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Sui Rejects Centralization Claims, Do Founders Really Control 84% of Token Supply?

Last Updated May 6, 2024 1:06 PM
James Morales
Last Updated May 6, 2024 1:06 PM

Key Takeaways

  • Crypto investor Justin Bons has claimed that Sui’s founders control 84% of the tokens’ total supply.
  • Sui argued that Bons’ claim is misleading.
  • Charges of centralization center on locked tokens which make up 53% of Sui’s total supply.

Centralization concerns threaten to create a rift among the Sui community after crypto investor Justin Bons claimed the project’s founders control 84% of the staked token supply.

Hitting back at the allegation, the official Sui Network X account asserted that the platform’s founders don’t control locked Treasury funds. But without more transparency into Sui’s ownership and tokenomics, Bons remains unconvinced.  

What’s at Stake With Staked Sui?

Like most blockchain projects, Sui’s token distribution is determined by a fixed vesting schedule. 

Upon the mainnet launch in 2023, an initial 5% of the tokens’ total supply was released. Additional tokens are scheduled to unlock incrementally until Sui reaches a hard cap of 10 billion coins.

Bons’ concern centers on the 52% of the total supply that Sui has described as “unallocated”. Because these tokens are staked, earning yield and participating in the platform’s governance, he concluded that Mysten Labs and the small circle of founders control over 84% of the staked Sui supply.

Pointing to the fine print in Sui’s legal documentation, he argued that under the current model, this small, powerful group of people can “basically do whatever [they want] with this allocation at any time.”

Sui Defends Foundation Treasury

Responding to Bons’ criticism, Sui issued a statement insisting that “the founders of Mysten Labs do NOT control the Sui Foundation treasury, the community reserve, stake subsidies, or any tokens allocated to investors.”

The statement continues: 

Sui Foundation is the largest holder of locked tokens, which will be unlocked in accordance with the public emissions schedule. These tokens are used to support builders, advance the Move programming language, increase network security, and grow the ecosystem through initiatives like developer grants, hackathons, bug bounties, academic research, and more.

Although Sui’s defense goes some way toward ameliorating charges of centralization, Bons remains concerned about a lack of transparency. 

Questions Remain Over Locked Funds

Considering that the Sui Foundation controls over half of the 10 billion Sui that will eventually be in circulation, there is a conspicuous lack of publicly available information regarding when and how it will unlock these funds.

Sui’s response  to Bons’ criticism points to a web page  containing a chart showing the planned unlocking schedule, but this chart makes no mention of the Foundation’s Treasury funds. It also comes with the caveat that the figures are “hypothetical and “not a guarantee”.

In Sui’s defense, locked funds are custodied by independent third parties. Namely, BitGo, Anchorage and Coinbase Prime. But without greater transparency, the question of who controls them remains unanswered.

Is Sui Decentralized?

Aside from token ownership, the operation of validators is another critical factor in Sui’s decentralization. And in this area, the blockchain fares relatively well compared to its Proof-of-Stake peers.

The most common way of measuring node decentralization is the Nakamoto Coefficient: a measure of the smallest number of independent entities that can act collectively to shut down a blockchain. 

With a Nakamoto coefficient of 20, Sui falls somewhere in the middle of the table, behind Polkadot (92) and Solana (21), but ahead of BNB Chain (5) and Polygon (4).

This calculation factors in the fact that the Sui Foundation has split its allocation of locked tokens between different validators.

However, Bons’ charge that Sui lacks transparency remains an issue. As he points out , only after it was criticized did Sui confirm that the “unallocated” funds are controlled by the Foundation Treasury. There is also no visibility into the Foundation’s contracts with custodians. 

As long as this perceived lack of transparency remains, such criticisms are unlikely to go anywhere.

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