transaction confirmation fees resulting through collusion or otherwise may adversely affect the attractiveness of the Sui Network, the value of SUI and the value of the Shares. • To the extent that any validators cease to record transactions that do not include the payment of a transaction fee or do not record a transaction because the transaction fee is too low, such transactions will not be recorded on the Sui Network until a transaction is validated by a validator who does not require the payment of transaction fees or is willing to accept a lower fee. Any widespread delays in the recording of transactions could result in a loss of confidence in the digital asset network. • If validators collectively increase reference gas prices, or if network conditions cause higher gas usage, some transactions may be delayed or dropped until users raise fees or resubmit. Any widespread delays in the recording of transactions could result in a loss of confidence in the digital asset network. • Digital asset validating operations can consume significant amounts of electricity, which may have a negative impact and give rise to public opinion against allowing, or government regulations restricting, the use of electricity for validating operations. Additionally, validators may be forced to cease operations during an electricity shortage or power outage. • During the course of ordering transactions and validating some transactions, validators may be able to prioritize certain transactions in return for increased transaction fees, an incentive system known as “Maximal Extractable Value” or MEV. For example, in blockchain networks that facilitate DeFi protocols in particular, such as the Sui Network, users may attempt to gain an advantage over other users by increasing offered transaction fees. Certain software solutions, such as Flashbots, have been developed which facilitate validators in capturing MEV produced by these increased fees. The MEV incentive system may lead to an increase in transaction fees on the Sui Network, which may diminish its use. Users or other stakeholders on the Sui Network could also view the existence of MEV as unfair manipulation of decentralized digital asset networks, and refrain from using DeFi protocols or the Sui Network generally. In addition, it’s possible regulators or legislators could enact rules which restrict the use of MEV, which could diminish the popularity of the Sui Network among users and validators. Any of these or other outcomes related to MEV may adversely affect the value of SUI and the value of the Shares. Proof-of-stake blockchains are a relatively recent innovation, and have not been subject to as widespread use or adoption over as long of a period of time as traditional proof-of-work blockchains. Certain digital assets, such as bitcoin, use a “proof-of-work” consensus algorithm. The genesis block on the Bitcoin blockchain was mined in 2009, and Bitcoin’s blockchain has been in operation since then. Many newer blockchains enabling smart contract functionality, including the current Ethereum Network following the completion of the Merge in 2022, use a newer consensus algorithm known as “proof-of-stake.” While their proponents believe that they may have certain advantages, the “proof-of-stake” consensus mechanisms and governance systems underlying many newer blockchain protocols, including the Sui Network, and their associated digital assets – including the SUI held by the Trust – have not been tested at scale over as long of a period of time or subject to as widespread use or adoption as, for example, Bitcoin’s proof-of-work consensus mechanism has. This could lead to these blockchains, and their associated digital assets, having undetected vulnerabilities, structural design flaws, suboptimal incentive structures for network participants (e.g., validators), technical disruptions, or a wide variety of other problems, any of which could cause these blockchains not to function as intended, lead to outright failure to function entirely causing a total outage or disruption of network activity, or to suffer other operational problems or reputational damage, leading to a loss of users or adoption or a loss in value of the associated digital assets, including the Trust’s assets. Over the long term, there can be no assurance that the proof-of-stake blockchain on which the Trust’s assets rely will achieve widespread scale or adoption or perform successfully; any failure to do so could negatively impact the value of the Trust’s assets. If a malicious actor or botnet obtains control of a sufficient amount of the validating power on the Sui Network, or otherwise obtains control over the Sui Network through its influence over core developers or otherwise, such actor or botnet could manipulate the Sui Network to adversely affect the value of the Shares or the ability of the Trust to operate. The Sui Network is currently vulnerable to several types of attacks, including: • “33% attack” where, if a validator or group of validators were to gain control of more than 33% of the total staked SUI on the Sui Network, a malicious actor could temporarily impede or delay transaction confirmation or even cause a temporary fork in the blockchain. • “50% attack” where, if a validator or group of validators acting in concert were to gain control of more than 50% of the total staked SUI on the Sui Network, a malicious actor would be able to gain full control of the Sui Network and the ability to manipulate the blockchain on a forward-looking basis, including censoring transactions following the achievement of threshold, double-spending and fraudulent block propagation, while the attacker maintains the threshold. In theory, the
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