The Sui Platform is a blockchain platform that relies on Delegated Proof of Stake (DPoS) to determine the set of validators that process transactions. This article will delve into the economic model of the Sui platform, especially the operating mechanism of the DPoS system and SUI token staking.
Delegated Proof of Stake (DPoS) system
On the Sui platform, at the beginning of each epoch, a fixed set of validators are selected to process transactions. These validators are selected by SUI token holders for staking, and the staked SUI tokens will be locked for the entire epoch. Each validator’s share of the total stake determines its share of voting power when processing transactions. This means that the more SUI tokens staked, the more influence a validator has in transaction processing.
How the economic model works
Important events at the beginning of the era
At the beginning of each epoch, three important events occur:
Calculate the total amount of pledge, which is called user pledge share (α).
Calculation Storage Fund.
Calculate the epoch staking reward subsidy.
Transaction processing during epochs
During each epoch, users submit transactions to the Sui platform, which are processed by validators. Users need to pay for gas calculation and storage. If users delete previous transaction data, they will receive a partial refund of storage fees. Validators observe each other's behavior and evaluate each other's performance.
Reward distribution at the end of the epoch
At the end of each epoch, the Sui protocol distributes staking rewards to participants of the DPoS mechanism. This process consists of two main steps:
Calculate the total staking reward, which includes the sum of accumulated computation fees and the epoch staking reward subsidy.
Allocate staking rewards to various entities.
It is worth noting that the storage fund is taken into account when calculating the total staking for an epoch, but it is not owned by any entity. Instead, the Sui economic model pays validators a share of the staking rewards allocated to the storage fund to compensate for their storage costs.
Reward distribution between validators and users
Validators receive full rewards for their own staking, but only retain commissions on SUI tokens staked by users as fees for managing that staking. The staking reward distribution of the user staking pool at the validator is equal to the staking reward distribution of the validator itself.
Validator Incentive Mechanism
Sui’s economic model incentivizes validators in a variety of ways:
Performance rewards: Validators that perform well receive larger rewards, which is captured by the variable μv.
Stake Share: Validators with more stake earn more staking rewards, which is captured by the variable σv.
These incentives ensure that validators have an incentive to operate the Sui platform efficiently and encourage users to allocate their stakes to the most efficient validators.
Gas price mechanism of Sui platform
The design of Sui's gas price mechanism encourages validators to set fair price competition with low gas fees and a viable business model. This means that validators need to find a balance between setting a low gas price and maintaining operating costs, or else suffer reduced staking rewards.
User's monitoring role
The Sui economic model gives users an important surveillance role. On the one hand, users want their transactions to be processed as quickly and efficiently as possible. The user's client (e.g. wallet) communicates with the most responsive validator first, and this efficiency is compensated by boosting rewards.
SUI token holders, on the other hand, receive the same rewards or penalties as their chosen validator. Therefore, an unresponsive validator suffers a dual impact in terms of Sui incentives: directly through lost rewards being slashed, and indirectly through reduced user staking in future epochs.
in conclusion
The economic model of the Sui platform establishes a mechanism to incentivize validators to operate efficiently through the DPoS system and SUI token staking. This not only ensures efficient processing of transactions, but also promotes decentralization and cost-effectiveness of the entire network. Users play an important monitoring role in this process, ensuring fair competition and efficient operation of validators.
Overall, Sui's economic model is exquisitely designed and ensures the stable and efficient operation of the network through a multi-level incentive mechanism. This lays a solid foundation for the future development of the Sui platform.