Zoom in on Mysticeti, the update that powers Sui (SUI)

Key Information

• Sui is a layer 1 blockchain developed by Mysten Labs, launched in May 2023, and designed to be highly performant and scalable.
• The Mysticeti update is the most significant upgrade to Sui since its launch. It introduces a new consensus protocol based on an uncertified directed acyclic graph (DAG), allowing for the lowest latency ever achieved by a blockchain.
• Sui’s performance after Mysticeti: an 80% reduction in latency (now 390 ms for consensus and 640 ms for settlement finality on the testnet), with a throughput potential of 100,000 transactions per second.
• Impact on activity: Significant increase in Total Value Locked (TVL) from $350 million to $600 million within a few weeks, along with a notable rise in the number of daily active addresses.

---

Introduction and Context on Sui

Sui is a next-generation layer 1 blockchain, designed to be highly performant and scalable. Developed by Mysten Labs since 2021, its mainnet was launched in May 2023, along with the official launch of SUI, the native cryptocurrency of the Sui network.

Unlike most layer 1 projects, Sui stands out due to its innovative technological infrastructure that combines a new programming language, Move, with horizontal scalability enabled by transaction parallelization. These features allow Sui to handle a theoretical throughput of 125,000 transactions per second, with a finality time of less than 3 seconds.

The layer 1 blockchain sector is certainly one of the most competitive in the cryptocurrency industry, as evidenced by the dozens of Ethereum competitors that have emerged in just five years. To date, one of the few success stories is Solana, particularly due to its ability to execute transactions quickly, with no latency and low costs. Thus, the new generation of layer 1 blockchains—such as Aptos, Sei, and of course Sui—possesses the necessary technological advantages to offer a solid and viable value proposition. In this analysis, we focus on the recent Mysticeti update, which further enhances Sui's theoretical performance, and its impact on the ecosystem.

---

The Mysticeti Update

Consensus Changes

On July 25, 2024, Sui's mainnet implemented Mysticeti, the most significant update since its official launch in 2023. This update introduces a new consensus protocol based on a directed acyclic graph (DAG), which improves upon the previous Narwhal-Bullshark algorithm. The goal is to provide the lowest latency among existing blockchain networks.

Mysticeti is a Byzantine Fault Tolerant consensus protocol, based on a directed acyclic graph (DAG), building on the successes of the Narwhal-Tusk consensus algorithm while improving upon its weaknesses.

Previously, the Narwhal-Bullshark consensus protocol relied on two main components: Narwhal and Bullshark. Narwhal is a distributed mempool protocol that organizes user transactions. Each validator has two entities: a primary and workers. The workers divide transaction data received from clients and forward it to the primary, which compiles a list of transactions.

This list is included in the block for the current round. To move to the next round, 2f+1 validators must confirm the block (where f is the number of potentially faulty nodes) and generate a certificate. With these certificates, validators do not need to include all transactions in the block but can validate them using the certificates, thus reducing the communication burden.

The Bullshark consensus protocol leverages Narwhal’s DAG structure to order transactions so that all validators can arrive at a total order, even if they do not possess all the same information at the same time. Bullshark uses "anchors" and "weak links" to ensure that even slower validators are included in the consensus process, ensuring better fairness.

The main difference between Narwhal-Bullshark and Mysticeti is that the latter uses uncertified DAGs, unlike Bullshark's certified DAGs. In other words, block certification no longer requires a supermajority of validators (2f+1), as with Mysticeti, validators sign and share blocks without needing certification. This cuts the number of validator round trips in half, thus providing the lowest latency among all DAG-based consensus algorithms.

Impact of Mysticeti on Sui’s Performance

The Mysticeti update fundamentally changes how Sui achieves consensus by introducing an uncertified DAG-based consensus mechanism. No longer requiring a supermajority of validators to confirm a block drastically reduces Sui's latency. According to testnet results, Mysticeti enables the network to reach consensus in 390 ms, with settlement finality in 640 ms, representing an 80% reduction compared to Narwhal-Bullshark.

Additionally, Mysticeti simplifies the operation of validators by removing the distinction between primaries and workers. Transactions are now aligned within the block, allowing throughput to increase to 100,000 transactions per second.

Mysticeti also introduces more efficient resource management by reducing the number of messages and signatures required to reach consensus. By eliminating the need to generate and verify multiple validation certificates, the protocol significantly reduces validators’ CPU load, thus improving the overall performance of the network and potentially enhancing its decentralization.

However, the full extent of Sui's new performance capabilities will only be determined when the network faces heavy usage by users. In the next section, we will examine the impact of this update on Sui's user activity and the potential forecasts for the coming months.

---

Some Activity Data on Sui

The Mysticeti update has had a significant impact on Sui's blockchain activity. In our recent August 2024 activity report on layer 1 blockchains, we observed a substantial increase in Total Value Locked (TVL) and the number of daily active addresses on the network, positioning Sui as the top performer of the summer.

At the beginning of August, Sui’s TVL had dropped to $350 million, its lowest level since January. However, the announcement of Mysticeti's deployment on the mainnet had a positive effect, attracting new liquidity to the blockchain and raising the TVL to $600 million by early September.

The number of daily active unique addresses rose from 20,000 in early May to over 2.45 million by the end of May, following the announcement of Mysticeti on the testnet, before stabilizing around 400,000 between June and August. This figure rose again in early September, reaching approximately 1.75 million as of September 16.

Similarly, the number of transactions per day on Sui exceeded 40 million in early May. It is worth noting that these are not proposed transactions but transactions that were added to a block and confirmed on the blockchain. Despite recent announcements, these activity levels have not yet been matched again, making it difficult to fully assess the impact of the Mysticeti update on network performance.

Nevertheless, August saw a few peaks in terms of transactions per second (TPS): 277, 281, and 275. While these figures are still below Solana's average performance (around 500 TPS), they remain encouraging for Sui’s future. Technically, the blockchain has the infrastructure necessary to accommodate a large number of simultaneous users, far more than most current EVM-based blockchains.

Analyst's Opinion: The Mysticeti update is promising, both in theory and in practice on the testnet, for Sui's future performance. However, the Narwhal-Bullshark mechanism already offered good performance, allowing a high number of parallel transactions and managing a large user wave. Yet, this wave of users has not materialized, and Mysticeti may not be the catalyst to bring it about.