Sei Network: What It Is And How To Use It

By Lipsa Das

One key use case of blockchain technology lies in trading digital assets.
However, not all blockchains are designed for this type of value transfer. In fact, the architecture of some blockchains makes trading digital assets more of a challenge than a feature.

Issues like low liquidity and lack of transparency become persistent problems due to the sheer volumes of transactions and the lack of proper infrastructure. Some networks are great at offering fast transaction times but don’t have the security and decentralization to run defi apps at scale. Then other networks can support decentralized apps, but struggle with congestion, meaning interacting with these apps is too slow and expensive. While many chains opt to build upon another network to achieve their goals (i.e. via layer two solutions), other networks focus on building app-complementary infrastructure on the original network. 

One such network is Sei. In short, its innovative architecture allows developers to design scalable decentralized apps. But what is the Sei blockchain? To understand its role in the crypto ecosystem, let’s explore SEI: from its founders and ethos to its token and the network’s future.

What Is The Sei Network?

Sei is an open-source Layer 1 blockchain that optimizes the trading of digital assets. 

The Sei Network is one of the fastest blockchains in existence, boasting a theoretical speed of executing 12,500 transactions per second and a block finality time of 380 milliseconds. These high-speed transactions make Sei suitable for building decentralized exchanges, gaming finance (GameFi) platforms, and NFT marketplaces.

Sei was built using the Cosmos SDK framework, thus it is interoperable with the Inter-Blockchain Communication Protocol (IBC). Using this framework, SEI can seamlessly exchange data and tokens across different IBC networks while retaining a unique underlying infrastructure.

Who Is Behind Crypto Network Sei?

Jeffrey Feng and Jayendra Jog co-founded the San Francisco-based Sei Labs in 2021. Then Sei Labs launched the Sei Network in August 2023. Before Sei, Feng worked at Goldman Sachs and Coatue Management while Jog was a software engineer at Robinhood. The Forbes 30 under 30 list featured them for their contributions to the Sei ecosystem in 2023.

Head of Ecosystem at Sei Labs,  Dan Edlebeck, has also played a key role in the network’s development. He was previously the co-founder and CEO of the web3 protocol, Exidio.

Working together, they managed to secure funding worth over $120 million from notable venture capital firms, such as Multicoin Capital, Jump Crypto and Coinbase Ventures, Delphi Digital to make SEI a reality.

What Is Sei For?

Sei’s Layer 1 network mainly provides an infrastructure to build high-performing and user-friendly DeFi apps. But of course, there’s a bit more to the network than that. To understand SEI’s role, let’s look at each of the reasons you may want to use the network.

DeFi Applications

Centralized exchanges (CEXs) use off-chain order books to control a major share of the total crypto trading volume. Although these exchanges are fast, cheap, and capital-efficient, they go against blockchain’s fundamental principle of decentralization.

While decentalized exchanges (DEXs) already exist across multiple chains, they often cause network congestion and slow execution. The only way to make DEXs as efficient as CEXs without compromising on decentralization is to use a better underlying network.

The Sei Network has a built-in order book infrastructure and a native order-matching engine. This allows developers to build scalable, decentralized exchanges with more stable liquidity.

Superfast Transactions

A blockchain’s transaction speed depends on the time it takes validators to reach a consensus to determine the transaction’s validity. This process involves block proposal and finalization, which usually takes some time.

The Sei network reduces a block’s ‘time to finality’ to less than 400 milliseconds via its custom consensus mechanism. Without getting too technical, it means SEI can execute multiple transaction orders simultaneously; leading to faster block finality.

Mitigating Frontrunning

Frontrunning occurs when a trader uses their knowledge of pending transactions to sneak in their own trades before someone else’s. The Sei network has a method in place to minimize this frontrunning called frequent batch auctioning. Put simply, this batches and clears market orders at a fixed price to prevent traders from placing orders in queues. In doing so, SEI promotes a much fairer trading environment.

Interoperability

As part of the Cosmos ecosystem, Sei is interoperable with IBC blockchains, which makes cross-chain communication more scalable and efficient. Plus, apps are easily migratable, as SEI uses CosmWasm, a standardized smart contract platform for Cosmos blockchains. This also means the ecosystem is inviting to new developers as CosmWasm provides a comprehensive toolkit and enables developers to write interoperable contracts in a familiar programming language, Rust.

What Is SEI Coin?

The SEI coin is the native currency of the Sei Network, which functions as a utility and governance token in the Sei ecosystem. Users can pay transaction fees in SEI tokens for all on-chain activities within the network. The token also serves as native liquidity to provide collateral on Sei-based lending-borrowing apps.

The total supply of SEI tokens is 10 billion, with an allocation as follows:

• Ecosystem Reserve: 48%.
• Foundation: 9%.
• Team: 20%.
• Launchpool: 3%.
• Private Sale Investors: 20% 

Network validators can also stake SEI tokens or delegate their assets to secure the network and earn rewards. Users can also tip validators in SEI to prioritize their transactions. Plus, there are plans to introduce protocol governance in the future.

How Does The Sei Network Work?

The Sei Network uses a Twin-Turbo consensus mechanism to address blockchain efficiency and improve block finality. These features along with its built-in orderbook and matching engine promise a more efficient, transparent, and user-friendly trading experience. 

Twin-Turbo Consensus

Before explaining the Twin-Turbo consensus, it’s important to understand that it’s based on Cosmos’ Tendermint consensus.

Tendermint consensus offers a ‘single slot finality’, which provides instantaneous block finalization. It has a 6-second block finality time and almost negates the waiting period to finalize blocks on the network. Using Tendermint, a block proposer creates a block and distributes it to the validators. However, the validators still have to wait to receive all relevant data to reach a consensus and finalize the block. This process takes about 13 minutes on most blockchains.

The Twin-Turbo Consensus builds on the Tendermint to bring down block finality to around 380 milliseconds. It adopts an intelligent block propagation technique and optimistic block processing to reduce the ‘time to finality’. Let’s see how that works.

Intelligent Block Propagation

While most blockchains communicate all of the details of a transaction at the block propagation stage, SEI uses an alternative method. Essentially, block proposers on the SEI network can transmit compressed block proposals that only include transaction hashes rather than each transaction’s full details.

This intelligent block propagation avoids unnecessary waiting time and increases transaction throughput by over 40%.

Optimistic Block Processing

On traditional blockchains, block processing has two critical steps: the pre-vote and pre-commit steps where validators reject invalid blocks. SEI skips both of these steps by directly finalizing blocks.

Validators ‘optimistically’ process transactions when they receive a block proposal instead of waiting for the pre-commit stage to end. In other words, they process transactions before they are fully validated. If any blocks they add are invalid, validators will delete them from the cache and stop block processing at that block height. This optimistic processing significantly speeds up transactions.

Built-in Orderbook and Matching Engine

Besides the Twin-Turbo consensus, Sei network is packed with features to optimize DEX trading.

Sei has an in-built order placement and matching engine at the Layer 1 level, which allows it to develop on-chain orderbook-based crypto exchanges. This chain-level engine helps developers build a Central Limit Order Book (CLOB) system for decentralized trading platforms. CLOB is a cost-effective, transparent, and capital-efficient method to trade assets on exchanges compared to other DEX trading methods like Automated market makers (AMMs).

Native Price Oracle

Sei incorporates a native price oracle, providing accurate real-world data and asset valuations. This price oracle helps validators to agree on a correct asset price before executing a transaction and adding it to the blockchain.

Parallel Order Execution

Parallel order execution modifies the block production process to enable Sei to process orders from independent markets simultaneously to maximize transaction throughput. Orders from the same market, on the other hand, are processed one after the other to ensure deterministic behavior from network validators.

Single Block Order Execution

Single-block order execution allows traders to place orders and execute them within a single block. High-frequency crypto traders directly benefit from this feature, as they must quickly complete trading orders to book profits.

Order Bundling

Order bundling enhances the trading process, making it easier for market makers to supply liquidity with greater efficiency. By aggregating orders, Sei offers a cost-saving mechanism for managing trades. It further allows market makers on decentralized exchanges to update token prices on multiple markets in one go. 

The Future of Sei Network

The Sei roadmap demonstrates the Sei Labs team’s commitment to technical innovation and expanding the Sei ecosystem. To illustrate, it is currently working on upgrading the network to launch the first Parallelized Ethereum Virtual Machine (EVM) to scale Ethereum-based apps. After the Sei v2 upgrade, Sei will support both CosmWasm and EVM execution environments.

Sei Labs is also launching Parallel Stack, an open-source framework for Layer 2 solutions and rollups that leverages parallel processing. The Parallel Stack will help all Ethereum L2 networks to become more efficient.

While SEI is not yet available in Ledger Live, the teams are working together to make this integration a reality. So watch this space and you’ll be able to protect your SEI assets in no time.