What is Sei? Deep dive into the Layer-1 built for decentralized crypto trading

Imagine a blockchain built for speed and designed to overcome the common challenges of decentralized trading — this is what Sei attempts to achieve. Sei aims to process transactions fast, while still being flexible enough to support everything from trades to gaming and NFTs.

On paper, it could merge the best features of existing technologies without the usual bottlenecks or high fees, so let’s dive in to see how it works and how to use it.

TL; DR

• Sei is a Layer-1 blockchain designed for decentralized trading and asset management.

• It’s designed for speed and could theoretically process up to 12,500 transactions per second, with a block finality of 400 milliseconds.

• Sei could stand out with its parallel processing, cutting congestion, and lowering fees compared to Ethereum.

• Developers, traders, and community members could benefit from easy-to-use tools, low fees, and scalable infrastructure.

What is Sei?

Sei is a Layer-1 blockchain designed to improve the trading of digital assets. Built within the Cosmos ecosystem, Sei wants to solve challenges decentralized exchanges (DEXs) face, such as slow transaction speeds and liquidity issues.

Sei could theoretically handle up to 12,500 transactions per second using advanced technology like parallel EVM processing, with a block finality (the time it takes for a block to be completely processed) of just 400 milliseconds.One key highlight of Sei is its ability to process transactions in parallel. This sets it apart from blockchains like Ethereum, where transactions are processed sequentially, which can sometimes lead to bottlenecks and congestion during peak times, potentially leading to higher gas fees.

With its parallel EVM, Sei could combine the strengths of both Ethereum and Solana, enabling faster and more systematic execution of smart contracts. Sei could be well-suited for building decentralized exchanges, gaming platforms, and NFT marketplaces thanks to its built-in order-matching engine and twin-turbo consensus mechanism.The goal of Sei is to let traders trade in real-time while protecting them from problems like front-running, where other traders change the order of transactions to get an advantage. In this sense, Sei aspires to be a high-speed trading platform, kind of like a decentralized version of NASDAQ, optimized for fast, fair, and transparent trading of digital assets. It’s designed to handle large volumes of transactions without the delays seen in older blockchain networks.

What are Sei’s features?

Sei’s blockchain wants to improve performance and scalability — here’s a breakdown of its features.

Twin-turbo consensus

Twin-turbo consensus is Sei's proprietary consensus mechanism and is designed to deliver high throughput and low latency. It combines the best aspects of Proof-of-Stake (PoS) and Proof-of-Authority (PoA) to achieve optimal performance. Key features of twin-turbo consensus include the following.

• Fast block times: Sei aims for extremely fast block times, enabling rapid transaction processing.

• High throughput: The consensus mechanism is designed to handle a high volume of transactions, ensuring scalability.

• Security: Twin-turbo consensus prioritizes security, leveraging advanced cryptographic techniques to protect the network.

Customizable virtual machines

Sei allows developers to create custom virtual machines, tailored to the specific requirements of their applications. This flexibility enables optimization for performance, security, and specific use cases. By customizing the virtual machine, developers can fine-tune the execution environment to match their exact needs. For example, a high-frequency trading application might require a virtual machine optimized for low-latency execution, while a DeFi protocol might prioritize security and smart contract execution efficiency.

Interoperability

Sei's interoperability capabilities enable cross-chain communication and asset transfers, fostering a more connected and efficient blockchain ecosystem. By breaking down typical network silos and facilitating seamless interactions between different blockchains, Sei empowers developers to build more innovative and interconnected applications. For instance, a DeFi protocol built on Sei could integrate with other blockchains to access liquidity and expand its user base. Additionally, a gaming DApp could leverage interoperability to allow players to use assets from other blockchains within their game, creating a richer and more immersive gaming experience.

Developer-friendly tools and SDKs

Sei provides a comprehensive suite of tools and SDKs to help developers build and deploy applications on the platform. These tools simplify the development process and accelerate time-to-market. Beyond tools and SDKs, the platform fosters a vibrant and supportive developer community through initiatives like hackathons, grants, and educational resources. By providing a welcoming environment for developers of all skill levels, Sei encourages innovation and collaboration.

Security

Unlike many layer-1 networks, Sei puts security first. It uses advanced cryptographic techniques to secure communication and data storage, conducts regular security audits to identify and address potential vulnerabilities, and employs a dedicated security team to monitor the network for threats and respond promptly to incidents. Additionally, Sei provides educational resources to help users understand security best practices and protect themselves from scams and hacks.Overall, these features combined make Sei a powerful platform for building high-performance and scalable DApps, so much so that it's one of the crypto space's top layer-1 networks in market cap.

What is Sei V2?

Source: Sei Network

To build upon its lead, the Sei team announced Sei V2 as a major upgrade to the Sei blockchain that went live in May 2024. This upgrade significantly improved the performance and functionality of the Sei blockchain in the following ways.

• Backwards compatibility of Ethereum Virtual Machine (EVM) smart contracts: Sei V2 introduced a parallelized EVM, allowing for faster and more efficient execution of smart contracts. This means existing EVM smart contracts can run on the Sei V2 chain without any modifications, making it easier for developers to migrate their existing projects to Sei V2.

• Optimistic Parallelization: Sei V2 leverages optimistic parallelization to process multiple transactions simultaneously, significantly increasing throughput and reducing transaction latency. This enables Sei V2 to handle a higher volume of transactions and support more complex applications.

• SeiDB: This custom-built database is optimized for blockchain applications, offering faster query times and improved performance. SeiDB is specifically designed to meet the unique needs of blockchain applications, providing a significant performance boost compared to traditional databases.

• Interoperability with existing chain: Sei V2 maintains interoperability with the existing Sei chain, enabling seamless asset transfers and data exchange between the two. This allows users to leverage the benefits of both chains, such as accessing liquidity and expanding their reach.

These improvements will allow Sei V2 to support many more users and far more interactive experiences than existing blockchains, while offering far cheaper per-transaction costs. Specifically, Sei V2 is expected to offer 28,300 batched transactions per second of throughput, with block times of 390 milliseconds and finality times of 390 milliseconds.

Who can use Sei?

Sei is a blockchain designed to have a wide range of use-cases, so here’s a breakdown of who can use Sei:

Developers

If you’re a developer familiar with Ethereum, Sei could be an excellent platform due to its EVM compatibility. Thanks to its backwards-compatible setup, you can easily port your existing dapps without rewriting code.

Devs in the DeFi, NFT, and GameFi spaces might also find Sei’s tools useful, as the platform supports features like smart contracts using CosmWasm. This helps make building applications more seamless, especially for those familiar with Rust or Solidity.

Traders

Sei can be interesting for high-frequency and algorithmic traders. It’s designed with trading in mind, with its order-matching engine and features like frequent batch auctioning, which can help reduce issues like frontrunning.

The platform’s fast block finality time is also a strong feature for traders that might be put off by the challenges faced by some other DEXs.

Community Members

Sei promises community members a fast and low-fee experience when interacting with dapps. Whether you’re staking tokens, trading NFTs, or using DeFi platforms, the alleged low transaction costs and high throughput can make Sei accessible to those looking for a user-friendly blockchain.

How to get started with Sei?

Getting started with Sei is easy, especially if you’re familiar with crypto wallets and staking tokens. Here’s a simple guide:

Create a Sei Wallet

You’ll need a wallet that’s compatible with the Sei blockchain. If it’s an Ethereum wallet, you can link to the Sei blockchain by adding it as a custom network.Compass Wallet, for example, is tailor-made for Sei and offers additional features like in-wallet staking and a portfolio overview. The OKX Wallet is also compatible with Sei, among more than 100 other decentralized networks, making it a great way to manage all your crypto activities in the same place.

Link wallet addresses

One of Sei’s convenient features is that it supports Ethereum (0x) and Sei addresses. This means you can manage assets across multiple chains without hassle.

You’ll need to link your wallet addresses through the Sei dashboard, making cross-chain interactions simple and fluid.

Explore DApps

Once your wallet is set up, you can start exploring Sei’s growing ecosystem of dapps.

Whether you’re into liquid staking with projects like Silo, or trading onchain with DragonSwap, there could be something for everyone to sink their teeth into.

Staking on Sei

Sei uses a Delegated Proof of Stake (dPoS), where you can delegate your tokens to validators. By doing this, you can help secure the network and, in return, earn staking rewards. You can easily stake SEI tokens directly with OKX Wallet. Getting started with Sei is simple, whether you’re staking, trading, or exploring its dapps. Just set up your wallet, link your addresses, and explore Sei’s ecosystem.

What are SEI’s tokenomics?

Before we dive into SEI’s tokenomics, it’s important to note, we got these details from Sei’s blog written in 2023, before the mainnet launch. If there’s any changes, we’ll update them accordingly, but for now, here’s what we understand.

Sei runs on a decentralized PoS blockchain powered by the SEI token, which plays a few key roles:

• Transaction fees: SEI is used to pay network fees on the blockchain.

• Validator staking: Holders can delegate SEI to validators or stake it to run their own validator, helping secure the network.

• Governance: SEI holders have a say in the future direction of the protocol.

• Collateral: SEI can be used as liquidity or collateral for apps built on Sei.

• Fee markets: Users can tip validators to prioritize their transactions, and delegators can share in these tips.

• Trading fees: SEI can be used to pay for fees for exchanges built on Sei.

The total supply of SEI is capped at 10 billion, mostly allocated to communities and projects being built on Sei:

Community Tokens

51% of SEI tokens are reserved for the community, broken down into:

Ecosystem Reserve (48%)

• Staking rewards: Validators secure the blockchain, propose, and vote on blocks, and add them to the chain. Users can stake SEI to validators in exchange for rewards.

• Ecosystem initiatives: SEI will be distributed through grants and incentives to developers, builders, and network participants contributing to Sei.

Some tokens have already been set aside for projects that reach specific milestones.

Foundation Treasury (9%)

These funds help fund the ongoing operations of the Sei Foundation.

Launch Pool (3%)

Used to support future development.

The blog flagged SEI has no plans for airdrops outside its domain and no SEI ICOs or community sales. Just like with any other token, as the blockchain continues to evolve, there may be changes to the community’s governance.

The governance of the Sei blockchain

Governance on the Sei blockchain is decentralized, meaning stakers — those who lock up their Sei tokens — can propose, discuss, and vote on changes to the network.This can empower the community to participate in important decisions around Sei and keeping the network in check.

Proposal process

• Submit a proposal: Anyone can propose a change by submitting a proposal and paying a deposit.

• Deposit period: The community can add deposits to the proposal. The proposal moves to the next stage if the minimum deposit is met.

• Voting period: The community votes on the proposal.

• Result period: Once voting ends, results are tallied, and the outcome is finalized.

Voting options

When a proposal is up for voting, you have four choices:

• Yes: Agree with the proposal.

• No: Disagree with the proposal.

• No with veto: Strong disagreement — if this passes, the proposal’s deposit is burned.

• Abstain: Participate without taking a side.

What makes a proposal valid?

For a proposal to count, it must hit a quorum, which is a minimum percentage of all staked Sei that needs to participate in the vote.

Types of proposals

Common proposals include:

• Parameter change: Adjust settings in the network modules.

• Community spend: Suggest how to spend funds from the community pool.

• Text proposals: Covering larger decisions or directional shifts.

Voting process breakdown

• Submission: Proposer submits the proposal, and a 2-day deposit period starts.

• Deposit: If the proposal gets 3,500 Sei or more in deposits, it moves forward; otherwise, deposits are burned.

• Voting: The community votes over 5 days, choosing between Yes, No, No with Veto, or Abstain.

• Result: For a proposal to pass:

• 33.4% of all staked Sei must vote (quorum).

• Less than 33.4% vote “No with Veto.”

• More Yes votes than No/No with Veto.

Deposits and spam protection

Deposits act as spam protection. If a proposal doesn’t meet the deposit threshold, it’s scrapped, and deposits are burned. Proposals that reach the voting stage get their deposits back unless vetoed.

The final word

With the successful launch of Sei V2, the platform is well-positioned to become a leader in the layer-1 blockchain space. Its focus on speed, scalability, and security paves the way for a more efficient and user-friendly experience for developers, traders, and community members alike. As the Sei ecosystem continues to evolve and attract innovative projects, we can expect even more exciting developments in the future.

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