Supporting Decentralization and the Sui Community
The SUI Delegation Program will enable community members seeking to run a validator to apply for delegated SUI tokens from the Sui Foundation to bootstrap their validator operations. The Sui Foundation believes this program is a critical step in its mission towards decentralization and supporting the participation of Sui community members in Sui’s operations.
The Sui Foundation will be the largest SUI token holder at Mainnet launch and plans to aggressively use these funds to support its mission. More details regarding token allocation will be shared soon! Before diving into the delegation program, let’s take a useful detour to talk shop around Sui decentralization.
What is Decentralization?
In Sui, our philosophy is that decentralization is all about permissionless participation. Sui operates with a Delegated Proof-of-Stake mechanism through which:
- Any validator candidate with sufficient stake can join the validator set.
- Any SUI token holder can influence Sui’s operations via direct delegation to one or more validators.
Since token holders will always greatly outnumber validators, delegation is the critical component allowing every Sui user to have a voice in who runs the Sui network. Sui validators have voting power in proportion to the amount of stake delegated to them, and receive staking rewards depending on their efficiency. Simply put: if a validator does not operate well, then it receives fewer staking rewards per unit of staked SUI than a validator operating normally. This introduces a powerful financial incentive: if a validator operates poorly, it gets hit by the double-whammy of less stake rewards today and less stake rewards in the future since SUI holders will delegate their stake to more performant validators.
A fun way to think about decentralization in Sui is analogous to representative democracy. Imagine a world where every single citizen had to vote for every thing that goes through congress or parliament. Not only is this almost impossible to operationalize, it’s also very hard for everyone to be an expert in everything.
A simpler alternative to direct democracy is to delegate voting power to a representative aligned with your interests and, if they stop doing so, change your delegation decision in the next election. Sui operations are very similar! If a validator stops operating the way you like, then move your stake to a more aligned one. And similar to how democracies can operate very well with a limited number of political parties, Sui can be truly decentralized even if most users do not operate a validator.
Importantly, on-chain stake delegation delivers key benefits relative to off-chain democratic systems. Because validator entry is permissionless and voting power is proportional to stake, even small parts of the Sui community can be represented – as opposed to the high barriers faced by traditional political parties.
Moreover, transparency and continuous network operations deliver a fluid voting system. On a day-to-day basis, validators don’t have much discretion beyond correct and performant network operations. Short-term stake delegation, including the threat of immediate stake recall and re-delegation to another validator, makes this system much more responsive than lower velocity-based voting systems. In the longer-run, delegation decisions incorporate validator preferences and Sui’s future is effectively determined by the super-majority of delegated stake.
In addition to permissionless participation, what really matters for Sui decentralization is that SUI token holders always have enough candidates to delegate their stake to – and, specifically, that there are at least a handful aligned with each member of the Sui community. Two SUI token holders need not agree on who their best candidate is, but a SUI token holder can rest well if assured that they will have many good options to choose from. The threat of stakers switching delegation encourages validators to align with staker interests and operate efficiently. And, if no validator reflects the views of a segment of Sui community members, permissionless entry lets them join forces and enter as a new validator.
Foundation Delegated SUI Stake
Sui's object-centric design allows validators to scale horizontally – if a validator adds more cores or more worker machines, it can process more transactions. This enables Sui's throughput to grow to meet the demand of the community, which is crucially important for unlocking broader adoption of web3. However, this also means that the cost of operating a validator will grow with increased traffic.
The Sui Foundation is adamant that up-front cost should not be a barrier to running a Sui validator – as mentioned above, we need to make the validator pool as big as possible so Sui users have a wealth of good options. There are many community members who are aligned with Sui, but may not have the capital or resources needed to bootstrap enough stake to begin operating. In economic lingo this is a market failure or negative externality since these community validators are good for Sui decentralization and Sui operations.
To address this market failure, the Sui Foundation is announcing the intention of this program that will allow small community teams to obtain delegated stake and operate on Sui. While the Foundation is still finalizing the details on this program – including the application process and requirements – we thought it was important to announce that it will exist, that the Sui Foundation is committed to decentralization, and that this will ensure Sui remains community-driven at its heart.
The Sui Foundation was launched less than a month ago and announced the flagship Developer Grant Program. In addition, the Foundation is committing itself to a high set of principles, including: transparency, openness, and community engagement. The SUI Delegation Program is a critical milestone in this endeavor. Sui is only as good as its community, and we hope this program is one more step towards a fair, open, and decentralized future.