What exactly did ui do right, and where did competitors fall short?

Written by: Alex Liu, Foresight News

On May 3, 2023, the Sui mainnet officially launched, two years ago. Many may remember: when Sui first launched, the situation was not as optimistic as it is now - investor FTX collapsed, and the foundation was forced to 'buy back tokens'; during the bear market, the token price fell from $1.7 to $0.4; there were no regular token airdrops, but lottery token purchase quotas, leading the community to shout 'No airdrop, No community.' and even call it 'scam'.

In just two years, everything has changed. In this cycle, where Bitcoin bottomed out at $16,000 and finally broke through $100,000, Sui is undoubtedly the new public chain protagonist. Looking at the entire public chain landscape, its momentum is only slightly less than that of Solana, which has 'rebirthed' in this round. In fact, Sui's governance token SUI has an FDV (Fully Diluted Valuation) that ranks sixth among all cryptocurrencies excluding stablecoins, only behind BTC, ETH, XRP, SOL, and BNB.

Cryptocurrency FDV ranking, data: CoinGecko

How did Sui achieve such impressive results? What did it do right, and where did competitors fall short? Taking the opportunity of Sui's second anniversary, I, as a deeply involved participant in the ecosystem, attempt to uncover the growth secrets behind Sui's various data through personal experiences and subjective feelings.

DeFi ecosystem

Today, Sui ranks 9th among all public chains with a DeFi TVL (Total Value Locked) of $1.78 billion, surpassing established public chains like Avalanche and the Move language public chain Aptos, which launched its mainnet a year earlier. However, the construction of Sui's DeFi ecosystem was not accomplished overnight.

Public chain DeFi TVL ranking, data: DeFiLlama

Like most 'VC tokens', the mainnet activity data of Sui right after launch was not impressive, and DeFi lacked users to operate. How did Sui turn this situation around?

Quests 'Airdrop', introducing the first wave of traffic

Since July 2023, Mysten Labs (the Sui developer) has launched three rounds of Bullshark Quests in less than six months. Users can earn SUI token airdrops for completing tasks, with 5 million tokens per round, accumulating a total of 15 million tokens airdropped.

It is noteworthy that Sui's early task incentive model was inclined toward 'sunshine distribution', rewarding based on headcount rather than capital allocation. While those ranked higher could receive a large amount of tokens, ordinary retail investors ranked lower also had decent returns.

During this phase, a large number of retail investors and airdrop studios flooded into the Sui ecosystem, helping Sui establish an objective early user base. Sui's official rewards also left an impression of 'non-competitive' and 'retail-friendly' in the airdrop track. I was also attracted to Sui's ecosystem by the Quest at the end of 2023.

The number of tokens at different ranking levels in Quest 3

Token incentives, strong price relief from selling pressure

The TVL trend under token subsidies in the early days of Sui

Sui is the first new public chain in this cycle to use tokens for interest rate subsidies in DeFi protocols. Early relatively niche protocols could even achieve annualized returns exceeding 100% through stablecoins. I have participated in many DeFi mining projects, and under the temptation of high interest, I increased my capital deployment on Sui during this stage.

In the early days, the interest rate for staking stablecoin LP in Aftermath was as high as 110%

Subsequently, public chains that imitated Sui's substantial subsidies to the DeFi ecosystem include Aptos, Starknet, Sei, ZKsync, etc., but their ecosystems did not achieve the prosperity of Sui. Where does the difference come from? DeFi interest rates attract mining whales, while the previously mentioned token price trends remain relatively weak. Large holders, in order to lock in profits, had to 'mine, withdraw, and sell', causing continuous selling pressure on the tokens, leading to further declines in token prices. To maintain the same interest rates, more tokens need to be subsidized, creating a vicious cycle.

Moreover, the high token subsidies of SUI were distributed at low price levels. Subsequently, the token price steadily increased, and the willingness of whales to hold SUI tokens strengthened, reducing selling pressure. The number of tokens needed to maintain the same interest rates also decreased, achieving a positive spiral of token price growth and TVL growth.

Considering the current SUI price, the actual annualized yield of the DeFi protocol with a 100% annualized return mentioned above may exceed 300%.