Summary of a SUI Transaction Prior to engaging in SUI transactions directly on the Sui Network, a user generally must first install on its computer or mobile device a Sui Network software program that will allow the user to generate a private and public key pair associated with an address on the Sui Network. The Sui Network software program and the SUI address also enable the user to connect to the Sui Network and transfer SUI to, and receive SUI from, other users. Each Sui Network address, or wallet, is associated with a unique “public key” and “private key” pair. To receive SUI, the SUI recipient must provide its public key to the party initiating the transfer. This activity is analogous to a recipient for a transaction in U.S. dollars providing a routing address in wire instructions to the payor so that cash may be wired to the recipient’s account. The payor approves the transfer to the address provided by the recipient by “signing” a transaction that consists of the recipient’s public key with the private key of the address from where the payor is transferring the SUI. The recipient, however, does not make public or provide to the sender its related private key. Neither the recipient nor the sender reveal their private keys in a transaction, because the private key authorizes transfer of the funds in that address to other users. Therefore, if a user loses his or her private key, the user may permanently lose access to the SUI contained in the associated address. Likewise, SUI is irretrievably lost if the private key associated with them is deleted and no backup has been made. When sending SUI, a user’s Sui Network software program must validate the transaction with the associated private key. In addition, since every computation on the Sui Network requires processing power, there is a transaction fee involved with the transfer that is paid by the payor. The resulting digitally validated transaction is sent by the user’s Sui Network software program to the Sui Network validators to allow transaction confirmation. Sui Network validators record and confirm transactions when they validate and add information to the Sui Blockchain. When a validator validates transactions, it contributes to the formation of certified data structures—sometimes referred to as blocks—which include data relating to (i) the verification of newly submitted and accepted transactions and (ii) references necessary to maintain the continuity of prior transaction records. Validators become aware of outstanding, unrecorded transactions through the data packet transmission and distribution mechanisms discussed above. Some SUI transactions are conducted “off-blockchain” and are therefore not recorded in the Sui Blockchain. These “off- blockchain transactions” involve the transfer of control over, or ownership of, a specific digital wallet holding SUI or the reallocation of ownership of certain SUI in a pooled-ownership digital wallet, such as a digital wallet owned by a Digital Asset Trading Platform. In contrast to on-blockchain transactions, which are publicly recorded on the Sui Blockchain, information and data regarding off- blockchain transactions are generally not publicly available. Therefore, off-blockchain transactions are not truly Sui transactions in that they do not involve the transfer of transaction data on the Sui Network and do not reflect a movement of SUI between addresses recorded in the Sui Blockchain. For these reasons, off-blockchain transactions are subject to risks as any such transfer of SUI ownership is not protected by the protocol behind the Sui Network or recorded in, and validated through, the blockchain mechanism. Creation of SUI Initial Creation of SUI Unlike other digital assets such as Bitcoin, which are solely created through a progressive mining process, 10 billion SUI were created in connection with the launch of the Sui Network. Following the launch of the Sui Network, no further SUI shall be created without modifying the Sui protocol. The initial 10 billion SUI were distributed as follows: • Private Sale: approximately 1.41 billion SUI, or 14.1% of the initial supply, was sold in private sales to venture capital and other investors conducted between 2021 and 2022. • Community Reserve: approximately 1.06 billion SUI, or 10.6% of the initial supply, was issued to be disbursed by the Sui Foundation towards supporting community-run validators and grants for developers, community ambassadors, and other similar parties. • Community Access Program: approximately 613 million SUI, or 6.1% of the initial supply, was offered for purchase to early contributors of the Sui ecosystem. • Staking Subsidies: approximately 949 million SUI, or 9.5% of the initial supply, was reserved to be released to Sui staking participants. • Early Contributors: approximately 582 million SUI, or 5.8% of the initial supply, was retained by core developers and contributors to compensate for their early efforts in the development of the Sui Network.
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