Sui overview: investment opportunity
Sui is (yet another) L1, so, why would you care?
What is Sui?
In Evan Cheng’s words (CEO of Sui and Co-Founder of Mysten Labs):
“Sui is a permissionless smart contract platform that scales throughput and storage horizontally and linearly with no upper bound. Sub-second finality for most transactions.”
If I have the describe Sui in a few bullet points:
- Permissionless, POS, Smart Contract L1
- Target to be faster, cheaper (fees and storage) and safer
- Uses Move (programming language created by Meta)
- New paradigm based on objects instead of addresses
- Founded by former senior executives at Meta’s Novi Research
Introduction video:
Why invest in yet another L1?
Historically entering early in L1 projects has a good return. They usually have a big supply but as the token is linked directly with network usage it’s normally not a big concern once the network has a decent number of users (adoption). There are many L1’s to pick from which means there are less opportunities than years ago, so…
It’s key that a L1 solves a real problem and is able to drive adoption (technology + partnerships + marketing)
Here you can check from Coingecko the current top L1 (top in market cap also):
Screenshot of L1 at the time of writing this article:
Most of them has an initial period with no volume + low price, then first hype wave, then peak down + flatten for long time (normally when reality doesn’t meet expectations), this is the period where teams keep building and then second and stronger wave where the project starts to get real traffic (users, TVL, etc.).
Zoom into first wave to get better detail:
Strategy is simple: buy early, take profit when everybody talks about it, load again when hype fades and hold as a long term investment (for example buy + stake during flat period)
Just to compare with another investment I can see Polkadot on the “flat phase” now. We entered early at 3$ but didn’t take profit on the first wave peak (you can tell always there is a double top sign)
Now it looks like a good point to start doing DCA slowly (but as we saw on previous projects it may take time for second wave)
Sui main features
As I mentioned in the intro, Sui is a permissionless, POS, smart contract platform, this means that everybody can start a node and join the network (permissionless), the consensus is based on how many tokens you hold (you can be a validator or delegate your tokens) and it supports smart contracts, so you can create tokens, NFT’s etc.
Not all chains support smart contracts, for example Polkadot doesn’t, you have to use any of the parachains that support SC like Moonbeam or Astar
It uses Move as programming language and is based on objects instead of addresses. Its new paradigm aims to reach faster settlements and more throughput thanks to parallel processing (more details in the next section).
The fees model aim to be cheaper with predictable prices and part of them are dedicated to a fund for storage which will reward validators for storing data. The later should lead to more “on-chain” data (what most people doesn’t know is lot of NFT’s pictures are in reality on external servers which means the author can change the pictures at any time)
It also brings tools and an SDK for developers to help building Web3 apps.
Technical details
Sui uses Move as programing language. Move was created by Meta and claims to be safer than Solidity and supports better performance through parallel processing. However for Solidity there are plenty of resources on internet and a big community of developers compared with Move which is a new player.
A critical point for adoption is to have developers and with Sui they need to learn a new language for Smart Contracts (Move), this may impact it’s adoption
Overview of the difference between Move and Solidity here:
Not only Sui is using a new language (Move) it also created a new model:
Sui new model based on objects instead of addresses changes drastically the way we code smart contracts
Comparison with traditional blockchain
Let me put a graphical example to compare Sui with traditional approach. Let’s consider three types of transactions:
- transfer a token balance
- a swap in a DEX
- transfer an NFT between users
In a traditional blockchain all transactions are considered the same and to generate next block a miner/validator need to do all operations before a block is released:
- before each block each user submit his transaction into a mem pool
- validators/miners pick up all tx and sequence them in order
- each tx is executed with a global lock (nothing can be modified until full process finished)
- database is updated and merkel trees are generated (crypto proof)
This approach has 2 main issues:
- All transactions are paused until next block is generated (even if they are not related and could be processed in parallel)
- Block process involves both execution (update token balance, change nft ownership, etc) and crypto proof (create a merkel tree which is the mathematical proof that all transactions on the current block are legit)
I like “Evan Cheng” analogy:
All passengers line up (consensus) to get on a bus, each passenger ticket is checked (execution) before the bus leaves, and they all get off at the same location (MT update). Only then is the bus ready to take on new passengers
Sui tackles these issues with the next techniques (among others):
- transactions are divided on groups (each group can be executed in parallel)
- transaction effects are committed to an object (for example a token balance is 10, after a transfer of 3 it’s remining balance is 7)
- object owned by a single user (like NFTs) don’t need consensus
- for shared objects Sui uses Narwhal & Bullshark (cutting edge consensus)
- transactions of the same shared object are in sequence
- all other transactions are executed in parallel
Difficult to draw all concepts here but it would look something like this:
To continue with the analogy:
Sui: Group passengers based on their destinations (objects). Each group has their tickets checked in parallel, and they are taken by separate vehicles to go to their destination in parallel
Another challenge with current blockchains is to compose assets, a simple example could be two NFTs from a game (an avatar and an accessory).
Today when you mint or buy and NFT it gets associated with your wallet (address oriented) but there is no clear relationship between them, it’s even worst, there is not a concept of asset at all in Ethereum (everything is a smart contract).
Sui with it’s unique object model allows developers to define assets with custom attributes and dependencies where it’s easy to change the state and/or compose them.
Check this video from Evan Cheng covering all of these points:
Tokenomics
Mysten Labs, the company behind Sui, raised 300M funding at a $2 billion valuation. Sui has a fixed supply of 10 billion tokens with next token allocation:
Token utility:
- Staking: you can delegate Sui to validators getting rewards from fees
- Pay gas fees: for transactions and other operations
- On-chain voting: voting on governance and protocol updates
You can change which validator you want to delegate your tokens each era where a new validator committee is created (keeping the incentive of been an honest validator).
Sui has a gas pricing mechanism which main target to keep fees low and predictable. Instead of having gas prices changing each minute Sui gas price is defined by validators committee every 24 hours.
Part of the fees goes to validators and delegators and part goes into the storage fund, which is a critical element on Sui to incentivize on-chain data
The team
Sui is backed by Mysten Labs , the Web3 infrastructure organization founded by former senior executives at Meta’s Novi Research. It is made up of experts in cryptography, programming languages, and distributed systems.
Some of the team members:
- Evan Cheng (Co-founder & CEO at Mysten Labs), 25+ years of experience in companies like Apple or Meta (involved in Libra, later renamed Diem) https://www.linkedin.com/in/chengevan/
- Adeniyi Abiodun (Co-founder & CPO at Mysten Labs), almost 20 years of experience with experience on VMware, Meta and Oracle https://www.linkedin.com/in/chengevan/
- Sam Blackshear (Co-founder & CTO at Mysten Labs), 12 years of experience, main skill on research, creator of Move language and participant of Diem platform (previously called Libra) https://www.linkedin.com/in/sam-blackshear-599b3965/details/experience/
I can continue but you can get an idea of the level we are talking:
Conclusion
I think Sui is a really interesting opportunity with the only open question about the public offering (still not price nor date provided), it gathers all the elements to be a successful L1 and we know what it means to enter early.
I’ll keep myself updated to enter in different phases, most probably I’ll load little bit on launch, then slowly accumulate on each retrace until we see the classic double-top + bearish div we saw on previous L1 first waves
About us
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Sources
https://github.com/MystenLabs/sui/blob/main/doc/paper/sui.pdf
