ArtDEX increases liquidity for the NFT series and sparks price discovery
ArtDEX is an NFT trading platform that uses DeFi mechanisms to increase liquidity for specific NFT series.
Trading of NFTs that are part of a series (such as a generative NFT series or any type of PFP series) is done through an automated market maker (AMM) on ArtDEX, which can increase the liquidity of NFTs by a large margin.
In addition to improving liquidity, this can also trigger price discovery and offer arbitrage opportunities.
An important difference compared to a DeFi DEX where DeFi tokens are traded (which are fungible) is the fact that on ArtDEX a pool for a specific NFT series is not a shared pool as you are used to on a DeFi DEX where all tokens in a trading pool are interchangeable.
NFTs are non-fungible, so owners of an NFT own a specific NFT in the series, while owners of a token (such as tez/XTZ) don’t care which token they get back if they exit the pool.
So in a DeFi DEX you will see one pool for a specific trading pair, for example XTZ – sDAO. But on ArtDEX you will see multiple pools from different liquidity providers for the same NFT series.
See for example the NFT series on ArtDEX “The Devils” (officially licensed Manchester United digital collectibles). You will see that AMM collects all available NFTs from multiple pools and displays them under the “Buy” tab.
Price discovery
As explained above, ArtDEX is DeFi inspired and uses an AMM to facilitate trades.
This means that buying one NFT changes the price of the other NFTs in a particular pool.
This is because liquidity providers can set custom price curves on their trading pools, which change the NFT price as commodities are bought or sold.
This is obviously different from traditional NFT platforms, where the prices are manually set per item by the owners offering the NFTs. If they want to change the price, they have to do this manually.
This means that at ArtDEX price discovery can be more explosive.
Arbitrage
The above shows the difference between markets on traditional NFT platforms such as objkt.com and ArtDEX. Different market mechanics mean different price developments.
The result is the fact that there will be price differences between both market types and thus arbitrage opportunities.
These possibilities have been mentioned on Twitter several times since ArtDEX went live.
This is an interesting development for NFT trading volume and it remains to be seen how it will affect the NFT market on Tezos in the longer term.
QuickSweep
With the QuickSweep feature, you can buy a larger number of NFTs in one purchase.
This is a very useful tool if you want to go into a project and intend to “sweep the floor”.
This means that the user might want to buy all NFTs for a specific project at the current floor price, while expecting the price to go up in the short, medium or long term.
The ArtDEX interface will search across pools for the lowest items and calculate the best offer to sweep the floor.
“It is not easy to sweep the floor in a classic NFT marketplace. With classic listing systems, most of the NFT liquidity will be concentrated around the floor price.
This means that a sudden influx of users will create a liquidity shortage at the new floor price, and interested users will have to wait for liquidity providers to relist NFTs at the correct price.
At ArtDEX, our persistent NFT liquidity responds more quickly to market changes via bond curves, meaning liquidity providers can confidently list multiple NFTs simultaneously.
This means that there is no need to wait for liquidity providers to relist assets in the event of a sudden price increase. Thus, users can swipe NFTs faster on ArtDEX.”
Notes
Check out the entire user guide here: https://guide.salsadao.xyz/artdex/
ArtDEX has undergone a successful contract audit by Functori.
FXHash is completely UNSUPPORTED at this time due to the organization of tokens at the protocol level. ArtDEX is exploring ways to support this market.
