SUI could soon be Solana’s fiercest competitor, says K33 Research

Solana may be the top alternative layer-1 network next to Ethereum right now, but the Sui Network could eventually rival that position, speculates analysts from K33 Research. 

In a Sept. 18 research note, K33’s DeFi analyst David Zimmerman said that Sui’s performance relative to Solana, combined with its architecture and upcoming game console release, could make it a top contender among “alt L1s.”

“Solana often steals the focus in the L1 wars, but while SOL/ETH has gained 6% since the August open, SUI/SOL has rallied 115% in the same period,” said Zimmerman. 

While he conceded that much of Sui’s recent outperformance — with the network’s native Sui (SUI) gaining 36% in the last week — could come down to wider “mispricing,” he said SUI “certainly” had the right ingredients to back the recent price move up. 

On Sept. 17, stablecoin issuer Circle announced the upcoming launch of its native USD Coin (USDC $1.00) on the Sui network, indicating further adoption and support of the network from key industry players. 

Zimmerman explained that Sui has all the necessary technical gusto to become a rival to Solana. Sui boasts a theoretical maximum of 297,000 transactions per second, compared to Solana’s theoretical maximum of 65,000. 

Solana vs Sui theoretical TPS. Source: K33 Research 

Notably, there’s a major distinction between a network’s theoretical maximum TPS and the TPS it can actually achieve in practice, with Solana’s highest “real” TPS being closer to 3,000 and Sui’s highest reaching a maximum of 854 in July 2023, per CoinGecko data.

“Sui has produced impressive tech, arguably the most impressive in the space. However, we have yet to see it outshine Solana in practice and in terms of metrics such as daily average TPS,” he said, adding that this could soon be a plausible scenario if Sui can continue to attract users and capital to its ecosystem. 

Zimmerman argues Sui does have one major hurdle affecting long-term price action: token supply. 

He noted that Sui was launched in May 2023, a time when low-float / high fully diluted value (FDV) tokenomics “were pervasive.” As a result, only 27% of Sui’s total supply of tokens is in circulation, leaving current investors exposed to potentially significant sell-offs when future token unlocks occur.

In comparison, 80% of Solana’s total token supply is currently in circulation. 

Sui tokenomics contrasted with Solana. Source: K33 Research

SuiPlay0x1 gaming console 

Another key bullish offering from the Sui network is the upcoming release of a handheld gaming console called SuiPlay0x1 — which will be developed and distributed by Mysten Labs, the main developer behind Sui.

Expected to ship sometime next year, the console will come with a native “Eternals” non-fungible token (NFT), potentially unlocking exclusive rewards for users.

Zimmerman drew parallels to Sui’s console and Solana’s first mobile device, Saga, which rewarded users with airdrops that far exceeded the upfront cost of the device itself. 

Herein lies the true value of the console for speculators.

However, Zimmerman said that while Sui could reasonably gain ground on Solana in the so-called “L1 wars,” Ethereum is not in danger anytime soon. 

“Sui has a lot to offer in the competitive L1 landscape. The market largely continues to view L1s other than Ethereum as ‘Ethereum competitors’ [...] In a post-US spot ETH ETF world, we have placed Ethereum into its own category,” he said. 

Sui is a layer-1 blockchain and smart contract platform that aims to simplify and improve the creation of applications and functions in the Web3 ecosystem. Its model is based on the Move programming language and enables parallel transaction execution.