Research
June 4, 2024
Sui: How are users leveraging its speed, security, & scalability?
Sui: How are users leveraging its speed, security, & scalability?
Aboudi Rai
Research
Sui: How are users leveraging its speed, security, & scalability?
We’re excited to announce the launch of Sui Application Activity on Artemis. As we pass the one-year anniversary of the Sui Mainnet launch, we believe it will be crucial for investors to explore the Sui platform and its on-chain activity. In this research article, we will outline the novel features of the Sui blockchain, the economic outlook of its native SUI token, and how investors may leverage Sui Application Activity to see what dApps are driving usage on-chain.1
Sui (pronounced ‘swee’) is a Proof-of-Stake Layer-1 blockchain built with the goal of enabling Web3 to scale to a billion users. To accomplish this, the original contributors to Sui, Mysten Labs, went back to first principles and designed a blockchain with architecture that eliminates wasteful and undesirable tendencies of existing chains. The most fundamental of Sui’s innovations is its object-centric design, in which assets (fungible and non-fungible) and smart contracts are encoded as objects.
While most blockchains like Ethereum encode the ownership of assets in the form of smart contract key-value stores that map addresses to balances, Sui’s object data model encodes assets as objects directly on-chain, where ownership, usage rules, and other functionality are all self-contained. Objects can be owned, where they may only be accessed by a single user (or smart contract), or shared, where they may be accessed by anyone on the network. This key attribute of objects single-handedly enables mass transaction parallelization opportunities by which transactions involving owned objects neither require ordering nor consensus.
With the scaling problem effectively solved through object-enabled parallelization and a robust consensus mechanism built on top of it, the Sui platform can ensure predictability in two forms. First, developers can build on Sui infrastructure with confidence that it will not run out of transaction capacity. And second, users can interact on-chain with confidence that gas fees won’t be hiked on them based on some other user’s usage, both within and across epoch periods (~24 hours).
Sui implements a solution to the Web3 onboarding problem too: zkLogin. By enabling billions of potential users to create a wallet using credentials for Google, Facebook, Apple, and more while remaining anonymous and self-custodial, Sui has brought down yet another barrier holding Web2 users back from migrating to Web3. zkLogin may be integrated within a Sui-compatible wallet, but perhaps in a more intended use case, dApps may integrate zkLogin directly within their UI to provide a Web2-like experience that abstracts away crypto wallet mnemonics and keys.
The native SUI token has five core use cases as outlined by the official Sui tokenomics documentation.
The SUI token has a fixed supply of 10,000,000,000 tokens, which are minted over time in the form of stake rewards for validators and delegators, as well as pre-mined unlocks for investors, the Mysten Labs team, and community programs. A chart with the projected token share allocation is available in this Sui Foundation Announcement. And in an effort to increase transparency, the Sui Foundation has released the projected SUI token distribution schedule which is available via API. At Mainnet launch in May 2023, roughly 5% of the total SUI supply was in circulation. Now (April 2024), that number is closer to 13%. By May 2030, that number will be roughly 48%.
SUI is minted in the form of stake rewards to validators, with gas fees rewarded directly to validators, too. This is in contrast to other PoS L1s like Ethereum and Solana, which burn a portion of their gas fees, removing some of their respective currencies from circulation with every transaction. While Ethereum has the prospect of being deflationary (i.e., the burn rate is greater than the mint rate at any particular instant), SUI is strictly inflationary until its 10 billion token supply cap is reached.
In the one year that the Sui Mainnet has been live, there have been over 3.6 billion transactions submitted by 14 million total active accounts. Currently, there is about $750 million in value locked on-chain. These statistics highlight the substantial traffic and considerable flow of liquidity on the Sui chain. But how has the chain’s infrastructure been able to handle this activity? And as these numbers continue to grow, will Sui’s promise of “unrivaled speed coupled with low, predictable fees” hold up?
Having observed the scaling issues that Ethereum has experienced with its unprecedented scaling, as well as the difficulty of executing major infrastructure migrations, the designers of the Sui protocol set out from the get-go to bake in robust validator incentives that keep fees low, both across time and at scale. Before diving into the incentive structure, we must acknowledge the novel feature of the Sui protocol on which these incentives are based: object-centric design.
Most other L1 blockchains implement account-centric data storage, whether that account be a wallet or smart contract address. Under this system, each transaction changes the global state of the chain and therefore must be cross-checked with the other transactions to avoid conflicting operations. Sui, on the other hand, implements object-centric data storage under which assets are encoded as objects, accessible and controllable by the owner, and, most crucially, can be totally independent of one another. What that latter bit implies is that there are cases where transaction ordering does not matter—a golden opportunity for parallelization.5,6
Sui validators may take advantage of this opportunity by engaging in horizontal scaling, whereby an individual validator adds more workers to increase their transaction throughput in a cost-efficient manner. In the testing of 100 global validators on a private testnet, Sui was able to demonstrate a peak 297,000 transactions-per-second throughput for the network—a testament to the potential of object-centric blockchains.7
Returning to Sui’s incentive structure introduced above, the protocol was specifically designed to keep gas prices low in terms of USD and predictable within and across epochs. The gas pricing mechanism has three working elements that the validators must engage in between epochs: the gas price survey, the tallying rule, and the incentivized stake reward distribution rule. The gas price survey asks each validator what gas price they are willing to process transactions at. The tallying rule is where validators enforce that all other validators honored their quote from the gas price survey, with slashing penalties in store if they don’t and reward boosts if they do. And, the incentivized stake reward distribution rule establishes an equilibrium at which all validators are incentivized to submit low gas prices and adhere to them promptly in the two previous parts, respectively. This mechanism ties in beautifully with the ability of Sui validators to scale horizontally while remaining cost-efficient. When traffic soars, Sui validators will look not to raise their gas price, but rather add more workers to reap the low gas price transaction fees at a higher throughput.6
Sui boasts yet another impressive metric of a 400ms time to finality (TTF). TTF definitions often vary. Sui defines TTF as the time it takes for a transaction to effectively become irreversible. They define settlement as the total time it takes until a transaction’s outcome—whether it’s accepted or rejected—is available and verifiable on-chain. A crucial byproduct of Sui’s object-centric design is that if an object is owned (i.e., it has only one owner), then its ordering is arbitrary, it requires no consensus, and settlement is reached simultaneously with execution in 400ms. If an object is shared, then a consensus mechanism is required of the validator set, pushing latency to ~2 seconds for both execution and settlement.8
There is substantial evidence here that if Sui’s user base continued to grow, the validators would be able to scale cost-effectively with little impact on the user experience in the form of hiked fees. However, the question of how well Sui can handle swaths of users adopting their platform is quite decoupled from the question of whether Sui can continue to attract swaths of users and founders to their ecosystem in the first place. To answer the latter, we explore the Sui ecosystem.
Exploring Sui and the tendencies of its users requires lots of research and oftentimes far too much blind exploration. The good news is that there is a solution that makes exploring on-chain activity a much more efficient and curated experience. We just launched Sui Application Activity, allowing investors to analyze real-time trends and explore user activity. Let’s see for ourselves what users are doing on Sui.
By analyzing the sector breakdown of transactions over the past three months, we immediately notice a spike in user transactions near the beginning of May 2024 spearheaded by the Spam sector, peaking at 37.5 million transactions on May 4, 2024, which accounted for 96.04% of the transactions that day. To see which dApps within the Spam sector are responsible for this flood of activity on Sui, we explore the sector breakdown table.
The Spam sector is occupied by a sole dApp: Spam Sui.
Spam Sui is effectively a community-driven stress test developed by Polymedia in which users earn the SPAM token in exchange for sending transactions on the Sui network. The project has evidently achieved its goal of stress testing the network, garnering a 1,134% increase in total transactions week over week before and after the release of Spam Sui.
Sui’s daily transaction volume even temporarily surpassed that of Solana for 3 days because of Spam Sui, displaying its ability to handle traffic well beyond that experienced by its L1 competitor. In early June Sui is handling an impressive ~8m transactions per day.
Another dApp that Sui users have been exhibiting interest in lately is Wave Wallet, a newly launched Telegram-based Sui wallet with its own Sui-native token, $OCEAN. If we click on Wave Wallet in Sui Application Activity, we can examine dApp-specific metrics as shown below.
We are seeing rapid growth in active addresses with 163,600 active addresses recorded on May 12, up 265% from a week earlier and up 3,618% from about two weeks earlier. Transactions submitted with Wave Wallet are expressing similar growth, up 258% week over week clocking 3.5 million transactions. These transactions mainly consist of users mining $OCEAN by playing the Ocean Game within the Telegram wallet.
Zooming out from recent trends such as Spam Sui and Wave Wallet, most Sui transactions within the past three months are from users bridging to Sui with Wormhole. Wormhole, an interoperability protocol with bridging compatibility between over 17+ chains. In Q1 of 2024, the net flow of bridged assets to Sui was worth $423.7 million transferred by 1,100 active addresses over 59.9 million transactions, up 432% from the worth of assets transferred in Q4 of 2023.
We can discover another impressive metric by looking at Ecosystem Flows on Artemis: on Wormhole in the past three months, assets originating on Ethereum are being bridged to Sui more than any other chain.
DeFi
Users are moving massive amounts of liquidity onto Sui, and DeFi usage has increased accordingly.
DEX trading volume on Sui reached $7.1 billion over Q1 of 2024, up 407% quarter-over-quarter. TVL on Sui reached as high as $724 million (378 million SUI) by the end of Q1 of 2024, up 240% quarter-over-quarter.
If we explore the DeFi sector breakdown on Sui Application Activity, we can sort by Gas (USD) to better understand where specifically DeFi users are transacting. We can see that gas spent year-to-date is up 122% to $81,975.80, most of which is being spent on DeepBook.
DeepBook is one of Sui’s Standards—features and frameworks native to the Sui blockchain that dApps can utilize or extend. It is a native liquidity layer on Sui which takes shape as a central limit order book (CLOB). While it has no built-in user interface, Cetus has recently released one on its DEX platform. Gas spent on DeepBook has risen 78% year-to-date, as more independent DeFi protocols and MEV bots tap into its CLOB for liquidity.
As the table displays, Scallop and NAVI are DeFi protocols each witnessing gas expenditure an order of magnitude greater than the other protocols on Sui, respectively. Let’s take a deeper look.
Scallop is a lending protocol built on Sui for Sui. They were the recipient of the very first Sui Foundation grant, maintain a reputation for reliable security, and recently launched their native governance token, $SCA. As more liquidity flows to the Sui platform, much of it is flowing into Scallop, putting them at $121 million TVL, up 256% year-to-date. Scallop is currently holding bi-weekly incentive programs rewarding lenders and borrowers with SUI in order to attract users and their liquidity. The bi-weekly incentive program beginning on May 13th offered suppliers and borrowers 251,000 SUI each in the form of higher yields. Incentive programs vary across bi-weekly periods.
NAVI is also a DeFi platform built on Sui offering lending/borrowing and liquid staking. They recently launched their governance token, $NAVX. Unlike Scallop, NAVI has put forth a 2024 roadmap that includes a plan to spread to more chains than just Sui.9 NAVI protocol has $149 million TVL, up 366% year-to-date. They, too, are running bi-weekly incentive programs. As an example, the program beginning on May 13th offered supply APY’s as high as 23.99%.
Where there’s DeFi, there’s MEV. Sui is no exception to this rule with MEV bots’ gas expenditure up 1,905% year-to-date, exceeding that of the DeFi sector by 22% during this period. There is some double-counting here as MEV smart contracts make calls to DeFi protocol contracts, but what this tells us is that a significant portion of DeFi activity is in fact originating from MEV bots.
Another consideration given the prevalence of DeFi on Sui is that smart contracts are implemented in Move on Sui, a Rust-based programming language developed at Meta and extended by Mysten Labs that is more secure and reliable than Solidity. Recent hacks such as Euler Finance’s $197 million hack or KyberSwap’s $54.7 million hack may have DeFi protocol founders and users looking for more reliably secure smart contracts, like those written in Move on Sui.
Gaming
Sui’s predictably low gas fees and high transaction capacity yield a ripe ecosystem for games to thrive. Sponsored transactions, by which a Sui address pays for the gas fees of another transacting address, create a new paradigm in which no funds need to be provided upfront in order to interact with a game on-chain. However, the gaming sector is still fledgling, having only made up 3% of the ecosystem in Q4 of 2023, with that metric dropping to below 0.1% for each quarter since.
Despite the relatively low activity, two platforms have dominated the sector year-to-date.
The first of which is Arcade Champion by Blue Jay Games, a mobile arcade-style game that implements a “play to own” model in which one earns “heroes” — NFTs that can be traded or sold in-game or directly on Sui. The game has 4.8 stars on the App Store on over 170 ratings. Although around $10,300 was spent in gas fees in Q4 of 2023, activity appears to be slowing down as DeFi soars, dropping 96% quarter over quarter.
The second gaming platform still seeing some activity on Sui is DeSuiLabs’ on-chain betting games, like Sui Coin Flip, which has garnered over $20 million in transaction volume. Users spent $1,200 in gas fees on DeSuiLabs games in Q4 of 2023, which fell 93% quarter over quarter. Transactions are not sponsored on DeSuiLabs.
Sui’s gaming sector is expected to see more titles released through the second half of 2024. Notable announcements at Sui Basecamp include E4C: Final Salvation by Ambrus Studio and Xociety by NDUS Interactive. A Sui-based mobile gaming device, SuiPlay0X1, was also announced with a 2025 expected release date.10
Community
Sui also announced Sui Overflow, Sui’s first global hackathon with over $1,000,000 in prizes. This is sure to attract students, developers, and founders worldwide to the Sui chain, including those who perhaps were not previously experienced or even interested in building on Sui.
Finally, as evidenced by the recently held Sui Basecamp Conference, Sui is making a highly concerted effort to attract more newcomers to their ecosystem, as well as fostering the community already building within it. According to the conference website, over 1,200 people attended the conference, including speakers such as executives from Messari, Binance, a16z, Aftermath Finance, and Mysten Labs.
Sui is investing heavily in developing their community and garnering legitimate recognition from top industry players.
To reiterate, Sui is a PoS L1 blockchain with a novel architecture built to onboard the next billion users onto Web3. An object-centric model enables transaction parallelization via the horizontal scaling of validators. The Sui ecosystem is trending towards DeFi but has high potential for gaming and social given low gas fees, sponsored transactions, high transaction capacity, and zkLogin. The SUI token has a fixed supply of 10,000,000,000, released in the form of stake rewards and pre-mined unlocks for private investors, the Mysten Labs team, and community programs. The Sui Foundation is ramping up community-building initiatives, including DeFi incentives, the Sui Overflow hackathon, and the Sui Basecamp conference. And of course, a great way to monitor and analyze real-time Sui chain activity is by using Sui Application Activity by Artemis.
[1] https://iq.wiki/wiki/sui-token
[3] Solana Storage Rent Economics
[4] Sui Tokenomics Documentation
[8] Settlement Time and Compostability
[9] NAVI Protocol
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