Sei is a Layer 1 blockchain focused on DeFi, built on Cosmos, and features key components such as an order-matching engine and a unified liquidity model. This makes it faster and easier to build applications than general-purpose blockchains like Ethereum.

The built-in CLOB module, developed with the Cosmos SDK and Tendermint Core, can be used by other Cosmos-based blockchains as a shared liquidity hub, enabling the creation of trading markets for nearly any asset. Decentralized applications (dApps) built on Sei can also utilize CLOB.

At its core, CLOB works like a traditional stock exchange system, where bids are matched based on price and priority. By removing intermediaries, users can trade directly with each other. The order-matching engine is a critical component of Sei’s technology.

Sei has received support from industry leaders like Multicoin Capital, Coinbase Ventures, Delphi Digital, and GSR Ventures. But what problems does Sei address, and what potential applications can it offer?

What problems does Sei address?

Sei’s main goal is to create the best environment for decentralized exchanges (DEX) to thrive. DEXs are widely used in the blockchain world, enabling users to trade tokens without intermediaries. Given their large network effects, entire ecosystems are built around DEXs, making them highly dependent on reliability, scalability, and speed.

Sei positions itself between general-purpose blockchains (like Ethereum and Solana) and application-specific chains (like Osmosis and dYdX), opening up a unique design space between the two.

Sei is creating an environment tailor-made for DEX applications by focusing on the industry’s needs. Built with the Cosmos SDK, Sei offers a complete end-to-end blockchain solution.

Every aspect of Sei’s blockchain has been optimized for maximum performance, providing users with a seamless and intuitive experience.

Sei aims to differentiate itself from other Layer 1 blockchains through its focus on optimizing DEX performance.

Sei Team Overview

Sei Network was founded by Jay Jog and Jeff Feng in 2022. According to official sources, the team comprises three main groups: senior engineers from companies like Robinhood and Airbnb, crypto veterans from the Cosmos ecosystem, and traders from institutions like Goldman Sachs, bringing extensive experience in traditional tech.

With a strong background in the internet, crypto, and traditional fintech, Sei sets itself apart not only through its distinct focus but also through its innovations in performance, efficiency, security, and composability. Sei has upgraded Cosmos’s ABCI framework, making each step of the consensus process programmable. This improves key areas such as block production, smart block broadcasting, and parallel order execution.

Sei DEX Optimization Plan

The Sei platform includes native features such as a globally accessible order book, a price oracle, and frontrunning prevention.

Source: Sei Network - Twitter

Decentralization
One of Web3’s main goals is to allow users and developers to interact optimally and decentralizedly. However, given the industry’s current state, new protocols often have to prioritize performance over decentralization. Sei offers a balanced solution, enabling DeFi protocols to scale and grow decentralized without sacrificing performance.

Tight Spreads
The difference between the lowest asking price and the highest bid on the order book is called the market spread. Sei offers lower transaction fees and works with market makers to attract large amounts of liquidity, which helps reduce spreads on its order book.

High Liquidity
Sei is designed for developers. It serves as the infrastructure and shared liquidity hub for the next generation of DeFi applications. Sei’s order-matching engine is accessible from anywhere, allowing one application to tap into the aggregated liquidity of others.

Blazing Fast Transaction Speed
One of Sei’s key advantages over other Layer 1 blockchains is its speed. Sei’s current transaction finality time is around 600 milliseconds.

Ultra-low Fees
Sei was built to improve decentralized exchanges, and its powerful performance enables it to maintain ultra-low transaction fees.

Purpose-built Design
Sei isn’t an application-specific chain but a Layer 1 blockchain designed specifically for DeFi. Rather than aiming to provide a generic solution for all protocols, Sei optimizes its blockchain for a specific class of DeFi protocols.

IBC Interoperability
Sei has partnered with Axelar to use its cross-chain messaging technology. This means that in addition to bridging assets between IBC and EVM chains, Sei can now leverage smart contract functionality from Axelar’s partner networks.

MEV Prevention
Maximal Extractable Value (MEV) refers to the extra value miners can extract from producing blocks, in addition to block rewards and gas fees. Since frontrunning and MEV issues disrupt DeFi markets, MEV prevention is critical. Sei uses frequent batch auctions to prevent frontrunning and minimize MEV, improving the experience across all Sei applications.

Features that Enhance User and Developer Experience

Order Bundling
Sei provides multi-tiered order bundling, reducing gas costs for market makers. On Sei-based applications, traders can submit a single transaction to update multiple markets simultaneously.

Built-in Price Oracle
Sei has a native price oracle, offering consistent and reliable data feeds. Sei includes an oracle module to support the asset pricing needs of various modules and contracts. Oracle participation during network validation achieves the most accurate asset pricing.

Technological Innovations

Parallel DeFi Processing
If multiple transactions don’t affect the overall state, they don’t need to be processed in a specific order. By processing independent transactions simultaneously, throughput can be increased and latency reduced.

Dual-turbo Consensus
This combines optimistic block processing with intelligent block propagation. In intelligent block propagation, block proposers send the hash values of each transaction in a block. Using transactions from the mempool, validators can quickly reconstruct the block after receiving the proposal.

By combining optimistic block processing with enhancements to the block proposal process, Sei’s “dual-turbo consensus” enables low latency, high throughput, and a 600-millisecond confirmation time.

Built-in Order Matching Engine
This engine increases the scalability of all DEXs that use order books on Sei. Sei carefully balances trade-offs to open new design possibilities for decentralized exchanges, becoming the first Layer 1 blockchain tailored to a specific industry.

Sei Ecosystem

Source: Sei Network official website

As of November 2022, the Sei ecosystem within the IBC framework has grown significantly, connecting a wide range of applications with over 80 apps launched on Sei. Key deployments include the Pharaoh synthetic asset protocol and the Vortex perpetual futures exchange. Other notable applications running on Sei are:

• KYVE: A web3 solution focused on making data more accessible
• Axelar Network: Cross-chain communication infrastructure for Web3
• Nitro: The first Solana Virtual Machine blockchain on Cosmos
• Leap Wallet: A non-custodial wallet for the Cosmos ecosystem
• White Whale: An app that offers arbitrage opportunities to individual users
• Synthr: A protocol focused on synthetic assets, collateral management, and risk management

Goals of the Sei Ecosystem

The Sei team has expressed their ambition to create a “decentralized Nasdaq.”

While other blockchains have attempted to build a network-wide order book exchange, the Sei ecosystem is growing rapidly, and new applications are beginning to use its order book-based DEX model.

The aim is to create a network-wide decentralized order book exchange similar to Nasdaq.

Solana, another leading blockchain, has similar plans through its popular DeFi protocol, Serum. Solana’s order book platform provides essential liquidity and token exchange functions for the Solana ecosystem, supporting the growth of other DeFi applications.

SEI vs. Other Blockchains

Compared to mainstream blockchains like Bitcoin, Ethereum, and Solana, Sei is optimized for higher transaction throughput, faster confirmation times, and frontrunning prevention.

Transaction throughput, or the rate at which a blockchain processes transactions, is a crucial metric. Simply put, throughput defines the total number of transactions a system can handle per second. Sei is capable of processing 22,000 transactions per second, which is significantly higher than Solana.

Finality ensures that it cannot be altered once a transaction is complete. Blockchain users rely on finality to determine how long they must wait to ensure that a transaction has been finalized and will not be reversed. The lower the finality time, the quicker you receive confirmation that a blockchain transaction is settled.

Sei also stands out from other general-purpose blockchains with its front-running prevention mechanism. Frontrunning occurs when someone uses insider knowledge to trade ahead of others. Sei addresses this issue through several techniques, including frequent batch auctions, where all orders are gathered at the end of a block and executed simultaneously.

Source: Sei Network

Sei v2

The Sei v2 upgrade is focused on boosting performance and user experience. A key feature of this upgrade is the introduction of the world’s first parallel EVM (Ethereum Virtual Machine), combining the strengths of both Ethereum and Solana. This allows for faster development, with the ability to process multiple transactions simultaneously, raising throughput to an expected 20,000 transactions per second (TPS) and reducing confirmation times to approximately 390 milliseconds.

The upgrade also includes an improved ledger storage structure, enhancing data management efficiency and security. EVM support will enable Ethereum developers to deploy their apps on Sei without significant changes. These upgrades enhance Sei’s technical capabilities while offering more flexible resource management and a better transaction experience for users and developers alike.

The Sei v2 upgrade will be released in three phases: governance, Alpha release, and v2 readiness.

1. In the governance phase, Sei Labs engineers will start the on-chain governance process via proposals. If approved, validators will begin upgrading their node software, and the Sei Pacific-1 mainnet will also be upgraded to v2.
2. The Alpha release phase will focus on network stability and the deployment of third-party infrastructure, including RPC nodes, cross-chain bridges, indexers, and multi-signature tools. Sei Labs will closely monitor the stability of the network throughout this phase. Importantly, existing applications and token functionalities will not be affected by the upgrade.
3. Once the core infrastructure is in place, Sei’s official Twitter will announce the readiness of v2. To ensure stability, the initial gas limit per block will be set at a lower threshold, to be gradually increased as needed. Sei describes the v2 upgrade as a major milestone toward its goal of building a blockchain capable of supporting millions of users with consumer-grade applications.

Projects like Kryptonite, Super Seiyan Bot v2, Crown Finance, Seilamis, and Yei Finance are ready to use Sei v2’s new high-performance parallel EVM features.

SEI Tokenomics

Sei operates as a decentralized Proof-of-Stake (PoS) blockchain, with the SEI token powering its network. The SEI token serves several key functions within the ecosystem:

• Network Fees: SEI is used to pay transaction fees on the Sei blockchain.
• DPoS Validator Staking: SEI holders can delegate their tokens to validators or stake their SEI to run their validators, helping to secure the network.
• Governance: SEI holders can participate in decision-making processes for the future development of the protocol.
• Collateral: SEI can be used as collateral or liquidity for applications built on the Sei blockchain.
• Tips: Users can tip validators to prioritize their transactions, with tips shared among users who have delegated tokens to those validators.
• Exchange Fees: SEI is used to pay fees on exchanges built on the Sei blockchain.

The total supply of SEI is capped at 10 billion tokens, with the majority of tokens allocated to the community and projects built on Sei, distributed as follows:

Ecosystem Reserve: 48%

A large portion of the SEI token supply is allocated to the ecosystem reserve, including:

Staking Rewards

As part of Sei’s decentralized Proof-of-Stake system, validators play a crucial role in securing the blockchain and ensuring accurate transactions. Validators operate full nodes, which verify every transaction on the Sei network. They propose new blocks, vote on their validity, and add them to the chain. Users can delegate their SEI to validators and earn staking rewards. Validators can set fees to compensate for their role in maintaining the network.

Ecosystem Initiatives

SEI tokens will be distributed as grants and incentives to contributors, developers, validators, and other network participants who add value to the Sei ecosystem. Some tokens are reserved for projects built on Sei and will be released when those projects meet specific milestones.

Sei Airdrops and Incentives

A portion of SEI tokens is dedicated to airdrops, incentives for testnet participation, and ongoing initiatives to distribute SEI to users and the community. These airdrops and incentives are designed to reward genuine, active, and pioneering users in the cryptocurrency space.

Foundation Reserve: 9%

A portion of SEI tokens is set aside for the operations of the Sei Foundation.

Conclusion

Sei is a Layer 1 blockchain in the Cosmos ecosystem, focused on trading and DeFi applications. Its goal is to become a core infrastructure for decentralized finance, particularly for applications that utilize its native Central Limit Order Book (CLOB).

As Sei grows in popularity within the Cosmos ecosystem and new protocols and technological advancements shape Cosmos, Sei is well-positioned to solidify its role as a key player in DeFi within the IBC ecosystem.