State of Sui Q4 2023 and Q1 2024

Key Insights

• Sui’s average daily DEX volume grew by 3,689% in the past two quarters to $78 million. Cetus and DeepBook led with $37 million and $26 million average daily DEX volume, respectively.
• Projects building primarily on Sui raised $11.3 million in Q1’24, 31% more than the total amount raised by Sui projects in all of 2023. Projects that raised in Q1 include Talofa Games, Scallop, NAVI, Cetus, and Karrier One.
• Near the end of March, Mysten Labs introduced Pilotfish, a new execution scaling solution that distributes execution work across multiple machines for a single validator.
• Sui’s DeFi TVL increased by 1,459% to $786.6 million in the past two quarters. Incentive programs have helped drive growth, with several top protocols, including NAVI, Scallop, and DeepBook, launching or announcing tokens in Q1’24.
• During onchain gaming quest, Quest 3, Sui sustained an average of 151,000 daily active addresses, peaking at 453,000. Excluding that period, Sui averaged 24,000 daily active addresses in the past two quarters.

Primer

Sui (SUI) is a Layer-1 blockchain designed around the core tenets of scalability, safe programming, and mainstream adoption. Sui was created by members of the team that led Meta’s Diem and Novi projects, eventually launching in May 2023. Core developer Mysten Labs raised $336 million in two 2022 private investor rounds and around $54.3 million in several 2023 public offerings.

Sui’s technological stack features many novel aspects, including its object-centric data model, the Narwhal mempool protocol, the Bullshark consensus protocol, the Sui storage fund, and the programming language Sui Move. Sui Move, which builds on the original Move language created by Mysten Labs co-founder Sam Blackshear while at Novi, offers enhanced flexibility and safety compared to other Web3 programming languages.

Several other protocols and products to improve user onboarding and experience have been released on Sui, including sponsored transactions, allowing gas fees to be abstracted away from end users; zkLogin, enabling Sui users to transact using OAuth credentials; and Sui Kiosk, a decentralized system for commerce applications. Growth of the Sui ecosystem is led by the Sui Foundation, with Mysten Labs being the initial contributor to the development of the Sui blockchain protocol. For a full primer on Sui, refer to our Initiation of Coverage report.

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Key Metrics

Financial Analysis

The crypto market rebounded from the bear market in Q4’23 and continued its upward trend in Q1’24. SUI was no exception – its circulating market cap increased by 120% QoQ in Q4’23 and then by 176% in Q1’24, ending at $2.3 billion. Its growth outpaced tokens with a similar market cap, as its market cap rank increased from 81 to 57 in the past two quarters. With more supply unlocks, SUI’s price increased by less than its market cap but was still up 292% over the past two quarters.

Sui revenue is the sum of all fees collected by the protocol. Once collected, all Sui revenue is distributed to validators. Revenue reached a quarterly high of 807,000 SUI in Q4’23 but fell by 35% QoQ in Q1’24. With SUI’s price appreciation, quarterly revenue in USD reached an all-time high in Q1’24 at $774,000.

SUI currently has a fixed total supply of 10 billion, with 1 billion tokens set aside for staking rewards. Relative to the remaining 9 billion tokens, SUI’s annualized inflation rate from staking reward issuance was 3.2% at the end of Q1’24. This rate is set to continue decreasing by 10% every three months until all 1 billion tokens are distributed.

Other inflationary pressures come from genesis supply unlocks. The genesis supply accounts for the 9 billion SUI initially allocated and does not include staking rewards. By the end of Q1, over 10% of SUI’s genesis supply was distributed, a 16% QoQ increase.

Another 13% of SUI’s genesis supply is set to unlock in Q2’24:

• Private Investors (68% of Q2 unlocks): Unlocks to private investors account for 68% of total Q2 unlocks ($1.4 billion based on SUI’s price at the end of Q1). While FTX Ventures led Mysten Labs’ $300 million Series B, Mysten Labs completed the repurchase of FTX’s equity stake and warrant rights to purchase SUI tokens previously held by FTX for approximately $96 million.
• Ecosystem (15%): 15% of Q2 unlocks ($309 million) will go toward the Ecosystem category, which is used for grants, incentives, and other initiatives. While the Sui Foundation holds these tokens before distribution, they will not necessarily be immediately distributed upon becoming liquid. At the beginning of October, the Sui Foundation announced it was reallocating 117 million SUI earmarked for external market makers back to the Ecosystem bucket.
• Team (11%): Unlocks to early contributors and Mysten Labs’ treasury account for 11% of Q2 unlocks ($239 million).
• Public Sale (6%): 6% of Q2 unlocks ($130 million) will go toward public sale participants. These token allocations will be fully vested after May.

At the end of Q1, 83% of the supply eligible to be staked was staked, a slight 1% QoQ increase. Note that locked tokens can still be staked and earn liquid staking rewards. Thus, the supply eligible to be staked is SUI’s total supply rather than its circulating supply. With such a high stake rate, SUI’s annualized real yield is just above zero, at 0.3%.

Network Analysis

Usage

Network activity, measured by transactions and active addresses, has subsided since quarterly highs in Q3’23. Average daily transactions decreased by 73% QoQ to 2.3 million in Q4 and then by 35% to 1.5 million in Q1. Average daily active addresses similarly fell by 44% QoQ to 66,000 in Q4 and then by 66% to 22,000 in Q1. In the past two quarters, the number of daily active addresses was at its highest from the end of October into early November, reaching over 453,000 active addresses on November 5. Increased activity was driven by Mysten Labs’ Quest 3, which incentivized onchain engagement with select gaming projects from October 12 to November 9.

Despite the decrease in transactions, Sui’s average transaction fee has increased, up by 275% in Q4 and 2.1% in Q1. However, at a Q1 average transaction fee of 0.0038 SUI, Sui transactions are still extremely cheap at $0.0056. Sui enables dapps and other entities to abstract away gas fees from end users via sponsored transactions. During the heightened activity at the end of October, over 81% of total Sui transactions were sponsored via infrastructure provider Shinami’s Gas Station API.

Security and Decentralization

SUI staked continued to grow, finishing Q1 at 8.3 billion, up 1.2% QoQ. With SUI’s price appreciation, growth in total staked denominated in USD is even more significant, up 135% QoQ to $15.6 billion. As a result, Sui is the third-highest network by staked market cap. As noted above, locked tokens can be staked and earn liquid rewards. Along with Sui not having a slashing mechanism in place, it becomes a very attractive option to stake for the ~90% of SUI’s illiquid genesis supply.

Active validators on Sui have remained fairly steady since launch, with slight growth from 104 to 106. With the Sui Foundation and Mysten Labs holding a significant portion of the total supply on behalf of the Ecosystem allocation, they can help distribute stake rather equally among validators. As a result, Sui ended Q1 with a Nakamoto coefficient of 15, which is above the median of other networks.

Upgrades and Roadmap

Sui features frequent protocol upgrades. It entered Q4’23 on Sui Protocol Version 25 and ended Q1’24 on Version 41. Notable new features include:

• Closed-Loop Token standard, which allows token issuers to constrain the scope of the token;
• Ephemeral Shared Objects, which enables developers to delete shared objects; and,
• Transfer to Object, which allows objects to receive other objects.

In January, the Sui Foundation published a blog post highlighting other planned upgrades and additions to Sui Move in 2024.

Near the end of March, Mysten Labs announced a new execution scaling solution Pilotfish. Pilotfish distributes execution work across multiple machines for a single validator. In a testing environment, Pilotfish achieved 8x the throughput with 8 execution workers compared to just 1. The work demonstrated linear scaling, with increased latency bounded within the tens of milliseconds. Pilotfish is still undergoing testing and design iteration.

After quarter end, the Sui Foundation announced Sui’s upcoming consensus upgrade, Mysticeti. Mysticeti builds on Sui’s current Narwhal-Bullshark protocol to further reduce latency and validator CPU requirements. Mysticeti is expected to be live on mainnet this summer.

Ecosystem Overview

DeFi

Sui’s DeFi TVL witnessed strong growth in the past two quarters, increasing from $50 million at the end of Q3’23 to $787 million by the end of Q1’24. It also increased in SUI from 105 million to 418 million, indicating that the increase was not solely due to SUI price appreciation.

Borrow/lend protocol NAVI is Sui’s top protocol by TVL at $195 million, a 25% market share. When NAVI launched its points program on December 27, it had just below a 21% market share. At the end of January, NAVI announced a $2 million round co-led by OKX Ventures, dao5, and Hashed. Shortly after, it launched its token NAVX, which ended the quarter with a market cap of $35 million.

Borrow/lend protocol Scallop ended Q1 with $162 million TVL, a 21% market share. Scallop launched its points program on January 1. After announcing a $3 million round co-led by CMS and 6MV, Scallop launched its native token SCA, which ended the quarter with a market cap of $30 million.

Cetus is Sui’s leading DEX, with $116 million TVL or a 15% market share. Cetus features CLMM-based swaps that averaged $37 million daily DEX volume in Q1’24. At the end of February, Cetus announced a strategic investment from the Sui Foundation. It launched Cetus Vaults in mid-March to help users automate the management of liquidity positions.

Near the end of March, Cetus launched its front end for DeepBook. DeepBook is an onchain order-book protocol built natively into Sui’s codebase. DeepBook averaged $26 million daily DEX volume in Q1’24. At the end of March, it announced its native token DEEP. It also airdropped a soul-bound NFT to users, who will be able to unwrap the NFT and receive tokens when it launches. The initial airdrop received an allocation of 10% of the supply, with 31% allocated to the team and investors and the remaining 59% for future grants, community programs, and initiatives.

Other top DeFi protocols by TVL on Sui include Aftermath Finance, which features a DEX aggregator, liquid staking protocol, and yield farming; spot and perps DEX protocol KriyaDEX; and borrow/lend protocol Suilend. Suilend is developed by the same team as Solana’s Solend. It launched in mid-March following a beta pass NFT airdrop in mid-February.

To incentivize early TVL growth, many DeFi protocols have been boosting yields with additional SUI rewards on a two-week cadence. For example, at the end of March, ten protocols announced over 4.6 million SUI ($8.7 million) to be distributed as rewards over the following two weeks. As a result, yields on Sui have been notably higher than the rest of the industry. NAVI and Scallop have sustained USDC lending yields of 20-30%, around 3-4x higher than the median stable yield across other top networks.

Sui traders have been putting this liquidity to use, with Sui’s average daily DEX volume increasing by 662% in Q4 and another 397% in Q1 to $78 million. As noted above, Cetus and DeepBook led with $37 million and $26 million average daily DEX volume, respectively. Other top DEXs by volume included Turbos ($10 million average daily DEX volume), KriyaDEX ($3 million), and FlowX Finance ($1 million).

Bluefin is Sui’s leading perps protocol, with $146 million average daily volume in Q1’24. Bluefin V2 protocol launched on Sui in early October. Bluefin’s original protocol on Arbitrum was wound down to focus on the Sui deployment. Bluefin introduced an ambassador program at the beginning of January. Around 67% of Bluefin’s orderbook liquidity is currently powered by Elixir, a DPoS network powering liquidity across various protocols. In mid-March, Elixir announced an $8 million funding round at an $800 million valuation.

Because the cost of not staking sits at around ~4% dilution, liquid staking protocols will be crucial to continue growing Sui’s DeFi ecosystem. In early August, SIP-6, authored by Aftermath Finance developers, enabled liquid staking functionality. The Sui Foundation incentivized the development of liquid staking protocols via a Q3’23 hackathon and the deployment of 25 million SUI into three protocols (Aftermath, Haedal, and Volo) in mid-December.

Volo, which launched at the end of October and was then acquired by NAVI in mid-January, leads Sui liquid staking protocols in TVL at $34 million. Aftermath’s liquid staking protocol, which launched in mid-October, finished Q1 with $30 million TVL. Haedal launched in early September and finished Q1 with $24 million TVL. As a whole, 0.53% of total SUI staked is liquid staked, a 132% QoQ increase.

Other DeFi-related events from Q4’23 and Q1’24 include Athens Exchange’s Sui deployment announcement, Ondo’s USDY stablecoin launch, Pravica’s S3 launch, Sudo Financia’s launch and “S” card mint, Desig’s staking aggregator launch, Typus Finance’s V2 launch, Fluidity Labs’ grant from the Sui Foundation, Synthetix’s proposal to form a Sui Perps Working Group, and Kai Finance’s yield aggregator contracts open-sourced.

Gaming

Incentivizing and enabling gaming applications on Sui has been a core focus for the Sui Foundation. Several core Sui features make it well-suited for gaming applications, including dynamic NFTs, nestable NFTs, sponsored transactions, Sui Kiosk, and zkLogin. The Sui Foundation hosted its own gaming summit, Play Beyond, during the Game Developer Conference (GDC) in March. The event attracted over 450 attendees.

In Q4’23, the third iteration of Mysten Labs’ onchain quest program went live, focused on gaming applications. In partnership with the Sui Foundation, Quest 3 offered up to 5 million SUI rewards to addresses that interacted with 10 Sui games.

Near the end of February, Mysten Labs announced a partnership with leading professional esports team Team Liquid. Team Liquid will leverage Sui for the relaunch of its fan loyalty program. Mysten Labs also announced partnerships with ChonosWorlds, Pocket Space, and Interverse.

Several gaming-related infrastructure companies announced support for Sui in February. In mid-February, Web3 gaming infrastructure company Stardust announced support for Sui, bringing its Wallet-as-a-Service and User Acquisition features. In late February, Forge announced that it would be integrating Sui, bringing its community engagement and gamer reward services.

Other gaming-related developments include Talofa Games’ $6.3 million fundraise, E4C: Fallen Arena’s launch, Playtr0n’s introduction, Pebble’s beta launch, Space Mavericks’ introduction, Samurai Shodown R’s introduction, BRICK POP’s launch, ALL.ART Collective’s gaming introduction and grant, Baby Shark Universe’s introduction, and Poetry in Motion’s launch.

NFTs

Since launch, there’s been 11.4 million SUI in total NFT trading volume. Leading marketplaces by volume include Clutchy (5.2 million SUI), BlueMove (2.2 million SUI), Hyperspace (1.7 million SUI), and TradePort (590,000 SUI).

Notable NFT-related events from Q4’23 and Q1’24 include:

• Oracle Red Bull Racing released free, limited-edition collectibles on Sui. Over 113,000 NFTs were claimed. Sui announced its multi-year partnership with Oracle Red Bull Racing in June 2023.
• The Sui Foundation partnered with SUMM3R in November for a 6-week NFT Growth Program with up to $350,000 in graduation grants from the Sui Foundation.
• BlueMove released a no-code NFT minting feature.
• OasisX announced that it received a grant from the Sui Foundation. OasisX will integrate its NFT launchpad and marketplace on Sui.
• Speedy Comics announced that it will integrate its collectible authentication service AGS with Sui, uploading authenticity certificates onto the blockchain.

Other Use Cases

Developments from payments, DePIN, and other projects in Q4’23 and Q1’24 include:

• Decentralized wireless network Karrier One announced a strategic partnership and investment from the Sui Foundation in mid-January. Karrier One later released its whitepaper at the beginning of March.
• IoT network Chirp launched its testnet in mid-March.
• Payments protocol BlockBolt launched on Sui near the end of January.
• Onramp Money integrated with Sui in early November.
• Banxa integrated Sui into its on/offramp solution at the end of January.
• Quantum Temple launched its regenerative travel experiences platform in early March.
• The Sui Foundation announced a partnership with Fils for tracking carbon credits onchain.
• Travel website TravelSwap announced a partnership with Mysten Labs near the end of March to develop its rewards program.

Development and Growth

After low activity during the bear market, fundraising for Sui projects is beginning to pick up. In Q1’24, five projects building primarily on Sui announced funding rounds. The rounds totaled $11.3 million raised, 31% more than the total amount raised by Sui projects in all of 2023.

The Sui Foundation and other organizations will look to continue this recent trend through developer resources and infrastructure as well as grants, hackathons, accelerators, and other initiatives.

On the infrastructure side, several protocols have been developed to ease user onboarding and experience. Notably, the Sui Foundation released zkLogin in September 2023. zkLogin enables Sui users to transact using OAuth credentials, including Google, Facebook, Twitch, Apple, and Kakao. The user’s OAuth credentials are combined with random data (called a Salt) to generate a zero-knowledge proof. This ensures that users can verify via their OAuth credentials without revealing them onchain. Many wallets and other infrastructure providers have integrated zkLogin.

Mysten Labs launched another zk-related feature, zkSend, in November 2023. zkSend enables users to send and receive SUI tokens just by sharing a link. zkSend is also integrated with zkLogin.

Other infrastructure-related developments from Q4’23 and Q1’24 include: Tencent Cloud’s RPC service launch, verified builds in Sui Explorer, migration to a new GraphQL RPC service, Sui Move GPT, partnerships with auditors OtterSec and Zellic, MPCVault’s Sui integration, oracle Stork’s Sui integration, Inspect’s Sui integration, MSafe’s Object Transfer feature, World Store’s Sui integration, partnership with ZettaBlock, Atomic Wallet’s Sui integration, Hello Moon’s Sui support, ChainIDE grant recipient, and Sui MetaMask Snaps’ Sui Kiosk integration.

On the ecosystem growth front, Q4’23 and Q1’24 initiatives include:

• The Sui Foundation has active grant programs for developers and academic researchers. It distributed over $2,310,000 to 42 projects between the October ‘23, November ‘23, December ‘23, and January/February ‘24 developer cohorts. In early March, the Sui Foundation launched its first Request for Proposals (RFP) program within its developer grants program. The first RFPs were for a marketplace for smart contract templates, kiosk compatible no-code launchpad, and solutions for onchain loyalty. The Sui Foundation distributed $425,000 to 17 proposals in its last two rounds of academic research grants. At the end of March, the Sui Foundation opened applications for the fourth round, with up to $250,000 in prizes.
• Mysten Labs announced that it is furthering its partnership with Alibaba Cloud, launching new services to support Sui developers. The services include an AI assistant for writing code built on Alibaba Cloud infrastructure, infrastructure support for ecosystem projects, Alibaba Cloud hackathons, and infrastructure support for running Sui full nodes.
• The Sui Foundation announced its first global hackathon, Sui Overflow. Sui Overflow will begin on April 21 and distribute up to $1,000,000 in prizes.
• Mysten Labs has conducted several onchain quest programs to incentivize the usage of specified protocols. As noted above, Quest 3 distributed 5 million SUI to over 164,000 addresses for interacting with up to 10 gaming applications. The Winter Quest then distributed 500,000 SUI to addresses for engaging with DeepBook, Hyperspace, SuiFrens, and SuiMint.
• The Sui Foundation has formed partnerships with several exchanges for learn-and-earn campaigns, including Revolut and Binance.
• The Sui Foundation launched the Sui Ambassador Program, incentivizing content creators and local community leaders.
• In November, the Sui Foundation donated $1 million to London Business School’s Wheeler Institute for Business and Development. The contribution will fund blockchain research and education.
• Multichain developer group Web3 Builders Alliance announced it will be coming to Sui. Its first Sui cohort, featuring live classes, development support, and a demo day, was conducted in Q1’24.
• Other: Mysten Labs’ partnership and investment in Anapaya Systems, Mysten Labs’ partnership with Hub71, Overmind’s Sui developer quests, EasyA’s 60 Days of Sui development series, LetsMoveSui's interactive developer course Launch, MoveTalk08, Unfold hackathon prize tracks, first Sui European Student Hackathon, Dacade’s developer course, ThinkSui’s launch, StackUp's Sui developer quests, Rise In’s Sui Move Bootcamp, and AUS-Sui Blockchain Academy launch.

Closing Summary

The crypto market rebounded in Q4’23 and Q1’24 and Sui was no exception. Its market cap grew by 508% in the past two quarters to $2.3 billion. Its growth outpaced tokens with a similar market cap, as its market cap rank increased from 81 to 57 during that time period. Less than a year after its launch, Sui has become a top network by DeFi activity. Its TVL grew by 1,459% in the past two quarters to $787 million, ranking it 12th among all ecosystems. Its average daily DEX volume increased by even more, up 3,689% to $78 million.

During the past two quarters, Sui network usage reached a peak of 453,000 daily active addresses during Mysten Labs’ onchain gaming quest, Quest 3. Excluding that period, Sui averaged 24,000 daily active addresses and 1.8 million daily transactions throughout Q4’23 and Q1’24. Upcoming upgrades will bring further scaling improvements to the network. Near the end of March, Mysten Labs introduced Pilotfish, a new execution scaling solution that distributes execution work across multiple machines for a single validator. After quarter end, the Sui Foundation announced Mysticeti, a consensus upgrade planned for this summer.

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