Sei (SEI): Overview of an ultra-fast blockchain for trading

What is Sei?

Sei is a layer 1 blockchain designed to enable the creation of decentralized financial applications, with an infrastructure optimized for performance. Unlike traditional blockchains, which are often generalist, Sei has chosen to specialize in one sector: trading applications.

Thus, Sei is built to support high-frequency trading and large volumes, thanks to high transaction capacity, fast confirmation and validation, low latency, and particularly low fees.

Sei’s infrastructure is based on an improved version of the Cosmos SDK, integrating parallel execution of transactions, a decentralized order book, SeiDB (an optimized database), and the desynchronization of consensus and execution. This allows Sei to offer 12,500 transactions per second (TPS) with a finality time of 380 ms.

Launched in 2022 by a team composed of former members of Robinhood, Google, Databricks, and Goldman Sachs, the project is led by Sei Labs, a startup that has raised a total of 85 million dollars across three funding rounds. Sei’s mainnet launched in August 2023, accompanied by an airdrop of SEI to early participants.

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Sei’s Thesis

The current landscape of smart contract blockchains is heavily centered around decentralized finance. While this is not their only use case, it remains the most significant. In the case of Ethereum, more than 100 billion dollars circulate in decentralized finance.

Despite this success, Ethereum is often criticized for its slowness and low throughput. These limitations are not just about transactions per second, as some financial applications also require high throughput and fast transaction validation. Developing these applications directly on Ethereum is therefore a real challenge, sometimes almost impossible.

Sei’s idea is to capitalize on Ethereum’s strengths by offering a blockchain focused on decentralized finance, creating a version of the EVM presented as "100 times more powerful" while maintaining a high level of security.

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Sei’s Architecture and Technology

Parallel Execution

Modern computer processors can perform billions of calculations per second, but they can only execute one at a time. A commonly used method to accelerate applications is parallelization.

This involves distributing the tasks of a process among the cores of the same processor to accelerate transaction throughput. While this technique is widely used in computing, it is much less common in blockchains, and many do not utilize it (e.g., Ethereum). Naturally, this greatly limits the capacity of these blockchains to process transactions.

Sei uses optimistic parallelization, which distributes transactions among the cores of each validator. If two transactions collide because they interact with similar data, the protocol analyzes their code to determine whether the two transactions are related. If so, they will be executed in series, in the correct order, on the same core; otherwise, they will be distributed across multiple cores.

Twin Turbo Consensus

Consensus is the method by which network validators agree on the validity of transactions and their order. It is a central component of a blockchain, whose optimization is essential for fast transactions.

Sei relies on a consensus called Twin Turbo, which is an improved version of Cosmos’ Tendermint. The key feature of Twin Turbo is single slot finality, meaning that transactions are finalized when the block is published in just 6 seconds. This consensus was improved by Sei Labs with two major modifications: smart block propagation and optimized block processing. These optimizations enable transaction finality in less than 400 ms.

When a Sei validator is designated to create a new block, it builds it and sends it to its peers. However, instead of sending the entire block as done on other blockchains, the validator first sends a compact version containing only the identifiers of the validated transactions. This smart block propagation aims to minimize the time validators spend waiting to receive information.

Sei also optimizes how blocks are processed. In the original Tendermint consensus, validators must vote on the validity of the block and wait for two-thirds of validators to do the same before executing it. Sei uses optimistic block execution, which begins calculating results before receiving votes from other validators. If the block is found invalid, the transactions in the cache are deleted, and the work restarts from scratch. However, if the block is accepted by the network (which is the case most of the time), its execution will have already been completed. This way, Sei achieves a consensus that finalizes transactions in 400 ms.

SeiDB

Data storage is a critical element for smart contract blockchains, especially for a blockchain specialized in financial applications. This allows the recording of key information such as user balances, transaction history, etc. Validators must constantly access this information to validate transactions. Poor optimization of these databases can therefore have significant impacts on blockchain speed and significantly reduce transaction throughput.

To meet the desired performance needs, Sei’s team developed SeiDB, its own optimized database. A common issue for high-performance blockchains is that data storage quickly becomes excessive, and SeiDB provides a solution by adopting a structure divided into two layers: the State Commitment Layer and the State Storage Layer.

The State Commitment Layer provides only the latest state of the blockchain, allowing validators to perform their tasks optimally without accessing all previous information. The State Storage Layer is a long-term storage solution where network nodes store data for the long term. This storage has been optimized with pruning and metadata optimization, which, according to Sei Labs, reduces the amount of data generated by the chain by 90%.

EVM and CosmWasm Interoperability

Sei has the unique feature of combining two execution environments: EVM (Ethereum Virtual Machine) and CosmWasm (WebAssembly on Cosmos). This allows developers to choose between Ethereum smart contracts and Cosmos smart contracts.

To facilitate communication between these two environments, Sei Labs has implemented Pointer Contracts, which allow a CW-20 token to be used as an ERC-20 in EVM applications without duplication or asset wrapping. Sei also uses precompiled contracts that translate communications between the two environments.

On Sei, each wallet has two addresses: one starting with "0x" for EVM applications and a Sei address for CosmWasm applications. Even though these are two different addresses, they belong to the same unique wallet.

Staking SEI

The native SEI token plays a central role in network security and governance. Sei uses a delegated Proof of Stake mechanism where 39 validators ensure network security and verify transactions. To become or remain a validator, a node must accumulate a large quantity of SEI tokens, either their own or those delegated by other individuals.

These delegators contribute to network security by providing SEI tokens to validators, who can then gain influence over the network and earn more rewards. This model is particularly common for next-generation blockchains.

Active validators receive rewards through SEI token emissions as well as transaction fees included in the block. Like other PoS chains, Sei has slashing mechanisms in place for validators behaving maliciously (e.g., validating harmful blocks or frequently going offline), ensuring that network security is maintained through clear economic incentives.

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Sei Ecosystem

Since its launch, Sei has successfully cultivated an ecosystem of around sixty applications and integrated numerous players in the ecosystem, including bridges, wallets, and decentralized exchange platforms. The majority of applications are focused on the decentralized finance sector, which is Sei’s main use case.

Grants and Funding

Sei Labs is committed to stimulating its ecosystem through a grant program. The Sei Foundation has established a fund exceeding $100 million. More than 200 projects have already received funding, either through direct grants, incubations, or hackathons.

On one hand, direct grants target specific projects developing solutions for the Sei ecosystem, such as open-source tools, shared infrastructure, and protocol improvements. These grants can support projects not only in DeFi but also in gaming and DeSci (Decentralized Science).

On the other hand, Sei has partnered with the Gitcoin platform to launch a decentralized community funding program. This fund, valued at up to $20 million, allows the Sei community to vote and decide on the allocation of resources to projects proposed during different waves of grants.

For instance, a $10 million Creator Fund has been announced, with multiple phases already completed, aiming to encourage the development of educational content, developer tools, and new smart contracts that leverage Sei's unique features (parallelization, Twin Turbo, SeiDB, interoperability).

This model, combining funding from the foundation and the community, ensures a continuous flow of new projects and strengthens the engagement of both the community and developers.

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Conclusion

Sei positions itself as a next-generation blockchain optimized for decentralized financial applications. With its parallel execution, ultra-fast consensus, and EVM/CosmWasm interoperability, it aims to overcome the limitations of existing blockchains. Supported by a dynamic ecosystem and an ambitious funding program, Sei has the potential to become a key player in the world of decentralized trading.