A well-structured token economy is critical for any project building on Sui. Unlike speculative token models, sustainable designs balance supply, demand, and utility to ensure long-term growth.

Core Components of Token Design

1. Defining Token Utility
   Tokens must serve concrete purposes to maintain demand. On Sui, common utilities include:

   • Governance - Voting on protocol upgrades
   • Access - Paying fees or unlocking features
   • Staking - Securing networks and earning yields
   • Incentives - Rewarding liquidity providers

   Example: A Sui DEX token might combine governance rights with trading fee discounts.

2. Supply and Distribution Strategy

   • Fixed vs. Inflationary Supply
     Fixed caps create scarcity, while controlled inflation funds ongoing incentives.
   • Allocation Best Practices
     • Community & Ecosystem (40-50%)
     • Team & Advisors (15-20%, vested over 2-4 years)
     • Investors (20-30%, with gradual unlocks)
     • Treasury (10-15% for future development)

   Critical Avoidance: Over-allocating to insiders, which risks supply dumps.

Driving Sustainable Demand

1. Deflationary Mechanisms

   • Token burns (e.g., % of protocol fees)
   • Buyback-and-stake programs

2. Behavioral Incentives

   • Tiered rewards for long-term holders
   • Time-locked staking bonuses

Leveraging Sui’s Technical Advantages

1. Low-Cost Transactions
   Enable micro-rewards and frequent governance participation.
2. Dynamic NFTs
   Represent staking positions or membership tiers as upgradable assets.
3. Move Language Security
   Ensure tamper-proof token contracts.

Common Pitfalls in Token Design

• Governance Tokens Without Revenue - Leads to speculative collapse
• Unsustainable APYs - High yields that can’t be maintained
• Poor Vesting Schedules - Early team/investor unlocks crash prices
• Overly Complex Models - Confuses users and obscures value

Case Studies: Successful Models on Sui

• Cetus (DEX) - Fee sharing + buybacks maintain price stability
• Navi (Lending) - Staking rewards tied to protocol revenue
• Scallop (DeFi) - Deflationary burns from transaction fees

Implementation Checklist

1. Define all token utilities
2. Model supply emission schedules
3. Allocate with long-term alignment
4. Calibrate incentives carefully
5. Integrate Sui-specific optimizations

Conclusion

The most sustainable Sui token economies will be those that:

• Anchor to real utility
• Balance supply and demand mechanics
• Leverage Sui’s technical strengths
• Prioritize long-term participation over short-term gains

---