Tokenomics on Sui

The native token of Sui is SUI. The Sui tokenomics structure supports the long-term financial needs of Web3. The SUI token serves 4 purposes on the Sui network:

1. You can stake SUI to participate in the proof-of-stake mechanism.

2. SUI is the asset denomination needed to pay the gas fees required to execute transactions or other operations on the network.

3. SUI acts as a versatile and liquid asset for various applications.

4. SUI tokens play an important role in governance by acting as a right to participate in onchain voting on issues such as protocol upgrades.

Who are the stakeholders in the Sui economy?

Stakeholders in a blockchain's tokenomics have a vested interest in the viability of the blockchain economy. The Sui economy has 3 main groups of stakeholders:

• Users, who submit transactions to the network to create, mutate, and transfer digital assets or interact with smart contracts.

• SUI token holders, who have the option of staking their tokens to validators. SUI owners also hold the rights to participate in Sui governance.

• Validators, who manage transaction processing and execution on the Sui platform.

Delegated proof-of-stake

Sui uses a delegated proof-of-stake (DPoS) consensus mechanism, in which SUI holders delegate their stake to validators, and validators lock a certain amount of SUI as collateral for the duration of an epoch. Validators cannot make changes to their stake during an epoch, and any changes take effect when a new epoch begins. They then earn rewards for processing operations, such as validating transactions, and for providing resources.

Users of the network hold their own SUI, which they can delegate to validators of their choice as part of a validator's stake. In so doing, the validators reward users based on the amount of SUI they delegate. Users are free to withdraw their SUI or place stake in a different validator before a new epoch begins.

What is the total supply of SUI?

There is a finite supply of SUI. The total supply of SUI tokens on Mainnet has a cap of 10,000,000,000 SUI. This is the total number of SUI that the protocol can ever mint, but the total supply is not available for transactions. Supply availability follows the designed unlocking schedules in place to enhance the tokenomics stability of the network and provide a long-term level of security.

How are stake rewards distributed each epoch?

At the beginning of each epoch, 3 important events happen:

1. SUI holders stake their tokens to validators and a new committee forms.

2. The protocol sets the reference gas prices as described in Sui Gas Fees.

3. The protocol adjusts the storage fund size using the net inflow of the previous epoch.

Following these actions, the protocol computes the total amount of stake as the sum of staked SUI plus the storage fund.

During each epoch, users submit transactions to the Sui platform and validators process them. For each transaction, users pay the associated computation and storage gas fees. In cases where users delete previous transaction data, users obtain a partial rebate of their storage fees. Validators observe the behavior of other validators and evaluate each other's performance.

At the end of each epoch, the protocol distributes stake rewards to participants. This occurs through 2 main steps:

1. The protocol calculates the total amount of stake rewards as the sum of computation fees accrued throughout the epoch plus the epoch's stake reward subsidies. The latter component is temporary in that it only exists in the network's first years and disappears in the long run as the amount of SUI in circulation reaches its total supply.

2. The protocol distributes the total amount of stake rewards across various entities. The calculation of the epoch total stake includes the storage fund, but no entity owns the storage fund in the way that holders own staked SUI. Instead, the Sui economic model distributes the stake rewards accruing to the storage fund to validators for compensation of their storage costs. For details, see Storage fund rewards.

The distribution mechanisms built into Sui tokenomics encourage a healthy competition for fair prices where validators set low gas fees while operating with viable business models. Refer to the whitepaper for in-depth review of the mathematical proofs that support this structure.

What is the SUI vesting schedule?

A vesting schedule dictates when certain blocks of SUI become accessible to the market. The Sui tokenomics design includes a multi-tiered SUI vesting schedule.

When Sui first launched its Mainnet network (initial SUI mint), there was a one-year cliff period. During this time, no initial investor could transfer their initial stake of SUI to the marketplace. A common practice for new cryptocurrency, the cliff period protected early network stability against large-scale sell-offs from early investors. The cliff period ended in May 2024.

Were there any SUI airdrops?

Often, when a new token launches, its minters set aside a percentage of the sum to distribute to early adopters to drive interest in the associated blockchain project. This process is an airdrop.

There were no SUI airdrops to support the launch of Sui's Mainnet network. This was a publicly-stated, intentional decision for the following reasons:

1. Airdrops expose a potential for bad actors to take advantage of the excitement around a new launch. By publicly stating there would be no airdrops, Sui attempted to mitigate the risk its users faced.

2. Countries regulate cryptocurrency differently across the globe. Some jurisdictions might view airdrops as taxable events, creating legal or financial complications.

3. Sui is committed to the long-term success of the network and its stakeholders. Airdrops might generate excitement early in a project's lifecycle, but the long-term benefits are minimal.

What is the storage fund?

SUI pays for the gas fees and data storage on the network. A potential problem arises, however, when new validators come onchain. Even though the validator is new, it still must pay the storage cost for activity that happened before it was part of the network.

Sui addresses this problem with the storage fund, a cache of SUI that never fully depletes. Each onchain transaction that adds data to the chain includes a fee for storage, which the protocol adds to the storage fund. The storage fund itself has a stake in the network, so it collects rewards based on that stake just like every other onchain stakeholder. The protocol then regularly distributes those storage fund rewards to Sui validators to pay for storage. In this way, new validators to the network receive payment for storing data from past transactions.

Storage fund rewards

The protocol calculates total stake as the sum of user stake plus the SUI tokens deposited in the storage fund. The storage fund receives a proportional share of the overall stake rewards depending on its size relative to total stake. The protocol pays out the largest share of these stake rewards to current validators to compensate for storage costs. The protocol reinvests the rewards that remain into the fund. When onchain storage requirements are high, validators receive substantial additional rewards to compensate for their storage costs.

The storage fund includes 3 key features:

1. Past transactions contribute to the storage fund, which functions as a tool for shifting gas fees across different epochs. This ensures that the past users who created those storage requirements in the first place compensate future validators for their storage costs.

2. The storage fund pays out only the returns on its capital and does not distribute its principal. In practice, this means validators borrow the storage fund's SUI as additional stake and keep the majority of stake rewards. Validators do not, however, receive funds directly from the storage fund. This guarantees the fund never loses its capitalization and can survive indefinitely. The stake rewards reinvested into the fund further strengthen this feature.

3. The storage fund includes a deletion option. If you delete data, you get a partial refund of the storage fees paid originally.

Why is SUI deflationary?

Unlike in traditional economics, deflation is an intended feature of Sui rather than a flaw. The total supply of SUI has a cap, so increased activity on the network has a deflationary effect as the storage fund grows in relation to the amount of data stored, which effectively takes more SUI out of circulation. The value for SUI increases in relation to the decrease in circulating supply.

Validator rewards

All honest validators on Sui receive their staking rewards with full certainty. The rewards are based only on the amount of stake the validators hold, removing randomness from the equation.

How do I stake SUI?

Stake SUI tokens by sending a transaction to the network that calls the staking function implemented as part of the system Move package. This transaction wraps the SUI tokens in a self-custodial stake object. This stake object contains information including the validator staking pool ID and the activation epoch of the stake. With the introduction of SIP-6, you can participate in liquid staking protocols using your staked objects.

Sui-compatible crypto wallets typically have functionality to initiate staking and unstaking from your Sui address. See the respective documentation for these tools to begin staking your SUI.

How do I unstake SUI?

Similar to staking, you withdraw stake from a validator by sending a transaction that calls the unstaking function in the system Move package. This transaction unwraps the stake object, and sends both the principal and the accumulated rewards to you as SUI tokens. You accrue rewards only during epochs where the stake is active for the entire epoch. The protocol calculates the rewards withdrawn from the validator's rewards pool based on the activation epoch and unstaking epoch of the stake.

How do I choose a validator for staking?

You must choose a specific validator you would like to stake your SUI in. The choice of validator can potentially impact the amount of staking rewards you receive. The factors determining this amount include, but are not limited to:

• Validator commission rate: A validator can choose to set a non-zero commission rate specifying the percentage of staking rewards they are taking from the stakers. For example, if a validator has a commission rate of 10%, then the validator receives 10% of every staker's staking rewards.

caution

A validator can choose its commission at a future moment in time without prior notice.

• Validator performance: The protocol might punish a validator with bad performance according to the tallying rule. Punished validators do not receive any staking rewards for the epoch during which the protocol punishes them, and you also do not receive that epoch's rewards when you withdraw your stake from that validator.

Sui-compatible crypto wallets and explorers typically provide validator information such as commission and annual percentage yield (APY). See the respective documentation for these tools for information on how to retrieve this data.

Staking pools

Each Sui validator maintains its own staking pool to track the amount of stake and to compound staking rewards. Validator pools operate together with a time series of exchange rates that the protocol computes at each epoch boundary. These exchange rates determine the amount of SUI tokens that each past SUI staker can withdraw in the future. Importantly, the exchange rates increase as a staking pool receives more rewards. The longer an amount of SUI stays in a staking pool, the more rewards it accrues.

When you deposit SUI to the staking pool in epoch E, the staking pool converts those SUI into liquidity tokens at the epoch E exchange rate. As the staking pool earns rewards, the exchange rate appreciates. At epoch E', those liquidity tokens are worth more and translate into more SUI.

The only difference between Sui staking pools and typical liquidity pools is that in Sui the liquidity tokens do not exist. Rather, Sui uses the global exchange rate table to track the accounting. Because the staking pool treats all SUI tokens the same, all SUI tokens immediately count as stake and thus compound rewards immediately.

The staking pool is part of the Sui framework, and a system-level smart contract (staking_pool.move) implements it.

Validator pool exchange rate

At each epoch boundary, the exchange rate for each validator pool grows by the rate of return that third-party stakers earned during that epoch, which is their rewards divided by their stake. The protocol calculates the exchange rate for each validator pool at each epoch boundary as follows:

$$Exchange rate at E+1 = (1 + (third-party staker rewards at E / third-party stake at E)) × (exchange rate at E)$$

For example, using hypothetical numbers: if the exchange rate at epoch E is 1.0, and third-party stakers earned 10 SUI in rewards on 1,000 SUI of third-party stake during E, then the exchange rate at E+1 is (1 + 10 / 1,000) × 1.0 = 1.01.

The distinction between third-party owned versus validator-owned rewards and stake is relevant in that validators earn commission on the staking pool's tokens but third-party stakers do not. This accounting enables Sui to keep track of the rewards accrued by both validators and third-party token holders using a single global exchange rate table.

Validator staking pool requirements

There are minimum staking requirements a validator must satisfy to become active and to stay in the active validator set.

Stake requirements

The Sui network is rolling out SIP-39, which will significantly lower the barrier to entry for validators. Instead of requiring a minimum amount of SUI tokens, validators will need a minimum amount of voting power.

When fully rolled out, SIP-39 will mean the following validator requirements:

• A validator candidate must accrue at least 3 voting power before they can request to join the validator set.
• If an active validator's stake falls below 2 voting power, they have seven epochs of grace period to gain back the stake before being removed from the validator set.
• If an active validator's stake falls below 1 voting power, they are removed from the validator set at the end of the current epoch boundary. Sui uses 24-hour epochs.

For more information on voting power, see Understanding the voting power formula.

tip

Want to be a Sui validator?

If you have the required stake and plan to operate a validator on Sui, your participation is welcome and Sui is committed to supporting your onboarding. Kindly complete this form to be added to our Validator Discord and keep up with upcoming validator releases and technical support.

How does the voting power formula work?

SIP-39 uses the following formula to determine if a validator can join the set:

S / (S + T) > V / 10000

• S = The validator candidate's stake amount.

• T = Total amount already staked in the network.

• V = Minimum voting power threshold (3 in the final phase).

• 10000 = Total voting power units in the Sui system.

This formula checks if the validator would have at least V voting power after joining.

1. S / (S + T) calculates what proportion of the total stake the validator would control.

2. When multiplied by 10000, this gives their voting power in Sui's standardized units.

3. The validator can join if this value is greater than or equal to the threshold V.

For example, with a network stake of 7.69B SUI (an illustrative figure; the actual total network stake changes over time) and V=3, a validator with 2.31M SUI would have: 2,310,000 / (2,310,000 + 7,694,950,773) ≈ 0.0003 proportion, converting to voting power: 0.0003 × 10000 ≈ 3 units.

Because 3 ≥ 3, they meet the threshold to join.

As the total network stake changes, the minimum required amount adjusts automatically.