Sei Network: Born for trading, the fastest Layer 1 public chain on Cosmos?

Sei Network
2023-06-20 16:41:51
Collection
Sei's built-in order book infrastructure, ultra-fast execution speed, deep liquidity, and fully decentralized matching service provide a more secure, transparent, efficient, and reliable network for DEX, as well as new innovations and development opportunities for the crypto market.

Author: Daniel Li, CoinVoice

The SEC's lawsuit against Binance has been the biggest event in the crypto industry over the past month. As a result of this event, the prices of most crypto assets have halved in the past few weeks, and the crypto market, which had just entered a brief recovery, has once again fallen into the shadow of a bear market. This incident has also caused crypto users to lose trust in centralized exchanges (CEX), further strengthening the necessity to develop decentralized exchanges (DEX). Sei Network, built using the Cosmos SDK as a Layer 1 public chain, aims to become the preferred chain for DEX in DeFi, NFT, and GameFi. Sei's built-in order book infrastructure, extremely fast execution speed, deep liquidity, and fully decentralized matching service provide a more secure, transparent, efficient, and reliable network for DEX, bringing new innovations and development opportunities to the crypto market.

1. Sei is Built for Trading, Aiming to be the Fastest Layer 1 Public Chain

Traditional Layer 1 public chains can be roughly divided into two categories: general-purpose public chains, such as Ethereum and Solana, and application-specific chains, such as dYdX and Osmosis. These public chains each have their unique advantages and characteristics in terms of technical implementation, but they have certain limitations in trading scalability.

As a new Layer 1 public chain, Sei does not take sides between general-purpose chains and application-specific chains. Instead, Sei finds a middle ground between the two, becoming a public chain built specifically for trading. Compared to general-purpose public chains, Sei has optimized every layer of its tech stack to provide the best trading infrastructure. Compared to application-specific chains, Sei is a relatively general public chain that can support various trading applications rather than targeting a specific application. This makes Sei a more flexible and customizable trading infrastructure capable of meeting the needs of different types of trading applications.

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As a public chain focused on trading, Sei aims to solve the scalability issues faced by current on-chain exchanges and become the fastest Layer 1 public chain. To achieve this, Sei has implemented several important improvements to its underlying network architecture, including the industry-leading Twin Turbo consensus mechanism. Sei's technical success largely comes from Twin Turbo consensus, which helps Sei achieve a minimum finality time of 300 milliseconds, ten times faster than Solana. Additionally, Sei has implemented a composable architecture for its order matching module, meaning that dApps on Sei have synchronous composability. Through Sei's numerous bridging partners, the IBC, EVM, and SVM ecosystems will have asynchronous composability, allowing for seamless connections and interoperability between different blockchain ecosystems, enabling developers to flexibly choose the tech stack that suits their needs.

Sei has also increased throughput by 5-10 times through market-based parallelization technology and supports batch order processing, simplifying the process of updating multiple orders across different exchanges. These are innovative features implemented by Sei to optimize the performance of trading applications. Furthermore, Sei's liquidity center and its underlying technology are also very beneficial for the operation of various dApps. Sei's liquidity management system can help DeFi, GameFi, and NFT applications provide users with a deeper liquidity system and cost-effective trading processes while leveraging the agility and efficiency of the Sei blockchain.

Trading is the most fundamental application scenario and use case of blockchain technology, and it is also an important driving force for the development of blockchain and Web3. By creating a dedicated trading public chain, Sei provides an attractive product for developers who wish to build applications on a general Layer 1. The emergence of Sei fills the gap of dedicated trading public chains, bringing new opportunities and challenges for the development of blockchain technology and Web3, while also providing more possibilities for the circulation and trading of digital assets.

2. Sei's Technical Advantages are Disrupting the Traditional DEX Network Environment

With the rapid development of Web3, exchanges, as centralized hubs for asset trading, have become increasingly important. Currently, exchanges are mainly divided into centralized exchanges and decentralized exchanges. In the past, centralized exchanges have dominated. However, with the regulatory lawsuit against the leading centralized exchange Binance, the increased regulatory pressure on centralized exchanges will drive the market towards decentralized exchanges. This requires DEX to scale and adapt to the massive wave of adoption.

Given that DEX has unique requirements for speed, throughput, reliability, and front-running, it is necessary to build dedicated infrastructure to address these issues. Sei was born for this purpose, providing solutions to the scalability problems of DEX and enabling exchange applications to scale effectively while maintaining decentralization and capital efficiency. Sei's technical advantages mainly include the following aspects:

1. 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, Sei's distinguishing feature is that it has created an order placement and matching engine at the chain level. This order matching engine is one of Sei's core functions, 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.

In addition, 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 for asset value updates based on executed orders. The benefit of using an order book exchange is that it can provide higher liquidity and better price discovery mechanisms. Although 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. This way, they can build order book-based exchanges more efficiently without sacrificing security and reliability.

2. Parallel Order Execution

Sei's parallel order execution is a significant improvement. It can process orders within the same market sequentially while simultaneously handling orders from different markets. This approach significantly increases Sei's throughput while ensuring deterministic behavior among validators. In traditional blockchains, the order of order processing occurs, 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; it allows orders from independent markets to be processed simultaneously, leading to faster block times, lower latency, and higher throughput across all load levels. This marginal improvement is particularly significant under high load.

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According to internal testing data from Sei, under the conditions of 10,000 orders/block and 20 different contracts (markets), parallel execution 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 pronounced.

3. Twin-Turbo Consensus Mechanism

Sei's Twin-Turbo consensus mechanism optimizes and upgrades the ABCI of Cosmos, making each step of consensus programmable. This consensus mechanism consists of two parts: smart block propagation and optimistic block processing.

Smart block propagation aims to improve block processing speed and efficiency. On Sei Network, block proposers can send compressed block proposals that only contain transaction hashes instead of detailed block content. During the block broadcasting phase, if a validator has all the transactions in 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 total time validators wait to receive blocks. If a validator does not have the transactions in its memory pool, it can simply revert to waiting for an uncompressed detailed proposal. According to Sei's tests, in over 99.9% of cases, due to the gossip mechanism of the network, each validator already has the transactions in its local memory pool. Therefore, this smart block propagation method can greatly accelerate Sei's throughput while still ensuring the validity of transactions.

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Optimistic block processing is a blockchain validation method that enables faster and more efficient validation processes. Unlike traditional non-optimistic blockchains, optimistic block processing skips the pre-vote and pre-commit steps, allowing validators to directly call the block finalization function, thereby speeding up block validation and voting. On Sei Network, validators can also optimistically process any first block proposal they receive by initiating a parallel processing procedure and writing state candidates to cache. This greatly reduces the waiting time caused by delays in block production, thereby improving Sei's throughput.

Through the Twin-Turbo consensus mechanism, Sei has reduced block confirmation time from 6 seconds on Cosmos chains to 500 milliseconds, achieving the fastest final block confirmation time in the network 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 also added other features at the foundational layer. These include:

(1) Single Block Order Execution: In Sei, placing and executing orders within a single block is allowed, while in Serum, multiple blocks are required to complete this 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 a block for settlement at a single price. This method aims to attempt and minimize front-running.

(4) Native Price Oracles: Native price oracles are integrated into Sei's foundational layer, ensuring reliable price information from on-chain markets.

The introduction of these features can further enhance Sei's efficiency and scalability, making it a more comprehensive blockchain network that provides better services for DEX.

3. Sei Network Ecosystem Development Status

Ecosystem layout has always been a focus of Sei's development, especially after entering 2023. In January and April, Sei received two rounds of ecosystem investment funds. Among them, the $20 million crypto ecosystem fund from the crypto trading platform MEXC and the $50 million crypto ecosystem fund from Foresight Ventures and the cryptocurrency exchange Bitget, along with the $50 million investment received from numerous investment institutions and market makers such as Multicoin Capital, Delphi Digital, and Hypersphere last September. As of now, the total scale of the Sei ecosystem fund has soared to $120 million.

These ecosystem investment funds provide Sei with more resources and support, helping Sei further expand its influence and market share in the blockchain field. The participation of numerous institutions also reflects the general optimism about the prospects of the dedicated trading public chain that Sei is building.

Currently, although Sei's mainnet has not yet launched, its ecosystem has already attracted many well-known projects. As of now, over 150 teams are developing projects on Sei Network, covering various fields such as infrastructure, DEX, MEV, cross-chain, NFT, and collateral lending. Regarding ecosystem projects, according to the latest financing report, there are already 120 cooperative projects in the Sei Network ecosystem. Approximately 70 cooperative projects are currently disclosed on the official website, with key areas covering decentralized exchanges, infrastructure, wallets, and cross-chain bridges. The addition of these cooperative projects injects new vitality and momentum into the construction and development of the Sei ecosystem, while also providing users with more choices and services.

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Key Projects of Sei Network

1. Decentralized Exchanges (DEX):

  • Sushiswap: An automated market-making DEX that launched a decentralized perpetual futures exchange on Sei Network in January 2023.

  • Satori: An on-chain evolution product protocol built on Polkadot, providing an on-chain evolution product protocol on Sei Network.

2. Infrastructure:

  • White Whale: A cross-chain liquidity protocol that provides tools for efficient markets through arbitrage, flash loans, and cross-chain liquidity pools, which will conduct airdrop activities on Sei Network to reward Sei's validators and token holders.

  • Kado: Supports basic setups, allowing Sei users to use its non-custodial wallet transfer rules and digital assets.

3. Wallets:

  • Keplr: A wallet for cross-blockchain ecosystems that supports Sei Network's tokens and applications.

  • Cosmoscan: A block explorer provided by validator node operators and wallet providers for Sei Network.

4. Cross-Chain Bridges:

  • Gravity Bridge: A cross-chain bridge that supports the transfer of assets and messages between Cosmos and Ethereum, providing open access for DeFi projects in the Sei Network ecosystem.

  • Axelar: Capable of providing various services, including multi-chain liquidity pools, facilitating cross-chain liquidity into Cosmos, making it easier for Sei to access liquidity outside of Cosmos.

4. Conclusion

Sei Network is hailed as the decentralized Nasdaq, aiming to create a blockchain focused on DeFi infrastructure. To achieve this goal, Sei has introduced multiple technical applications to improve the trading experience, including modular order matching, Twin-Turbo consensus, parallel order execution, and various foundational layer features like native price oracles. By synergizing these protocols, systems, and algorithms, Sei provides the best 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.

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