EXECUTIVE SUMMARY

Web 3.0 is still in its early days and presents ample opportunities for those willing to start operating in this space. Web 3.0 could have 1 billion users by 2031, and it is much fairer in economic terms for creators than Web 2.0. For example, according to an analysis of a16z crypto, Web 3.0 paid out $174,000 per creator, while Meta (previously Facebook) and YouTube paid out $0.10 and $2.47, respectively, over the period considered.

One such project aiming to serve Web 3.0 is Sui Network. The management team at Mysten Labs, the company behind Sui, left their roles at Meta, and are focused on accelerating the adoption of Web 3.0.

Sui is a layer-1 smart contract platform that uses an original consensus system, which started as a research prototype at Facebook’s Novi project. Currently, the project features:

  • The Move programming language.
  • Objects, the basic unit of storage.
  • Three transaction types.
  • Validators.
  • The SUI token.

The network’s native token, $SUI, provides at least two use cases to the holders. The project is yet to announce a token offering, and hence details about tokenomics are forthcoming.

The project is located in the United States, a country with the largest number of crypto investors, trading platforms, exchanges, investment funds, and crypto mining firms.

The project has a world-class team of experienced professionals. The team is further strengthened by venture capital backing.

However, the mainnet is yet to be launched, and there is also no detailed time-bound roadmap. Nonetheless, Sui is in active development with clearly spelled out upcoming features.

Our researchers gave Sui a final rating of 54.78%. (Note: The tokenomics of Sui Network are not considered in this rating). The breakdown of this rating is available at the end of this report.

 

PRODUCT & COMPANY DESCRIPTION

Introduction to Sui Network

Sui is a permissionless Layer-1 smart contract platform designed to make it possible for developers and creators to build experiences tailored for the upcoming users in web3. 

Vision: The team imagines a world in which “individuals can seamlessly move their assets across virtual worlds without sacrificing functionality.” The team also believes that “true asset self-sovereignty will be the foundation of economics in the Metaverse.”

Objectives: To achieve the status of being “the world’s premier open and decentralized network for builders,” the team is committed to ensuring builders can focus on building new things, whether financial applications, a series of dynamic and composable NFTs, game assets with ownership transcending product boundaries, or new experiences the world has not yet witnessed.

In 2021, the founding team members decided to leave their positions at Meta (formerly ‘Facebook’) to create Mysten Labs, a company that focuses on rethinking from first principles web3 infrastructure. Sui is the first step towards that goal. The platform’s notable features include:

  • Parallel agreement on causally independent transactions.
  • Byzantine consistent broadcast.
  • Ability to define rich and composable on-chain assets.

The Sui Network’s ecosystem comprises the following elements:

  • Move

Smart contracts powering Sui applications are written in Move, a programming language initially developed for Diem Foundation (formerly Libra Association led by Facebook) to write safe smart contracts. Move is a platform-agnostic executable bytecode language accessible to mainstream developers. Its design offers safety guarantees against issues like re-entrancy vulnerabilities, spoofed token approvals, and poison tokens, and expressivity enables the easy implementation of key blockchain elements. The developers can use Move to implement custom transactions and smart contracts. Although Move has not been around long, a couple of other silentious platforms are using it. E.g., 0L Network and StarCoin. We find this tutorial with concrete examples useful (link here).

  • $SUI

$SUI is the native token of Sui Network, and it has a fixed supply. The token is used to pay gas fees and, within an epoch, is used as a delegated stake on authorities. Within an epoch, the voting power of authorities is a function of this delegated stake. Fees collected via all processed transactions at the end of the epoch are distributed to authorities under “their contribution to the operation of Sui, and in turn, they share some of the fees as rewards to addresses that delegated stake to them” (Source: whitepaper).

Sui has produced a whitepaper outlining the central technical aspects of the project, like Sui smart contract programming, the Sui programming model, the Sui system from a systems perspective, and scaling and latency. The whitepaper is most suited to an audience with an advanced DLT/blockchain understanding level. It has been mentioned that a dedicated token economics paper is forthcoming. Nonetheless, the whitepaper briefly discusses the native token.

Additionally, several research papers are of relevance to Sui and have been co-authored by at least one team member. Some of the ideas presented in these papers are being integrated into Sui Network, while others are in the pipeline as per the roadmap. There is a possibility that in the future, the team might integrate other ideas that are not present in the roadmap. The latest design inspired by these research papers is explained in the whitepaper. A list of the research papers is available here.

The Sui DevNet was launched in May 2022. The DevNet will be a podium for the team to test with the Sui software. As witnessed by DevNet Sui Explorer, the blockchain seems to process transactions successfully. Next, a testnet is supposed to be released in a few months (Source: FAQ).

As far as smart contract platforms are concerned, it’s a growing and competitive sector dominated by the Ethereum blockchain. For Sui Network, gaining traction and sustaining success will be an uphill task.

Success Factors

Based on our understanding, there are several success factors for the project. These factors are listed below:

  • A team with a solid technical background. 
  • Large potential market as exemplified by the growth of the web3 market.
  • Technical features that differentiate Sui from traditional blockchains.
  • Financial backing by venture capital firms.

 

MARKET CONDITIONS AND COMPETITION

Market Conditions

Currently, the crypto market is going through a notable downturn across all sectors. The web3 sector’s week-over-week price has decreased by 25.8%, while the year-to-date price has witnessed a decrease of 67.0%.

 

Week-over-Week and Year-to-Date Price Changes as of 15 May 2022. Source: Arca

 

One of the key takeaways of the 2022 State of Crypto report by a16z crypto is that we are amidst the fourth ‘price-innovation’ cycle. Although the market experiences a drop, the overall long-term prospects for the web3 market still look promising. Even though we may be entering a period of downturn, once the dust settles, advances made by builders during the downturn will eventually re-trigger optimism.

The above report highlights that these cycles have an underlying order, bringing about consistent long-term growth, propelled by a feedback loop between innovation and interest. This trend is evidenced by the compound annual growth rates for the global crypto market cap, developer activity, startup activity, and social media activity, which are 270.9%, 68.6%, 62.5%, and 83.1%, respectively.

 

Compound annual growth rate. Source: a16z crypto    

 

Another takeaway is that Web 3.0, compared to Web 2.0, is much better for creators, having fairer economic terms with drastically lower take-rates. For example, OpenSea has a take rate of 2.5%, while YouTube has a take rate of 45%.

Finally, Web 3.0 is still in its early days. If the below-illustrated trendline continues on that trajectory, Web 3.0 could potentially have a billion users by 2031.

 

Internet Users vs. Ethereum Addresses (Log Scale). Source: a16z crypto

 

Competition

On Discord, the CEO has described Sui as being completely different from anything in the blockchain industry. Nevertheless, the project still faces competition from well-established layer-1 blockchains like Ethereum.

Although Ethereum has dominated the web3 market, plenty of other blockchains, such as Solana, Polygon, BNB Chain, Avalanche, and Fantom, have appeared on the scene, and some of these blockchains have surpassed Ethereum in metrics like active addresses and daily transactions as shown below. In this context, the aforementioned a16z crypto report states that Web 3.0 is multi-chain, with developers having many options to choose on which blockchains to build. Hence, Sui would have to compete with these other blockchains to get the attention of developers.

 

Source: a16z crypto

 

Ethereum is the leader in developer interest, with nearly 4,000 monthly active developers.

 

Monthly Active Developers Since Launch | 80+ Avg Developers. Source: Electric Capital

 

Because Ethereum has prioritized decentralization over scaling, alternative blockchains have been able to come in and attract users with claims of better performance and lower fees. This can be advantageous for Sui as it can also capitalize on Ethereum’s drawbacks.

 

How is the project different from its competitors?

 

The project asserts that many features differentiate it from traditional blockchains. Except for the last one, the below-mentioned features are taken from a page summarizing how Sui differs from other blockchains. Readers are advised to consult this page to understand these differences more in-depth.

  • Transaction validation: “Sui validates transactions individually, rather than batching them in the traditional blocks. The key advantage of this approach is low latency; each successful transaction quickly obtains a certificate of finality that proves to anyone that the Sui Network will process the transaction”.
  • Causal order vs. total order: unlike most existing blockchains, Sui is not always imposing a total order on the clients’ submitted transactions, except for shared objects. Most transactions are ordered causally. However, Sui validators can process transactions with no causal relationship in any order. “Causally ordering transactions allows Sui to parallelize the execution of most transactions massively; this reduces latency and allows validators to take advantage of all their CPU cores.”  
  • A different approach to state: as a result of Sui focusing on managing specific objects and not on a single aggregate of state, Sui uniquely reports on objects. As a result, Sui validators “can exhibit a causal history of an object, showing its history since genesis.”
  • A leaderless protocol and no view-change sub-protocol: Sui runs a leaderless protocol for processing common transactions (containing only owned objects). Because of this, faulty validators don’t impact performance in a significant way. “For transactions involving shared objects, Sui employs a state-of-the-art consensus protocol requiring no view-change sub-protocol and thus experiences only slight performance degradations. In contrast, most leader-based blockchains experiencing even a single validator’s crash see their throughput fall and their latency increase”. 
  • The reading process: Sui’s reading process differs enormously compared to other blockchains. “Users interested in only a handful of objects and their history perform authenticated reads at a low granularity and low latency. Sui creates a narrow family tree of objects starting from the genesis allowing it to read only the objects tied to the transaction’s sender. Users requiring a global view of the system (e.g., to audit the system) can take advantage of checkpoints to improve performance”.
  • Ability to define composable and rich on-chain assets: “Sui’s scalability is not limited to transaction processing. Storage is also low-cost and horizontally scalable. This enables developers to define complex assets with rich attributes that live directly on-chain instead of introducing layers of indirection into off-chain storage to save on gas fees. Moving attributes on-chain unlocks the ability to implement application logic that uses these attributes in smart contracts, increasing composability and transparency for applications.”

 

TECHNOLOGY REVIEW

Product

Sui is an open-source project. The Sui Contributor Covenant Code of Conduct states that “Sui as an open-source project encourages free discussion rooted in respect.” It welcomes users to the Sui platform and asks them to help grow the platform with relevant contributions. The open-source code is hosted on GitHub. As per a blog post, the team strives to provide tools for developers, creators, and end-users, to make their lives as simple as possible. There is also a plan to develop the Sui Developer Kit, which will be open-source.

  • Objects

An Object is the basic unit of storage in Sui. In contrast to many other blockchains in which storage centers around accounts with every account containing a key-store value, Sui’s storage centers around objects. An object (Move Package) is a smart contract, and Move smart contracts manipulate objects. Transactions modify and create objects, while validators store objects. The project’s team has produced in-depth technical explanations, as seen here.

  • Transactions

Any updates to the ledger of Sui happen via a transaction. Three transaction types are delineated – Move call transaction, Move publish transaction, and native transaction. All transactions contain standard metadata like sender address, gas input, gas price, maximum gas budget, epoch, type, and authenticator.

A Move call transaction is a smart contract call invoking “a function in a published Move package with objects owned by the sender and pure values (e.g., integers) as inputs. Executing a function may read, write, mutate, and transfer these input objects, and other objects created during execution.” Besides the common metadata, it consists of additional fields like the package, module, function, type inputs, object inputs, and pure inputs.

A new Move package is published as an immutable object by Move publish transaction. Future packages can use public functions and types once they have been published, and future transactions can call their entry-point functions. Besides the common metadata, package bytes are included in a publish transaction.

Native transactions are described as “optimized versions of common Sui operations.” Every native transaction is semantically equivalent to a particular Move Call but with a lower gas cost. A transfer is a native transaction type that transfers coins from senders to specified recipients. In addition to the common metadata, a publish transfer has fields like input, recipients, and amounts. Join, another native transaction type, combines several coin objects into one and includes an input field.

Transactions take objects as input and create objects as output, while validators execute transactions. A more in-depth explanation is available here.

  • Validators

A set of independent validators operate the Sui Network, with each validator “running its instance of the Sui software on a separate machine (or a sharded cluster of machines operated by the same entity).” Clients send read and write requests, and validators participate in the network by handling those requests.

Sui employs proof of stake to determine the voting power of validators and which validators operate the network. Staking rewards, a share of transaction fees, and slashing for misbehavior, are incentives for validators to participate in good faith. A more in-depth explanation is available here.

Blockchain

Sui’s blockchain has been described as horizontally scalable with no upper bound to meet application demand while maintaining transaction costs significantly lower. The implemented system design breakthrough eliminates a critical bottleneck affecting traditional blockchains, i.e., achieving global consensus on a totally-ordered list of transactions.

It has been claimed that Sui “takes a significant leap in scalability by enabling parallel agreement on causally independent transactions. Sui authorities commit such transactions using Byzantine consistent broadcast, eliminating global consensus’ overhead without sacrificing safety and liveness guarantees.”

This breakthrough is only possible thanks to Sui’s novel data model. Dependencies are explicitly encoded because of Move’s strong ownership types and the model’s object-centric view. Consequently:

“Sui both agrees on and executes transactions on most objects in parallel, while a minority of transactions that affect shared state are ordered via Byzantine fault-tolerant consensus and executed in parallel.”

 

Illustration of parallel execution of transactions. Source: Sui vs Traditional Blockchain video

 

According to the available information, the Sui blockchain is highly scalable. Mysten Labs claims that theoretically, Sui will have no limit on transactions per second or throughput. The team has reported that, as of March 19, “an unoptimized single-worker Sui authority running on an 8-core M1 Macbook Pro can execute and commit 120,000 token transfer transactions per second (TPS). Throughput scales linearly with the number of cores — the same machine processes 25,000 TPS in a single-core configuration”.

With the help of Sui, blockchain developers can define and build a wide range of projects that rely on blockchains. Some examples include on-chain DeFi and TradFi primitives, reward and loyalty programs, complex games and business logic, asset tokenization services, and decentralized social media networks.

Consensus Mechanism

Narwhal and Tusk is a consensus offered by Mysten Labs. The consensus page mentions that “Sui runs consensus as needed to checkpoint its state periodically. And for those transactions that require total ordering, Narwhal/Tusk is the consensus engine of Sui. The dual name highlights that the system splits the responsibilities of ensuring the availability of data submitted to consensus (Narwhal) and agreeing on a specific ordering of this data (Tusk).

The origins of Narwhal and Tusk go back to Facebook’s Novi project, where this consensus mechanism was started as a research prototype. The consensus system leverages directed acyclic graphs (DAG). The consensus that is DAG-based has been developed over the last 30 years. The history of DAGs is succinctly summarized in this paper. The closest theoretical ancestor of Narwhal and Tusk is DAG-Rider, explained in this paper.

Security Audit

No security audit has been done.

 

ROADMAP

Currently, there is no timebound roadmap for the project. However, it has outlined the current possibilities of the network and what’s forthcoming over the next several months. (Follow here and here to track updates). This blog post published on March 22 indicates that the team intends to share a roadmap over the next few months.

 

TEAM

The team page of Mysten Labs lists 35 employees who are skilled in different fields like software engineering, cryptography, and product management. Some of the team members come with strong academic credentials and have contributed to important research work, including creating the Move programming language. The team members have also gained business experience working for organizations like Apple, Facebook, and University College London.

Evan Cheng, Co-Founder & CEO, has worked at Apple and Facebook.

Sam Blackshear, Co-Founder & CTO, created the Move programming language and worked at the University of Colorado,  Facebook, and Novi Financial. Sam earned a Ph.D. in Programming Languages from the University of Colorado at Boulder.

Adeniyi Abiodun, Co-Founder & CPO, worked on Move, Diem, and Novi wallet as a Product Lead at Meta’s Novi Financial team.

George Danezis, Co-Founder & Chief Scientist, is a professor of security and privacy engineering at University College London with a Ph.D. in computer science from University of Cambridge. George has also worked at Facebook.

Advisors

Lefteris Kokoris Kogias, Research Advisor, is an assistant professor at the Institute of Science and Technology Austria. Lefteris conducts research on computer security and distributed systems (LinkedIn).

General Comments on the Team & Advisors

Mysten Labs is hiring for various roles (e.g., a Data Scientist, Developer Relations Lead, and Engineering Manager). The project is advantageous for having a team with a world-class experience. With the ongoing recruiting efforts, it is presumed that the project can fill any skill gaps in due course.

During our review period, we did not find evidence that the team members have taken part in any previous or current illegal projects or controversial projects. We did not find evidence of the advisor’s involvement in any controversial projects.

 

LEGAL AND COMPLIANCE SPECIFICS

Jurisdiction

Mysten Labs is headquartered in the United States according to the available information.

In the United States, the regulatory framework for cryptocurrencies is evolving despite existing differences in viewpoints and any overlap between agencies. For example, the U.S. Securities and Exchange Commission (SEC) often views many cryptocurrencies as securities, while the Commodity Futures Trading Commission (CFTC) calls Bitcoin a commodity, and the Treasury calls it a currency. On a positive note, the United States is home to the most significant number of crypto investors, trading platforms, exchanges, investment funds, and crypto mining firms. The President’s Working Group and the Financial Stability Oversight Council will have essential roles in developing a future regulatory framework to straighten out the regulatory differences and clarify confusion about definitions and jurisdiction.

Partnerships

Mysten Labs has announced partnerships with 0L Network and Sommelier. Mysten Labs and 0L Network will be building resources and tools for the Move smart contract programming language. Sommelier announced a development and research partnership with Mysten Labs to launch smart contract applications on the Cosmos blockchain and increase liquidity transaction speeds.

Mysten Labs raised a funding round of $36 million from a group of prominent venture firms.

Legal Advisors

The project has not appointed legal advisors or team members responsible for legal matters. However, it is believed that any assistance in connecting with legal experts for the project could quickly come from Mysten Labs investment partners like Andreessen Horowitz, Electric Capital, and the likes.

 

KYC & AML

Details concerning KYC & AML have not been released at the moment.

Token Classification

The available information indicates that $SUI is a utility token.

The token’s utilities are:

  • Paying for gas.
  • Within an epoch, using $SUI as delegated stake on authorities.

As per the project whitepaper, it remains likely that the project will introduce a token mechanism similar to Ethereum’s EIP-1559 implementation.

 

TOKEN OFFERING

A token offering has not yet been announced.

 

SOCIAL MEDIA AND VIRALITY

The project is active on Twitter. The channel has 16.7k followers. The Twitter channel is witnessing an increase in the number of followers, as on March 25, there were only 11.2k followers.

The most accessible and popular channel to communicate with the team is the Discord channel. Some team members actively participate in community discussions on varying topics about the project. The channel has 14.7k followers. This channel is also witnessing an increase in the number of followers, as on March 26, there were 8.5k members. There is no Telegram channel.

Mysten Labs has 1.4k followers on LinkedIn. The account is relatively active and has witnessed an increase in followers. On March 24, there were around 1k followers. The project is not present on Facebook.

The project has a limited presence on YouTube. Mysten Lab’s YouTube channel has uploaded five videos and has 70 subscribers. Evan Cheng, CEO, has been interviewed by a few third-party channels, e.g.:

Journal du Coin – 3.6k views

Brave New Coin – 314 views

 

RISKS TO THE PROJECT

The following list of risks is not an exhaustive one. Some risks may be minor or not materialize.

  • Technological challenges/security risks: Sui blockchain could suffer from malfunctioning, breaking down, unexpected or unintended functioning, and various attacks. The project and its technology are relatively new and untested at the commercial level (not yet operating on a testnet). Sui is yet to undergo security audits. Although not a complete security guarantee, security audits could serve a useful purpose.
  • Legal/Regulatory risks: Any unanticipated regulatory actions could impede the project’s continuity. The project may also be subject to various laws and regulations, and if the project fails to comply with them, it could receive negative publicity and face significant liabilities.
  • Lack of adoption/slow uptake: Developers might be hesitant to start using the Move programming language, and it might take time for developers to become proficient in using it. There are also plenty of other blockchains attracting the attention of developers.

 

RATINGS

Everything you see in this report is the aggregate result of an extensive research process carried out by a distributed team of researchers and crypto enthusiasts around the world. The process consists of 60 questions divided into three phases. Researchers are called to answer these questions about a project, while providing links or screenshots as evidence to support their answers. For every answer, they also provide a rating from zero to ten. The average of their ratings is detailed below.

 

Our researchers gave Sui Network a final rating of 54.78%.

 

 

DISCLAIMER

This Report is for informational purposes only and/or all or any of its content thereof, should not, may not and will not be taken to constitute, either as a whole or in part, any investment advice or recommendation or similar, regulated, or authorized advice, and D-Core by producing, disseminating, giving away, or making available this Report does not, should not, may not and will not be taken to advise on investments, or carry out any similar activity, or any regulated activity or any other authorized activity. D-Core is not authorized by the Financial Conduct Authority or by any other competent EU or elsewhere or otherwise competent authority to carry out any regulated activities and/or any activities within the scope of these authorities’ competence.
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