Sui Network (SUI): Analysis of the new wave of L1s

The Big Whale's opinion 🐳

Sui Network is one of the latest layer 1 blockchains to enter an already saturated category (Ethereum, Solana, etc.)

It nevertheless has relevant innovations that could enable it to nibble away at market share in the high-performance blockchain segment.

Sui is designed by former Meta engineers who were officiating on the Libra project, and they are building on this to offer a blockchain with an excellent user experience.

Sui has innovative tokenomics and in particular a maximum token quantity.

General presentation 🧬

Sui Network is a layer 1 blockchain launched in June 2023.

It is supposed to be horizontally scalable, with no real limits. This sets it apart from Ethereum, which needs secondary layers to ensure scalability.

Mysten Labs, the US company developing Sui, was created by part of the team developing the Libra project at Facebook (now Meta), whose launch was abandoned in early 2022.

Sui is based on Move, a programming language specially designed to ensure Libra's security. Move was later modified to become an "object" oriented programming language. Each asset on Sui is therefore considered an object, which should allow greater flexibility of use.

Each object on Sui has a unique identifier and can be owned or controlled by a wallet address. These objects can be tokens, smart contracts, digital assets such as NFTs, or any other form of decentralised data.

Sui uses an object-based concurrency model, meaning that each object can be processed independently, facilitating highly parallelizable and efficient transactions. This is made possible by Sui's architecture, which enables faster and more scalable interactions compared to traditional blockchains where each transaction must be processed sequentially.

For example, as long as two transactions do not involve the same object, they can be processed in parallel by the network. Solana (read our analysis) had already introduced the concept of transaction parallelization, but Sui has taken it a step further.

"When everyone talks about parallelization, they're only talking about the execution part," Evan Cheng, CEO of Mysten Labs, tells The Big Whale. "Yet a transaction goes through three stages in its processing: consensus, execution and storage, each of which are bottlenecks that we have parallelized," he points out.

Thanks to this, Sui can scale horizontally: if activity on the network increases, validators can add more resources in order to process more transactions. This is in contrast to scaling vertically, which requires the use of increasingly powerful computing components.

Sui also brings innovations to improve the user experience. For example, zkLogin makes it possible to create a wallet in a matter of seconds using a simple Google account, without having to download any applications and manage a private key. There are also sponsored transactions, which allow an application to pay transaction fees on behalf of its users.

Sui is therefore a new type of high-speed blockchain that claims to be capable of bringing the whole world on board its network.

Financing 💰

Mysten Labs has raised a total of $385 million.

In December 2021, a $36 million Series A took place, led by a16z and joined by Electric Capital, Samsung Next and Slow Ventures, among others.

In September 2022, a $300m Series B took place, led by FTX Ventures (now bankrupt) and joined by a16z, Coinbase Ventures, Binance Labs, Circle, Jump Crypto and Franklin Templeton Investments.

In April 2023, a $49m community sale took place on exchange platforms OKX, Kucoin, Bybit and Bitforex.

Mysten Labs has therefore been funded by most of the largest crypto funds as well as large traditional funds.

Team and community 👾

Evan Cheng is the CEO and one of the co-founders of Mysten Labs. He spent 10 years at Apple managing engineering teams before joining Meta in 2015.

Sam Blackshear is CTO and one of the co-founders of Mysten Labs. He worked 6 years at Meta as an engineer and notably created the Move programming language as part of the development of Libra.

Adeniyi Abiodun is the product director and one of the co-founders of Mysten Labs. He worked almost 15 years as an engineer in banks (J.P. Morgan and HSBC) and technology companies (Oracle and VMware) before joining Meta in 2019.

Mysten Labs is based in Palo Alto (California), not far from Facebook's historic headquarters.

He has 678,000 followers on X (ex-Twitter) and 640,000 members on Discord.

Function ⚙️

The Sui blockchain works using a consensus algorithm called Narwhal-Bullshark, which enables transactions to be processed very efficiently by distinguishing between two types of objects: objects owned individually by users and shared objects used collectively, such as pools of liquidity.

Shared object management: When several transactions take place with a shared object, such as a liquidity pool, the order of the transactions is crucial as it directly influences the outcome of these transactions (for example, the exchange price of a token). For these cases, Sui ensures that the entire network reaches a consensus on the order of transactions before finalising them.

Transactions with owned objects: When a user wants to transfer tokens they own to another user, this transaction can be processed more quickly. It does not need to wait for consensus from the whole network because the order of that specific transaction does not affect other users.

Storage funds: Sui also incorporates a "storage fund" mechanism. When a user stores data on the network, part of the transaction fee is redirected to this fund. The purpose of this fund is to remunerate future validators for their hardware costs associated with data storage. In addition, users have the option of deleting the data they have published in order to recover part of the initial fees. This system encourages users to keep only the necessary data on the blockchain, helping to manage on-chain storage space efficiently.

Performance and efficiency: In 2023, Sui set a record with more than 5,400 transactions processed per second and 65 million transactions in one day with no increase in fees or network congestion. No other blockchain has ever achieved such performance on a mainnet. They demonstrate the efficiency of its transaction management and storage system.

The limits of Sui 😨

While Sui's impressive performance is undeniable, the main benefit of a blockchain remains its decentralisation.

Ethereum has around 8300 complete nodes spread across 88 different countries, while the Solana network has around 2900 complete nodes in 31 different countries.

Sui is currently well behind on the decentralisation aspect with 106 validators and 480 nodes spread across 10 countries.

However, the Sui tokens delegated to each validator are distributed in a fairly balanced way.

This low level of decentralisation may be explained by the network's youth. It remains to be seen whether it will manage to become more decentralised while maintaining its performance.

The SUI token 🪙

The maximum supply of SUI tokens has been set at 10 billion (1.3 billion currently in circulation).

The token can be staked for a current annual return of 3.6%.

9.5% of all SUI will be distributed to validators until 2030.

Eventually, validators will be paid only by transaction fees and the aforementioned storage fund.

The storage fund will necessarily grow with on-chain activity, which will increasingly reduce the number of SUI tokens in circulation.

The initial distribution of tokens is as follows:

52.2% of tokens go to the SUI foundation, they are not locked.

10.6% of tokens are allocated to community reserves.

14.1% of tokens are allocated to private investors.

9.5% of tokens will be distributed to stakers until 2030.

6.1% of tokens are allocated to the team that developed SUI.

5.8% of the tokens were sold in the community sale.

1.6% of the tokens will be used for future Mysten Labs expenses.

The tokens for the team and initial investors will start to be unlocked from 1 June 2024 until April 2030, hinting at some selling pressure.

It should be noted that tokens locked since 2023 can still be staked, and staking rewards can be used as they see fit (i.e. sold).

System 🤝

The Move programming language is said to offer greater security than Ethereum (Solidity) for decentralised applications.

"Solidity has no chance of succeeding," says Mysten Labs CEO Evan Cheng. "We'll keep finding ways to hack it because it requires developers to also be security experts. There's no chance of this becoming the language of the future," he stresses.

This assertion is not denied insofar as Sui has not (yet) experienced any large-scale hacking, but only time will confirm it.

Almost all the DeFi protocols developed on Sui have received SUI tokens from the foundation and these are redistributed to their users. This offers very attractive boosted returns.

Navi and Scallop Lend are decentralised lending protocols inspired by Aave and Compound V3. They have the most value tied up (TVL), $124m and $117m respectively.

Cetus is the main decentralised exchange on Sui, it has concentrated liquidity pools in the style of Uniswap V3.

Aftermath is an aggregator of decentralised exchanges and does not yet have its own token.

Deepbook is an on-chain order book developed by Mysten Labs. It represents an infrastructure on which other decentralised exchanges such as Kyria can build.

Bluefin is a decentralised derivatives exchange. The protocol was originally designed on Arbitrum, but decided to migrate to Sui which was better suited to its low latency requirements and has seen a sharp increase in its trading volumes.

Regulation ⚖️

Sui Network is still a young project that has not yet attracted the attention of regulators, but the fact that the project was born in the US and benefits from funding from numerous US venture capital funds must inspire a degree of suspicion.

It would not be surprising if the US stock market watchdog, the SEC, were to take an interest in this project in the near future and label it an illegal financial security.

Competition ⚔️

Sui is positioning itself in the very high-speed blockchain sector.

Sui's main competitor is therefore Solana, which already has a well-advanced ecosystem, coupled with a resilient community and a fairly widespread programming language (Rust). However, Sui has never yet experienced any crashes, whereas Solana is subject to them on a regular basis. In addition, Solana is currently suffering from a phenomenon of transaction spam orchestrated by bots that makes the network difficult to use at times.

Sam Blackshear, Mysten Labs' CTO, explained on 13 April in a lengthy tweet why Sui was safer in this regard.

Sui is also competing with Aptos, whose team was also involved in Meta's Libra project. Aptos also uses the Move programming language, but this is the initial version, which is not an object-oriented language.

Launched nine months after Aptos, Sui has attracted more locked-in value ($558m versus $348m), but there is no clear winner yet.

Sei, meanwhile, is a blockchain launched in August 2023 within the Cosmos ecosystem that also supports transaction parallelization. A new version is due for release in the first half of 2024 and is expected to support the Ethereum Virtual Machine (EVM). This will enable applications from the Ethereum ecosystem to be deployed on a very high-speed blockchain.

Monad, a blockchain still in development that announced a $225 million fundraising round in early April, is also working to push the limits of EVM.

Roadmap 📝

This should see an improvement in its consensus with "Mysticeti" in order to reduce network latency to less than one second and reduce validator resources. This is expected to be implemented in the first half of 2024.

Sui has announced a partnership with Playtron to launch the SuiPlay0X1 portable video games console which will support traditional Web2 games as well as Web3 games. The console is expected to be released mid-2025.

Market analysis by Chadi El Adnani, Head of Content & Research at SUN ZU Lab 📈

Despite a rocky start where the native SUI token plunged ~70% in the first five months after its launch in May 2023, Sui has quickly regained momentum. Total locked value (TVL) exploded in 2024, surpassing Aptos, Cardano and Near with nearly $600m, tripling year-to-date according to Defillama data.

Sui's year-to-date performance was approaching 180% at the end of March, before losing momentum and falling to the level of BTC and ETH, at 50%. Daily volumes on centralised exchanges frequently exceed the $250 million mark.

Where can you buy the SUI token? 🛒

SUI is available on most centralised exchange platforms, including Binance and Coinbase.

Conclusion 🧭

Sui is trying to carve out a place for itself in the highly competitive market for very high-speed layer 1 blockchains. The challenge is a big one, since it has to succeed in creating a community of users and developers, especially as the latter have to learn a new programming language.

Sui's great strength is that it is being thought of as a product geared towards mass adoption, with the introduction of zkLogin and sponsored transactions that could allow the rest of the world to interact on Sui without even knowing it.

Sui appears to have the best performance in terms of transactions per second and low latency, making it very attractive for high-frequency trading and gaming. However, its degree of decentralisation remains very low at the moment and care will need to be taken to ensure that greater decentralisation does not hamper its current performance too much.

The value locked in on Sui has seen a remarkable rise since the end of 2023, but it remains to be seen whether this activity will continue after the end of the bonus rewards distributed by the foundation. These rewards are distributed in the form of Sui tokens and create selling pressure that is likely to be accentuated with the start of the release of locked investor and team tokens from June 2024.

‍

Our other analysis 🔍

⭐ Across Protocol (ACX)

⭐ Ondo Finance (ONDO)

⭐ Solana (SOL)

⭐ EtherFi (ETHFI)

⭐ Worldcoin (WLD)

⭐ Polygon (MATIC)

⭐ Dymension (DYM)

⭐ Starknet (STRK)

⭐ EigenLayer

⭐ Celestia (TIA)

⭐ Lido (LDO)

‍