Unlocking Sui’s Full Potential: Discover Your Ideal Market Niche

Posted by THOR AND MODERN EREMITE

Edited by Simjo TechFlow

In today’s report, we will delve deeper into the Sui ecosystem. Sui, created by MystenLabs, is considered the next generation blockchain and is designed to meet the ever-growing demand for blockchain adoption. You may be wondering who is adopting blockchain. The Web2 world is gradually finding its way and transitioning into the Web3 realm, which gives us new territories to conquer through marketing, user acquisition, and network effects.

Sectors related to mainstream usage, such as metaverse, gaming, social layer, and even business, require a specific type of blockchain to meet their needs. We all remember how expensive Ethereum can be when interest surges. Does anyone remember that over $150 million in ETH gas was consumed during the Otherside NFT minting period? In fact, this is why there has been demand for fast and cheap Layer 1 blockchain networks over the past few months, even during the last recession. This will meet the upcoming mainstream adoption.

So what about Layer 2 ecosystems like Arbitrum or Optimism? Couldn’t these be a solution to Ethereum’s high gas costs?

you’re right. However, much work remains in terms of L2 adoption, and this is the subject of another in-depth exploration. Given the massive demand coming from the world of traditional finance, we need to provide something here and now, and this is an area where a single blockchain can lead.

main point

What is Sui and why is it compared to Aptos?

Recent developments in the Sui ecosystem

Things to note

conclusion

Understanding Sui: The World of Parallel Chains

Sui is often compared to Aptos. Both projects were launched around the same time during the last recession and are related to Diem, Facebook’s long-forgotten project. The Diem project was developed to handle lightweight payment flows between a limited number of wallets, but was halted because it was too early for the public to embrace blockchain and the US government would not allow giants like Facebook to introduce payment processing infrastructure. . This is why both Sui and Aptos are Layer 1 based on Proof-of-Stake (PoS) consensus, leveraging parallel execution to meet the demands of upcoming mainstream adoption. There are many technical differences, such as differences in consensus mechanism or data architecture, but we will not discuss these differences in depth as they are not relevant to today’s discussion.

What is relevant, however, is that both Aptos and Sui are seen as projects heavily influenced by risky investments, which has led to a less welcoming atmosphere in the wider crypto world. This can be easily seen in the initial price action after they are listed.

Another similarity is that both blockchains use the Move programming language. However, there are subtle differences in the way language is used. On the one hand, Aptos has adopted Move’s usage from Diem, while Sui has changed some of the concepts and adopted an object-oriented approach to make it more suitable for mass adoption purposes. This is why it is part of the growing trend of parallel L1 blockchains.

In the coming months, we will witness another L1 chain war. This has been the dominant narrative throughout the 2020/21 cycle. But this time, new competitors will enter the arena: Aptos, Sui, Sei, Solana, and the yet-to-arrive Monad. All of this on a single chain, all supporting parallel execution, and designed to take market share from the same market segment.

Reverse Agreement: Recent Growth

As mentioned earlier, the price trends following Sui’s launch were not surprising. The main trade on crypto Twitter was opening short positions and holding them for months, which was quite profitable. However, when Bitcoin began to rise and finally surpassed $30,000 in October 2023, a bottom was formed for SUI and it began its upward path.

But it’s not just prices that have risen. The same goes for Sui’s TVL. From approximately $80 million in October 2023 to $567 million today, the Sui ecosystem has attracted more capital. However, there is a potential problem here: how and with what to raise capital.

One recent reason could be speculation about the upcoming Wormhole airdrop, which has promoted bridging usage and increased TVL on various chains. Needless to say, this liquidity will not remain there once the airdrop snapshot takes place, but it is still a mystery how much the recent TVL surge has to do with the Wormhole speculation.

So what about Sui’s DeFi ecosystem? Currently, we are seeing major DeFi protocols offering liquidity re-staking (NAVI), lending (Scallop), DEX, and Perps (Cetus and BlueFin), building the core infrastructure of an ever-growing ecosystem. Taking this idea further, driving DeFi protocols could be a way to attract users and liquidity. However, this must be synchronized with attracting developers to build various dApps and protocols. It is also worth noting that BlueFin recently signed a partnership with Elixir, and the protocol aims to increase liquidity on DEX order books. This increased BlueFin’s TVL by about 50%, from nearly $9 million to $13.1 million today. It is difficult to say whether this is the beginning of cross-chain integration, or a single event in the spread of Elixir’s influence, but it is worth watching closely for further integrations that may occur in the near future in the Sui ecosystem.

One strength of Sui in terms of attracting users and stimulating emotions is the lack of tokens in the ecosystem projects. One of the marketing techniques that crypto projects can do is use upcoming airdrops to build excitement among users by rewarding them for using the project. Even better if the airdrop activity spans the entire ecosystem. In Sui, this situation would be entirely possible.

Most importantly, we have seen the launch of Stardust, which provides the wallet service infrastructure to attract GameFi builders. Building on this foundation was an interesting collaboration between MystenLabs (founder of Sui) and Team Liquid (one of the most famous esports teams in Europe). In other words, Sui is about to enter the GameFi world, but why is this change happening?

In a highly competitive parallel L1, each ecosystem must find its own market segment to attract users and TVLs, and not compete for the same overly general audience. Solana appears to have found its appeal in crypto culture with NFTs and memecoins, and Sui is looking to move forward and attract GameFi users rather than replicating the success stories of others. This is thanks to the object-oriented Move language and user experience, which is much better than the user experience we saw on StarkNet.

Looking to the Future: Potential Problems

Although it may all sound overly positive and promising, we must consider all the associated risks and upcoming unlock plans that may affect the SUI token price.

As mentioned earlier, the price of SUI has been steadily rising since the bottom of $0.36 in October 2023, rising almost 100% since early 2024 to reach almost $2, but the narrative pace of the parallel ecosystem has slowed. This indicates that there is a real opportunity to earn money for those who explore the ecosystem and bet on the project and memecoin. Rising prices are always a good incentive. But Sui’s case is different.

The most popular DeFi projects we mentioned previously – BlueFin, Aftermath or Scallop – do not have their own tokens except Cetus, which may bring about airdrop speculation in the future. However, for now this severely limits the attractiveness of the ecosystem. This is because there are no tokens worth investing or speculating on.

The most obvious example might be Solana’s memecoin season, which created several small cycles with brief cooling off periods in between. During this cooling off period, the broader market has had time to turn to other trends, which often involve memecoin on other chains. This trend also exists in Sui. Sui’s most anticipated memecoin code, $FUD’s meme, followed the most popular trend at the time: dog-themed coins. However, after the initial surge, the price action had little to offer as interest waned and liquidity quickly departed.

What seemed like a promising route to bring liquidity into the ecosystem ultimately lasted only an extremely short period of time. The liquidity disappeared after a few hours. Besides this, the number of people trading is negligibly small, around 150 for the top four memecoins. Needless to say, this interest is almost non-existent, and even on the depowered Solana chain we see thousands of market participants every day.

Another pressing issue in the ecosystem is the unlock plan. Monthly unlocks are set at 0.65% of maximum supply, which equates to approximately 5.5% of the current market capitalization, or $110 million. This is a rough estimate and as the price of $SUI fluctuates, the market capitalization percentage and dollar value will fluctuate. While each month’s supply appears to have been absorbed into the market, the supply to be released in May could have a serious impact on prices.

On May 3, Sui’s supply increases by 8.27%, equivalent to approximately $1.4 billion in dollars and accounting for approximately 71% of the current market capitalization. It is difficult to predict how the market will react to such a large-scale lifting of lockdowns. However, we could see a so-called “liquidity cushion” gradually building, which would offset some of the released supply. This is generally the trend seen in unlocked cases of $DYDX. On the other hand, given the relatively low interest in the Sui ecosystem at the moment, it may be difficult to attract enough liquidity to build this safety buffer, and the market will likely start pricing in weeks before the unlock occurs.

Although it is impossible to predict the future, observing the trading volume and market capitalization ratio of the market and SUI can tell a story about how the market is planning to respond to the upcoming unlock.

conclusion

In the coming months and years, blockchain adoption is expected to explode not only among mainstream users but also Web2 brands, a trend we have already seen taking shape during the Metaverse craze of 2021. Considering all this, there is a dire need for a fast and affordable blockchain that can meet the demand of millions of users to explore the new frontier and the variety of dApps that come with it.

Sui is not the only competitor in this segment, there are strong competitors such as Solana, Aptos, Sei and the upcoming Monad, all of which will be vying for market share. Additionally, we will witness the rapid development of the L2 ecosystem, which offers similar features and combines the overall power of Ethereum with network effects to become a strong competitor that can compete for market share in the same market segments as Sui. there is.

Last cycle’s topic was the war between alternative L1s. This time a similar scene will be recreated. However, what we will see is not the L1 ecosystem, but a battle between L1 sub-projects and single chains, which will compete to become the preferred venue for “mainstream-oriented” dApps.