# How yield accrues

### Yield in the exchange rate

stSUI doesn't pay rewards as separate distributions. The rewards push the exchange rate up.

**Starting ratio**

At launch, 1 stSUI = 1 SUI.

**How the ratio grows**

At the end of each Sui epoch (\~24 hours), validators distribute rewards. The protocol claims them and adds them to the SUI pool. The stSUI supply doesn't change.

```
new_exchange_rate = (SUI in pool + new rewards) / stSUI supply
```

The ratio moves up by the per-epoch reward rate, minus the 6% performance fee.

<details>

<summary>Example</summary>

Stake 1,000 SUI at launch → receive 1,000 stSUI.

Network APR: \~3.5%. After the 6% performance fee, your effective yield: \~3.29% APR.

After 1 year:

* Each stSUI is now worth \~1.0329 SUI
* Your 1,000 stSUI is worth \~1,032.9 SUI

Unstake: receive \~1,032.9 SUI minus the 0.01% redeem fee (\~0.10 SUI) = **\~1,032.8 SUI**.

(Numbers illustrative. Actual APR varies.)

</details>

### APR Sources

stSUI's APR comes from:

* **Sui network staking rewards** — the base yield from validators
* **Network inflation** — drives staking rewards
* **Validator performance** — top validators earn more, underperformers earn less or get slashed
* **Instant unstaking fees** — part of the 0.01% redeem fee flows back to the pool
* **Minus: performance fee** — 6% of yield, deducted at each epoch
* **Minus: validator commissions** — taken from gross yield before it reaches stSUI holders

The APR shown on the stSUI page is net of all fees.

### Validator delegation

**How stSUI splits stake across validators**

The protocol holds a list of validators and their weights. New SUI gets allocated by weight.

Example: if Validator A has weight 90 and Validator B has weight 10:

* 90% of new stake goes to Validator A
* 10% goes to Validator B

Weights can be updated by the admin as conditions change.

**Why multiple validators**

Staking with just one validator is risky:

* **Slashing** — if the validator misbehaves, all stake suffers
* **Centralization** — single-validator LSTs concentrate the network

Splitting stake across many validators limits both. If one validator has a bad epoch, only its share of the pool is affected.

### Risks <a href="#risks" id="risks"></a>

**Smart contract risk**

stSUI relies on smart contracts to manage staking, unstaking, and redemptions. While audited, smart contracts carry inherent risk.

**Validator risk**

Staked SUI is delegated to validators. Poor validator performance or slashing events could impact rewards.


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