Sui Tokenomics - Figment

Sui Tokenomics

Published

January 5, 2023

Sui is a decentralized delegated Proof-of-Stake blockchain that enables horizontally scalable throughput with competitive speeds at low costs. The protocol uses Move, a programming language that focuses on security by using a modular architecture. The Move language allows parallel execution without adding additional complexity for node operators.

To keep pace with the cutting-edge infrastructure design, Sui implements a robust economic model that is designed to incentivize entities participating in the ecosystem. There are three main players in the Sui ecosystem:

• Sui Users: Users are actors who submit transactions, create, mutate, and transpose objects and interact with smart contracts.
• Sui Token holders: These are the owners of the native token called SUI and have the option to stake their tokens to secure the network and earn additional SUI tokens as a reward. They can also participate in Sui’s governance operations.
• Validators: Validators compile and validate transactions submitted by users and secure the network.

Figment’s Involvement

Figment is currently a part of the permissioned testnet validator set and will continue to be a part of the Sui ecosystem upon the arrival of mainnet. The testnet aims to stabilize the network by running formulated tests to ensure the network is performing optimally. We are very excited to be a part of the Sui ecosystem and will be supporting the Mysten Labs team as the journey progresses. Mysten Labs is building the foundations for the decentralized future.

Stay tuned for our Staking Guide if you want to learn how to stake SUI. Meanwhile, you can reach out to sales@figment.io to learn more.

The Economy

The Sui ecosystem consists of 5 vital components, each playing an interrelated role:

• The SUI Token as the native token.
• Gas Fees: All network operations are levied with transaction fees aka gas fees, and used to reward actors taking part in the PoS mechanism.
• Sui Storage Fund: Used to compensate validators for storing on-chain object related data.
• Delegated PoS: At the end of each epoch (an epoch can be defined as a fixed timeframe providing validators a common frame of reference for scheduled events on a blockchain), the protocol distributes staking rewards to participants of the proof-of-stake mechanism. This is to incentivize and reward validators for honest behavior and securing the chain.
• On-chain governance: Used to govern chain parameters and protocol upgrades.

The SUI token

Sui utilizes the native token called SUI. This means that SUI will be used as the primary medium of exchange and a store of value. The max supply for SUI is capped at 10,000,000,000 (10bn) and a large portion of the total supply will be liquid when Mainnet launches. The remaining amount will vest over the coming years and be used to distribute future staking rewards. SUI will be used to participate in the PoS consensus through delegating and earning rewards. The token will also grant the delegator the right to vote or propose on-chain protocol upgrades via governance.

Token Distribution:

The diagram above shows the token distribution for the SUI token.

• 50% of the total supply will be allocated to the community reserve which entails:
  • Delegation program: The foundation to help bootstrap community run validators and ensure even stake distribution across the network.
  • Grant Program: This is meant for the developers and other participants to encourage building on Sui.
  • Research and Development: The foundation will use these tokens to invest into further development of the protocol.
  • Validator Subsidies: These will be used to subsidize staking rewards in the early stages of the network.
• 20% is allocated to early contributors
• 14% will be distributed to Investors
• 10% is reserved for the Mysten Labs Treasury
• Lastly, 6% will be for the Community Access Program and App Testers. You can read more about the Access Program here.

Gas Fees

Sui’s gas fee structure is aimed to create a credible anchor for users to eliminate uncertainty when submitting transactions. Validators coordinate at the beginning of each epoch and set a reference price allowing users to have a credible citation mark when deciphering gas prices. By incentivizing validators who disclose their accurate reservation prices, users can credibly presume that transactions will be processed in a punctual manner. The reference price is fixed for the duration of the epoch, however, users can “tip” or reduce the price as long as it is above the gas price floor, which is updated periodically depending on network activity. Therefore, the more validators on the network, the lower the price.

• Reference Price: at the beginning of each epoch, a validator-wide survey is conducted and each validator submits a minimum price at which they are willing to process transactions. Out of the submitted prices, the protocol chooses the average minimum price to set as the reference price for gas fees. You can read more about the reference price mechanism here.
• Storage gas price: this refers to the cost of accommodating one unit of storage and is measured in SUI. This is decided through governance and is rarely changed. Storage gas price remains unchanged every epoch and is the same for all transactions.

Sui Storage Fund

In order to offset costs of large amounts of on-chain data, Sui uses a Storage fund. The fund is designed to redistribute storage fees collected over time. When submitting a transaction, users pay both the computation fee as well as the storage fee. The collected funds are distributed to new validators to combat the cost of large data storage.

There are 3 main features of the Storage fund:

• Funded by past transactions: the Storage Fund is funded by users who are creating on-chain data and compensates future validators for the extensive storage needed when entering the ecosystem.
• Only pays out from returns: Validators are able to borrow additional stake to bootstrap their node and meet the minimum stake requirements when initially starting out. To repay the funds, they get to keep a certain percentage of the rewards, and the remaining rewards from the borrowed stake are deposited back into the storage fund. Storage fund only pays out from the returns on its capital and does not distribute the principal accrued over time.
• Deletion Option: Once data is deleted from on-chain storage, users gain a Storage fee rebate. The theory behind is that if the deleted data is no longer on-chain, there is no point in paying for storage fees. It is to be kept in mind that this does not refer to transactions, rather points at data such as NFT metadata, auctions, tickets, etc.

The Storage fund reduces the barriers to entry into the Sui ecosystem and encourages new validators to join.

Delegated Proof of Stake

The Sui blockchain relies on a Delegated Proof-of-Stake mechanism (DPoS) which allows SUI token holders to delegate their tokens to any validator of choice. Total stake delegated to a validator is in direct relation to the validator's voting power. Once delegated, SUI tokens are locked for the entire epoch and are free to change the delegated validator once the epoch changes.

Rewards

In light of the PoS system, SUI holders who delegate their tokens to validators will earn rewards for securing the network. Rewards are distributed at the end of each epoch and are derived from transaction fees aka gas fees.

Future Developments

Prior to mainnet launch, Sui will run a private testnet consisting of three waves. Each wave will test a different functionality of the network. Sui has just recently launched the first wave of their Testnet. With each wave, more validators will be onboarded to eventually test the network at full capacity to prepare for the mainnet. Upon mainnet, Sui will launch with a delegated proof of stake mechanism which will allow users to stake their SUI tokens immediately. A diagram explaining the roadmap can be found below.