of the collection increases, and holders would have to pay even if they’re transferring the NFT from one wallet to another.

• Whitelist specific marketplaces where the NFT collection can be traded at the smart contract level. Centralized approach (isn’t this Web3?!), but effective.

• Apply a Harberger Tax. WTF is that?

Super interesting…but a lot edge cases and questions that make the simple act of buying/selling 10x more complicated.

So where does that leave us folks?

Wait a second if Sudoswap is evil, why did TPan write Pt. 1 on the title?

I guess you’ll have to tune in tomorrow to find out 😈

There’s a lot more to Feature than Licensing

A few weeks ago I wrote about Feature and its licensing platform. Cool stuff.

However, I didn’t peel the layers of that onion enough. The URL of the site is https://ip.feature.io/licensing.

While I was repurposing my piece on Feature’s licensing platform onto LinkedIn earlier today, I noticed that this was a subdomain — the “ip” in front of feature.

So what happened when I went to feature.io?

This revelation deserves a curious Nara look pic. And yes, that’s a painting of me as Peter Pan flying in the back.

Whoa whoa, they’re building hardware that will enable NFTs on your device. Let’s get that text on the right blown up:

• First delivery of the Feature3 GPU-enabled device

• Exclusive airdrops/claims from Feature3 spotlight artists and creators

• Allow list spots for Feature Original project mints

• Founder’s merchandise and apparel in collaboration with Feature3 artists

• Early access to claim your Feature3 identity and username

• VIP access to exclusive IRL events

• Access into the Feature3 Creator’s Room with community-led decision making

• Exclusive access to behind-the-scenes content from creative partners and Feature team

• Discount codes for public sale

So what will you be able to do with this device?

Suddenly, the licensing part of Feature’s platform makes a LOT more sense.

Maybe I’m in the wrong Web3 circles, but I haven’t heard any chatter about this.

In that initial post about Feature, I called out that they partnered with Coinbase to license the Coinbase Degen Trilogy series.

My prediction is that this is not only a test for Coinbase to enter the media space and get feedback on the content. It’s also going to be the first step of several to integrate this content into Feature’s hardware and capabilities. Some ways that might happen:

• Create games around the Degen Trilogy IP where users can bring in their own NFTs to interact

• Mint NFTs related to the Degen Trilogy for exclusive content and access for future series

• Bring the Coinbase NFT marketplace onto the Feature platform for seamless transactions and discovery

Are Netflix, Hulu, and Disney keeping tabs on this? 👀

See you tomorrow folks. Remember, Sudoswap is evil. Or is it? 🎭