The SEC's lawsuit against Binance was the biggest event in the crypto industry in the past month, and as a result, most crypto assets have seen their prices cut in half in the past few weeks, bringing the crypto market just entering spring back into bearish gloom. This event also caused cryptocurrency users to lose trust in centralized exchanges (CEXs), further reinforcing the necessity of developing decentralized exchanges (DEXs). Sei Network, a Layer1 public chain built with Cosmos SDK, aims to become the preferred chain for DEXs in DeFi, NFT, and GameFi. Sei's built-in order book infrastructure, ultra-fast execution speed, deep liquidity, and fully decentralized matching services provide a safer, more transparent, efficient, and reliable network for DEXs, bringing new innovations and development opportunities to the crypto market.
Sei, built for trading, aims to be the fastest layer1 public chain
Traditional Layer1 public chains can generally be divided into two categories: general public chains such as Ethereum and Solana, and application-specific chains such as dYdX and Osmosis. These public chains have their own unique advantages and characteristics in technical implementation, but there are certain limitations in terms of trading scalability.
Unlike other public chains, Sei, as a new Layer 1 public chain, does not choose sides between general and application-specific chains. Instead, Sei finds a middle ground between the two to become a public chain built specifically for trading. Compared to general public chains, Sei has optimized every level of its technical stack to provide the best trading infrastructure. Compared to application-specific chains, Sei is a relatively general-purpose public chain that can support a variety of trading applications, rather than just one specific application. This makes Sei a more flexible and customizable trading infrastructure that can meet the needs of different types of trading applications.
As a public chain dedicated to trading, Sei's goal is to solve the scalability problems faced by current on-chain exchanges and become the fastest Layer 1 public chain. To this end, Sei has implemented several important improvements to its underlying network architecture, including the industry-leading Twin Turbo consensus mechanism. Sei's technology success is largely due to Twin Turbo consensus, which enables Sei to achieve a lower bound of 300ms finality, 10x faster than Solana. Additionally, Sei has implemented a composable architecture order matching module, which means that dApps on Sei have synchronous composability. Through Sei's numerous bridge partners, the IBC, EVM, and SVM ecosystems will all have asynchronous composability, allowing for seamless connections and interoperability between different blockchain ecosystems, giving developers more flexibility to choose the technology stack that best fits their needs.
Sei has also increased throughput by 5-10x through market-based parallelization, and supports batch order processing, thus simplifying the process of updating multiple orders across different exchanges. These are all innovative features implemented by Sei to optimize the performance of trading applications. In addition, Sei's liquidity center and its underlying technology is also highly advantageous for various dApp runs. Sei's liquidity management system can help DeFi, GameFi, and NFT applications to provide users with deeper liquidity systems and cost-effective trading processes, while taking advantage of Sei's blockchain agility and efficiency.
Trading is the most basic application scenario and use case of blockchain technology, and at the same time is an important force driving the development of blockchain and Web3. By creating a dedicated trading public chain, Sei provides developers who wish to build applications on a generalised Layer 1 with an attractive product. Sei's emergence fills the gap in the currently trading-dedicated public chains, bringing new opportunities and challenges to the development of blockchain technology and Web3, and also providing more possibilities for the circulation and trading of digital assets.
Sei's technological advantages are revolutionizing the traditional DEX network environment
As Web3 continues to develop rapidly, exchanges have become increasingly important as the focal point for asset trading. Currently, exchanges are mainly divided into centralized exchanges and decentralized exchanges (DEXs). In the past, centralized exchanges have been dominant. However, with the SEC's lawsuit against the leading centralized exchange Binance, higher regulatory pressure on centralized exchanges will drive the market towards DEXs. This requires DEXs to expand and adapt to the huge adoption wave.
Given DEXs' unique requirements for speed, throughput, reliability, and front-running, a dedicated infrastructure is needed to address these issues. This is where Sei comes in, offering a solution to DEX scalability problems and allowing exchanges applications to scale effectively while maintaining decentralization and capital efficiency. Sei technological advantages include the following:
The Order Matching Engine
Sei is a Layer 1 public chain based on the Cosmos ecosystem. Like Ethereum, Sei allows users to transfer assets and deploy smart contracts. However, the distinguishing feature of Sei is that it has created an order submission and matching engine at the chain level. This order matching engine is one of Sei's core functionalities, as it allows anyone who wants to build an exchange to easily use this engine to create an order book-based exchange. This means builders can skip the step of building an order book from scratch, making it more efficient in terms of technology and cost.
Moreover, Sei's order matching engine provides a limit order design space similar to conventional centralized exchanges like Binance and Coinbase. It creates a set of orders at different prices and allows updating the asset values based on the executed orders. The benefit of using an order book exchange is that it can offer higher liquidity and a better price discovery mechanism. While technically, launching an order book-based exchange and providing liquidity for it is more challenging than on an AMM DEX, Sei aims to provide a cost-effective system for developers and users of decentralized applications built on the network. In this way, they can build order book-based exchanges more efficiently without compromising security and reliability.
Parallel Order Execution
Sei's parallel order execution is a significant improvement. It is able to process orders within the same market in sequence, while also handling orders from different markets simultaneously. This approach significantly increases Sei's throughput and ensures deterministic behavior among validators. In traditional blockchains, order processing is sequential, meaning each order must be processed in the exact order received, regardless of the assets or markets it interacts with. Sei's approach is different, as it allows orders from independent markets to be processed simultaneously, resulting in faster block times, lower latency, and higher throughput for Sei at all load levels. This marginal improvement is particularly notable under high loads.
According to Sei's internal test data, with 10,000 orders/block and 20 different contracts (markets), parallel processing can reduce block time from 1.33 seconds to 0.81 seconds, latency from 371 milliseconds to 48 milliseconds, and increase throughput from 7,500 orders/second to 12,200 orders/second. As the load increases, the degree of marginal optimization becomes even more significant.
Twin-Turbo Consensus Mechanism
Sei's Twin-Turbo consensus mechanism enhances the Cosmos' ABCI by making each step of the consensus programmable. This consensus mechanism consists of two parts: Intelligent Block Propagation and Optimistic Block Processing.
Intelligent Block Propagation aims to increase the speed and efficiency of block processing. On the Sei Network, block proposers can send compressed block proposals containing only transaction hashes, rather than detailed block content. During the block broadcasting stage, if a validator has all the transactions from the proposal in its local memory pool, it will reconstruct the entire block from its memory pool without waiting for all block parts to arrive. This process significantly reduces the overall time validators spend waiting to receive the block. If a validator's memory pool does not contain a transaction, the validator can simply revert to waiting for uncompromised, detailed proposals to arrive. According to Sei's testing, over 99.9% of the time, validators already have transactions in their local memory pools due to the network's gossip mechanism. This intelligent block propagation method greatly accelerates Sei's throughput while still ensuring the validity of transactions.
Optimistic Block Processing is a blockchain validation method that enables a faster, more efficient validation process. Unlike traditional non-optimistic blockchains, optimistic block processing skips the prevote and precommit steps, allowing validators to call the block finalization function directly, speeding up block validation and voting. On the Sei Network, validators can also optimistically process any first block proposal they receive at any height by initiating parallel processing processes and writing state candidates to cache. This significantly reduces waiting time caused by delays in block production, increasing Sei's throughput.
With the Twin-Turbo consensus mechanism, Sei shortens block confirmation time from Cosmos chain's 6 seconds to 500 milliseconds, achieving the fastest final block confirmation time globally and reaching a throughput of 20,000 transactions per second. This efficient consensus mechanism also makes Sei an efficient, scalable, and programmable blockchain system, providing faster and more efficient services for DEX.
In addition to the three main improvements mentioned above, Sei has incorporated other functionalities at the base layer, including:
1. Single-block order execution: In Sei, it is allowed to place and execute orders in a single block, while in Serum, multiple blocks are required to complete the process.
2. Order bundling: Market makers can update prices for multiple markets in a single transaction, improving efficiency.
3. Frequent batch auctions: Market orders can be aggregated at the end of the block and settled at a single price. This approach aims to try and minimize frontrunning to the greatest extent possible.
4. Native oracle: A native price oracle is integrated into Sei's base layer, ensuring reliable price information from on-chain markets.
The introduction of these features further enhances Sei's efficiency and scalability, making it a more comprehensive blockchain network for providing better services to DEX.
Sei Network Ecosystem Development
The ecological layout has always been a priority for Sei, especially after entering 2023. In January and April, Sei received two ecological investment funds. Among them, the $20 million crypto ecological fund from the cryptocurrency trading platform MEXC, and the $50 million crypto ecological fund from Foresight Ventures and the cryptocurrency exchange Bitget, along with the $50 million investment received in September last year from multiple institutions and market makers such as Multicoin Capital, Delphi Digital, and Hypersphere. As of now, the total size of Sei's ecological fund has soared to $120 million.
These ecological investment funds provide Sei with more resources and support, helping Sei further expand its influence and market share in the blockchain sector. The participation of various organizations also reflects a generally positive outlook on the exclusive trading public chain built by Sei.
Although Sei's mainnet has not yet launched, its ecosystem has already attracted many well-known projects. To date, Sei Network has gathered more than 150 teams developing projects on its platform, covering areas such as infrastructure, DEX, MEV, cross-chain, NFT, and collateral lending. According to the latest financing report disclosure, Sei Network's ecosystem has 120 cooperative projects. About 70 partner projects are currently disclosed on the official website, focusing on areas such as decentralized exchanges, infrastructure, wallets, and cross-chain bridges. The addition of these projects injects new vitality and momentum into the construction and development of Sei's ecosystem while providing users with more choices and services.
Decentralized Exchanges (DEX):
Sushiswap: An AMM-based DEX that launched a decentralized perpetual futures exchange on Sei Network in January 2023.
Satori: A chain-evolution product protocol built on Polkadot, offering a chain-evolution product protocol on Sei Network.
White Whale: A cross-chain liquidity protocol that provides tools for efficient markets by means of arbitrage, flash loans, and cross-chain liquidity pools, conducting airdrop activities on Sei Network to reward Sei's validators and token holders.
Kado: Supports basic setups, allowing Sei users to transfer rules and digital assets using their non-custodial wallets.
Keplr: A cross-blockchain ecosystem wallet that supports Sei Network tokens and applications.
Cosmoscan: Validator node operators and wallet providers offering a Sei Network block explorer.
Gravity Bridge: A cross-chain bridge supporting asset and message transfer between Cosmos and Ethereum, providing open access for DeFi projects in the Sei Network ecosystem.
Axelar: Provides various services, including multi-chain liquidity pools, enabling cross-chain liquidity to enter Cosmos and making it easier for Sei to access liquidity outside of Cosmos.
Sei Network, known as the decentralized Nasdaq, aims to create a blockchain focused on DeFi infrastructure. To achieve this goal, Sei introduces various technical applications to improve the trading experience, including modular order matching, Twin-Turbo consensus, parallel order execution, and native price oracles, among other foundational layer features. By working collaboratively with these protocols, systems, and algorithms, Sei provides the optimal infrastructure for trading applications and exchanges. In the fast-paced world of trading and innovative technology, speed, scalability, and affordability are crucial factors. As a high-performance, general-purpose Layer 1 public chain, Sei has become the preferred solution for traders, developers, and gaming communities alike.