The SUI blockchain is designed with a sophisticated economic model to ensure network security, sustainable data storage, and fair reward distribution. This article breaks down the core components of SUI tokenomics, including its fixed supply, storage fund mechanics, and staking processes.
Total Supply of SUI
SUI has a fixed total supply of 10 billion tokens. Out of this, 10% (1 billion SUI) is allocated for staking rewards.
- Initial daily mining rewards were set at 1.1 million SUI, decreasing by 10% every 90 days.
- As the mainnet has been operational for over 100 days, the current daily reward is approximately 1 million SUI.
- About 7.4 billion tokens are currently staked, with a significant portion locked and not in circulation.
- Locked tokens generate rewards that are also locked, preventing immediate circulation.
- The storage fund contributes to a deflationary model by permanently removing some tokens from circulation.
For detailed token release schedules, you can refer to the official token plan.
The Storage Fund Mechanism
Sui’s economic design includes a storage fund that addresses the financial challenges of on-chain data storage. This mechanism ensures that future validators are compensated for storing data from past transactions.
- Users pay upfront for computation and storage when executing transactions.
- Storage fees are deposited into the storage fund, which reallocates these fees to future validators.
- This approach mitigates negative network externalities and supports a sustainable business model for validators.
Rewards from the Storage Fund
The delegated proof-of-stake mechanism calculates total stake as the sum of user stakes and SUI tokens in the storage fund. The fund earns a proportional share of staking rewards, which are distributed to validators to cover storage costs. Remaining rewards are reinvested into the fund.
- During high storage demand, validators receive additional rewards.
- During low demand, rewards decrease accordingly.
Key Features of the Storage Fund
- Inter-temporal fee transfer: Past users compensate future validators for storage, ensuring fairness across time.
- Capital preservation: The fund distributes only returns, not principal, allowing it to operate indefinitely.
- Deletion refunds: Users can delete on-chain data and receive a partial refund of storage fees, promoting efficient resource use.
Important: Data deletion does not reverse transactions. Only data like NFT metadata or expired auction details can be deleted, not immutable transaction records.
Operational Mechanics
The storage fund’s size is fixed per epoch and adjusted at epoch boundaries based on net inflows:
- Inflows: Storage fees from transactions and reinvested rewards.
- Outflows: Refunds for data deletion.
- The fund is designed never to deplete, with outflows always less than inflows.
Incentives and Benefits
- Encourages data deletion when storage costs exceed value.
- Creates deflationary pressure by removing SUI from circulation.
- Functions like a capital-efficient lease model for storage.
Primary Uses of SUI Tokens
SUI tokens serve several critical functions within the ecosystem:
- Proof-of-Stake (PoS): Participating in the delegated proof-of-stake mechanism.
- Gas Fees: Paying for transaction processing and storage.
- Liquidity Provision: Supporting on-chain native liquidity.
- Governance: Influencing future network decisions (potential use case).
Staking Process Explained
Staking allows SUI holders to delegate tokens to validators, earning rewards while securing the network.
How Staking Works
- Any SUI address can stake by delegating to one or more validators.
- Staked tokens remain securely locked in the user’s address, unlike some liquid staking solutions that transfer control to third-party contracts.
- This design reduces exposure to smart contract vulnerabilities.
Staking Pools and Exchange Rates
Each validator maintains a staking pool that tracks deposits and rewards.
- Pools use an exchange rate time series to calculate rewards.
- The value of staked SUI at epoch E’ is calculated as:
(SUI deposited at E) * (Exchange rate at E’ / Exchange rate at E) - Rewards compound immediately, as all tokens in the pool are treated equally.
👉 Explore advanced staking strategies
Frequently Asked Questions
Q1: What is a staker?
A staker is any SUI address holder who delegates tokens to a validator. This includes both validators and third-party token holders.
Q2: Where do staked tokens go?
Staked tokens remain in the user’s address but are locked. The Sui protocol protects them, eliminating reliance on third-party smart contracts.
Q3: What is a staking pool?
A staking pool is a validator-managed system that tracks deposits and rewards using exchange rates. It operates similarly to a liquidity pool but without liquid tokens.
Q4: How do I calculate rewards?
Rewards are based on exchange rate appreciation. The formula above determines the value of staked SUI at any epoch.
Q5: Are rewards compounded automatically?
Yes, rewards are immediately reinvested and compounded within the staking pool.
Q6: What is the minimum staking amount?
The minimum staking amount is 1 SUI per validator.
Staking Reward Distribution
Staking rewards come from two primary sources:
- Gas fees: Collected from transactions processed during the epoch.
- Staking subsidies: Funded by the 1 billion SUI allocation, active in the network’s early stages.
Rewards are distributed at epoch boundaries and include:
- Staker rewards
- Validator commissions
- Storage fund rewards
The exchange rate updates reflect only staker rewards, but validators receive additional staked SUI for commissions and storage fund earnings.
Staking Limitations and Rules
- Partial unstaking isn’t directly supported. However, users can split StakedSUI objects and unstake portions indirectly.
- Each validator’s voting power is capped at 10% of the total, even if their stake exceeds this threshold.
- The consensus voting power is always 10,000, with a 6,667 quorum requirement.
Validator Responsibilities
Validators play a key role in maintaining network efficiency:
- They submit reference gas price quotes for each epoch.
- They participate in statistical rule enforcement, monitoring other validators for compliance.
- Validators can delegate gas price setting and rule enforcement to other accounts.
Statistical rules incentivize good behavior: validators score each other, and non-compliant nodes face penalty slashes.
Conclusion
SUI’s tokenomics model combines deflationary mechanisms, sustainable storage funding, and a robust staking system. By understanding these elements, users and validators can better navigate the network’s economic landscape. Whether you’re staking tokens or managing a validator node, these principles ensure long-term viability and fairness.