What are the main risks of using Sui?
Sui's main risks are smart contract bugs, a small validator set, token unlocks from its May 2023 launch, and US tax rules on staking rewards.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
On this page
- Move lowers some bugs but does not make apps hack proof.
- The IRS taxes Sui staking rewards as income when you receive them.
- A validator cannot take your staked SUI into its own wallet.
Sui is a blockchain built for apps and games. People use it to run applications, hold tokens, and play games that store ownership on the network.
What are the main risks?
Sui carries four broad risks. A bug in a smart contract can drain an app and the funds people put in it. A small group of validators can decide what the network confirms. US tax and securities laws also apply to activity on Sui.
What are the practical risks?
Practical risk appears when you connect a wallet to a Sui app or stake SUI. The network and its apps are separate, so a safe network does not make every app safe.
- Smart contract bugs. Move contracts can still contain errors, so look for an independent audit before you connect a wallet or deposit funds.
- Validator centralization. Sui's mainnet launched in May 2023 with a small validator set, so a few validators could disrupt the network.
- Token unlocks. At that May 2023 launch, much of the SUI supply was locked, and scheduled unlocks release those tokens over time, which changes supply and incentives.
Is Sui regulated or taxed?
The IRS treats crypto as property, and Sui staking rewards are taxable income when you receive them. Report the value of the rewards for the year you get them. Buying SUI with US dollars is not a taxable event by itself.
What is Sui and how does it work?
Sui is a Layer 1 blockchain from Mysten Labs. Former Meta engineers founded the company. Its mainnet launched in May 2023, and it uses the Move language for smart contracts.
Frequently asked questions
The Sui network has run since May 2023, but the apps on it carry smart contract risk. Look for an independent audit before you connect a wallet.
A validator cannot take your staked SUI into its own wallet because the network records your stake. A poor validator can reduce your rewards, and you can move your stake.
A halt stops validators from producing new blocks, so transactions wait. Your assets stay on the chain, but you cannot move them until the network resumes.
US securities law asks whether a token was sold as an investment contract, using a test from the Supreme Court's Howey case. That test can apply to SUI.
