Introduction

Sei Network is a sovereign layer 1 blockchain within the Cosmos ecosystem that is still under development. It will serve as advanced infrastructure for DeFi applications, especially for those leveraging its natively integrated central limit order book (CLOB).

Currently, there is an incentivized testnet live for whitelisted users. Sei will be a highly scalable “use case-specific” blockchain with a design that massively benefits DeFi developers and users alike, built by some of the most qualified minds in the game.

The Problem

For the most part, blockchain ecosystems are confined to the uniform framework of the chain they are built on. Developers are limited in how they can design their application simply because of the “one size fits all” development environment prevalent in most layer 1s.

dApp users on general purpose layer 1s have to share a substantial amount of block space with the rest of their native ecosystem and suffer during congestion. These dApps aren’t interoperable either, so they can only interact with other applications built on the same chain.

The Goal

Sei will be the first order book-oriented blockchain ever built. As a Cosmos chain it will have its own validator set, leverage Tendermint Consensus, and connect to 50+ other interoperable layer 1s using IBC. It will include built-in features like a universally accessible order book, price oracles, frontrunning protection, and more.

Those building on Sei can access a wide range of tools for customizing their application in order to meet its exact needs. They will not be restricted by a uniform development framework like other chains, nor will they have to build their own app-specific chain to achieve this.

How Does it Work?

Being a use case-specific layer 1, Sei takes a hybrid approach by combining the benefits of a general purpose blockchain and an app-specific blockchain custom designed for DEXes. It is not permissionless, so governance must approve any smart contract before it is deployed on the network. Sei supports both Solidity and CosmWasm smart contracts.

It will specialize in having an onchain order matching engine to facilitate trades. Order books work by matching buy orders and sell orders at given prices, whereas automated market maker (AMM) users trade with a pool of liquidity. Sei applications and the broader IBC ecosystem can plug into its built-in central limit order book (CLOB) in order to take advantage of its deep liquidity.

Sei brings sub-second finality (~600 ms) with several features that greatly reduce block times. Users can save on gas and pack multiple orders for different assets into one transaction thanks to Sei’s “order bundling”. Going a step further, the network then aggregates like orders (e.g. $ATOM) from these order bundles and packs those into a single contract execution.

Transactions are normally processed in the order they are received even if they are for different assets, but Sei has another feature “Parallelism”. This allows bundled orders from different trading pairs to be processed and matched simultaneously (or in parallel), rather than having to wait “in line” to be processed sequentially. All of this in sync makes Sei one of the most scalable chains ever built, especially for traders.

Sei is also built with MEV protection in mind. MEV basically refers to the profit made by others who frontrun orders in a mempool. Sei will batch market orders together every block, and with its “Frequent Batch Auctioning” mechanism the orders are executed together at the same price. Not only does this mean faster trades, but traders are well-protected from frontrunning.

How Does it Work? Nitro

Sei Labs is directly involved in the development of Nitro, a portal between the Cosmos and Solana ecosystems. Nitro is a layer 2 built on top of Sei that anyone can deploy applications on. It will function like a rollup by batching and sending transaction data to Sei.

Nitro will uniquely leverage Solana’s Sealevel Virtual Machine (SVM). In this, Nitro will be a way for Solana developers to easily port their dApps into the IBC ecosystem, and Solana users can access Nitro dApps using their native Phantom wallet!

Partnerships

Sei already has a growing family of applications and established partnerships within the IBC ecosystem. The Vortex perpetuals exchange and Pharaoh synthetic assets protocol are both launching natively on Sei. Recently a new stablecoin protocol known as UXD announced its intentions to launch on the network as well. A partnership with the Axelar IBC bridge has been established in order to facilitate cross-chain DeFi interactions beyond the IBC ecosystem between Sei and other EVM-compatible chains.

With its order book infrastructure, Sei can attract a diverse set of protocols that specifically benefit from using this framework. Sei has the potential to connect to other IBC chains and their ecosystems to become a new go-to liquidity hub for the internet of blockchains.

Tokenomics

$SEI Price: N/A

Market Capitalization: N/A

Circulating Supply: N/A

Total Supply: N/A

There is very limited information on the $SEI token. It is the governance token of the network and as of now will be airdropped to $ATOM, $LUNA, and $SOL stakers. Expectedly, $SEI will be used to pay gas fees on the network as well, but $SEI validators can opt to accept other IBC tokens for gas if the token has been approved by governance.

Conclusion

Sei is a much-needed addition to the Cosmos universe. At launch, Sei will position itself to capture the huge demand for interchain DeFi. As more new protocols and developments hit Cosmos in the long run, Sei will undoubtedly cement itself as a fundamental DeFi block of the IBC ecosystem.

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