Author: 0xU Research Department
Layout: Andy Ouyang, Clara Cheng
introduction:
Sui Move has made changes to the original Core Move language, introducing an object-centric model and a globally unique ID to identify objects. This improvement has brought significant performance improvements, supports transaction processing speeds of up to 120k TPS, and is extremely Greatly shortens transaction confirmation time.
At the same time, Sui solves the performance bottleneck and resource contention problems caused by assets being restricted to smart contracts on traditional blockchains such as Ethereum by giving users direct ownership and control over assets. Compared with Ethereum, it supports cross-contract asset sharing, high asset programmability, and variability of asset attributes, which improves the composability of assets and facilitates asset upgrades. In addition, Sui's decentralized storage function provides more possibilities for on-chain asset management, and enhances security through its design, preventing some common smart contract vulnerabilities.
We believe that Sui's underlying mechanism makes it a very suitable application for the development of Web3, and it has sufficient competitiveness to compete with other public chains for market share in the next round of market conditions. This report aims to analyze the ecological development of Sui in the six months since the launch of the mainnet.
The price trend deviates from the fundamentals: the price continues to fall, while TVL and trading volume continue to rise
Since the launch of the token, the price of Sui token has been falling and the performance has been poor
However, the trend of token prices did not affect the development of Sui's on-chain ecosystem. In terms of TVL, Sui doubled from $12.7 million to $24.5 million in one month in August. In the following two months, TVL grew exponentially, reaching an all-time high of $84.3 million on November 2. In terms of on-chain transaction volume, Sui has outperformed Aptos, another move language public chain, since its launch, and like TVL, it experienced an exponential growth at the end of September.
Ecosystem growth trend is healthy: major projects have achieved monthly organic growth, and leading project Cetus has grown strongly
Projects with market value > 5m:
There are currently 6 projects on Sui with a TVL of more than 5 million US dollars, all of which are DeFi projects. Most of the DEX transactions in the ecosystem occur on Cetus. Among the lending protocols, the utilization rate of the four lending pools in NAVI Protocol, except WETH, exceeds 50%. Scallop Lend, which follows closely behind in TVL, has a loaned asset volume of less than 3% of NAVI, and the utilization rate of the remaining pools except CETUS is less than 10%.
Sui's ecosystem has a very strong head effect, and the best performing protocols in the sub-sectors almost monopolize the related businesses on Sui.
TVL and transaction volume trends of each project:
It can be noted that the main projects have experienced organic resonance growth since the end of July and the beginning of August, and Cetus has entered an explosive growth since October. The focus of our ecological protocol research this time is also around Cetus.
Cetus is a DEX project based on Uniswap V3 centralized liquidity AMM. Users can build liquidity pools without tokens on Cetus and provide liquidity within a certain price range of assets. Cetus provides four different fee levels for trading pairs on the protocol: 0.01%, 0.05%, 0.25%, and 1%. 20% of each transaction fee will be saved in the protocol treasury as protocol fees.
There are 1 billion Cetus protocol tokens, 50% of which are allocated to the community and LPs. LPs in specific pools can convert their CETUS tokens into xCETUS and increase their fee income by farm boosting, up to twice. At the same time, users can also obtain xCETUS liquidity incentives by providing LPs to specific pools. The longer the user locks liquidity in the pool, the higher the xCETUS reward. The protocol currently provides LPs with 80,000 xCETUS liquidity incentives per day, of which the SUI-USDC pool is allocated 32,000 xCETUS.
The TVL explosion of Cetus since October is due to the growth of Sui's real trading demand. Cetus' monthly trading volume in October was $180 million, of which the trading volume of SUI-USDC pair was $61 million and the trading volume of USDT-USDC stablecoin pair was $106 million. The trading volume of SUI-USDC pair has seen a strong growth since October 22, making the trading volume of SUI comparable to that of stablecoin pair in the last week of October.
The core of Cetus' growth is the ultra-high APY caused by the high trading volume of the SUI/USDC trading pair. The actual Fee Earnings is 156.2%, accounting for the vast majority of 211.59%.
The reason behind the ultra-high APY is the contradiction between the rapid growth of demand for SUI transactions on Sui Chain since October and the insufficient TVL.
When observing the 24h Volume/TVL of SUI/USDC in the past few months, we found that although it did not reach the current level of 2-3 times, it still had an average value of 0.8, so we believe that there is a strong trading demand for SUI on the chain. The strong trading demand for SUI keeps the APY of SUI/USDC high, thereby attracting more LPs to enter to provide liquidity until TVL rises to a reasonable value compared to 24h Volume. Assuming that the long-term reasonable liquidity mining APY is 20%, with a handling fee of 0.25%, the long-term 24h Volume should be 22% of TVL.