1. Fundamental analysis
1. Basic situation
Sei is built based on Cosmos SDK and Tendermint Core. It is a Layer 1 blockchain for the DeFi field. It aims to bring the order book model to the chain, thereby narrowing the speed gap between DEX and CEX and becoming the "crypto Nasdaq" .
Sei is a general chain focused on transactions rather than an application chain dedicated to specific applications. In other words, Sei is a blockchain optimized for transactions. It achieves this positioning through the order matching system, native matching engine, twin-turbo consensus, transaction parallelism and other features:
(1) Core-order matching system and native matching engine:
As a Layer 1 “born for trading”, Sei does not use either AMM or traditional order book mechanism when processing transactions. Instead, it chooses a set of compromises – Central Order Book (CLOB). CLOB builds an order matching engine in the lower-level structure of the chain, trying to solve this problem by "built-in" the order book in the chain (Sei does not manage the order book, but it only provides an order matching framework). Various DeFi protocols on Sei can utilize this order matching engine. A major problem in the existing DeFi ecosystem is that the liquidity of each DeFi protocol is fragmented, but with Sei, all DeFi protocols share an order matching engine that can An order matching engine that provides deep liquidity.
As a simple example, suppose there are "Red Dex" and "Blue Dex" on the SEI. If User A submits an order on Red Dex to sell 1 ETH for $2,000, and User B submits an order on Blue Dex to buy 1 ETH at the market price, Sei’s order matching engine will match the two orders. Generally speaking, DeFi networks have problems with liquidity fragmentation, as each DeFi tends to maintain its own liquidity, but Sei provides a very deep liquidity pool that brings together all the liquidity related to the matching engine , minimizing users’ financial losses due to collateral effects such as slippage.
(2) Twin-Turbo Consensus: Twin-Turbo consensus includes two functions: 1) Intelligent block propagation for efficient block propagation; 2) Optimistic block processing to improve scalability by reducing block time.
1) Intelligent block propagation: In a typical blockchain network, a block proposer collects transactions in its local memory pool, forms them into a block, and propagates it to the network. During this process, a single block containing all transaction data is propagated to the network, meaning that even if a full node already has almost all transactions, the regular blockchain network is still propagating blocks with the same transaction data. This is a waste of bandwidth.
In Sei, the block proposer does not include transaction data in the block proposal, but the hash of the transaction, and the block ID, which is a reference to the block. The hash value of a transaction is a hash function that summarizes existing transaction data, so it has the advantage of being small in size. The block proposer first propagates the block proposal to the network, as shown in the figure below, and then propagates the complete block into smaller chunks. If a validator that receives a block proposal from a block proposer already has all transactions corresponding to that hash in their local mempool, then they will reconstruct the block from their local mempool instead of waiting for the complete blocks to reach them. If a particular validator loses a transaction in its local mempool (very unlikely), it can wait for the entire block to arrive at it.
Source: Four Pillars, Jay-Sei Labs
The benefit of this smart block propagation process is that it greatly reduces the time it takes for validators to receive blocks. According to co-founder Jay, this process has been proven to increase Sei’s overall scalability by 40%.
2) Optimistic block processing:
Sei uses the Tendermint core, but with some modifications to significantly reduce block times and improve scalability. At its core, Tendermint is a consensus engine that combines the Delegated Proof of Stake (DPoS) and PBFT consensus algorithms. Tendermint BFT consensus process is: Propose — — Prevote (2/3 consensus) — — Precommit (2/3 consensus) — — Commit
Sei's Optimistic Block Processing modifies the Tendermint BFT process. In the general BFT process, there is a block processing process between Precommit and Commit. It is assumed that there are few malicious nodes and the verifier has received the data required for calculation in the Propose stage from the Prevote stage. . Therefore, in order to further reduce the block generation time, Sei began to process calculations in parallel with Prevote. Reducing block times through optimistic block processing should not be a problem since most of the time there is no issue with the validity of the block, but if the block is rejected by the network during pre-voting and pre-commit when calculations are performed, it can simply be discarded.
Source: Four Pillars, Jay-Sei Labs
Taking a set of Sei data, according to the normal Tendermint BFT method, the total block time is 200+150+150+400+100, which is 1000ms. Optimistic block processing will save 300 milliseconds of pre-voting and pre-commit time, reducing the block time to 700 milliseconds. If the block size remains unchanged, reducing the block time from 1000ms to 700ms means that there are 1000/700 blocks in the same time, which is about 1.43 times more and 43% more scalability
(3) Transaction parallel processing:
Another method used by Sei to enhance scalability is the parallelization of transactions. The Ethereum Virtual Machine (EVM), the most popular virtual machine in the blockchain industry, processes transactions sequentially, which inherently limits scalability. The Cosmos SDK on which Sei is based also handles transactions serially by default. In the Cosmos application chain, when a block is received, the validator executes BeginBlock logic, DeliverTx and EndBlock logic in sequence, while Sei modifies DeliverTx and EndBlock to process transactions in parallel.
First, the DeliverTx process handles transactions such as token transfers, governance proposals, and smart contract calls, and it is important to ensure that transactions processed in parallel do not reference the same key. For example, two transactions in which A sends X tokens to B and C sends Y tokens to D can be processed in parallel, but two transactions in which A sends X tokens to B and B sends X tokens to C cannot be processed in parallel, so They will be processed continuously.
In order to parallelize multiple transactions, you need to ensure that they do not reference the same keys, so Sei built a DAG (Directed Acyclic Graph) to check the dependencies between transactions before executing them. In the figure below, suppose the DAG shows that R3 in the middle depends on R2 in the first column, and R3 in the third column depends on W1 in the middle. As a result, the transaction will be processed as shown on the right.
Source: Four Pillars, Jay-Sei Labs
In the last part of the block, EndBlock, transactions related to the matching engine are executed by the native order matching engine. Likewise, transactions related to the matching engine are not processed in serial order, but in parallel after confirming that they are not related to each other.
By default, the network is designed to assume that all transactions are irrelevant and process them immediately, and if relevant transactions exist, only those transactions will fail. Therefore, application developers based on Sei's order matching engine must first filter out which transactions are relevant and which are not. Data from parallelization experiments on Sei, compared to the case without parallelization, its performance in terms of block time, TPS, etc. is improved by 60–90%.
2. New narrative of parallel EVM
Since the official launch of Sei's public mainnet Pacific-1 on August 16, 2023, the plan for the Sei-V2 version was released on November 29, 2023, which will support the first parallel EVM.
Sei currently allows the use of Cosmwasm smart contracts written in Rust. As Sei continues to attract more developer interest and ecological expansion, the biggest request from developers is for greater flexibility in the execution environments supported by Sei. With support for parallel EVM, Sei is available to EVM developers worldwide.
Origin: Sei Labs
(1) What is parallel evm?
Parallel EVM (Ethereum Virtual Machine) is a concept designed to improve the performance and efficiency of existing EVM. EVM is the core of Ethereum and is responsible for running smart contracts and processing transactions. The current EVM has a very important feature: transactions are executed sequentially.
Sequential execution ensures that transactions and smart contracts are executed in a deterministic order, making it easier to manage and predict the state of the blockchain. This design choice prioritizes safety and reduces potential complexities and vulnerabilities associated with parallel execution, but can lead to network congestion and latency when faced with high loads.
Think of the original design of EVM as vehicles moving forward one after another on a single lane. Each vehicle must travel at the speed of the vehicle in front. Once a vehicle (transaction) is congested, all other subsequent vehicles will be blocked on the road; Parallel EVM is like extending this one-way street into a multi-lane highway, allowing multiple vehicles to drive at the same time. From a technical perspective, parallel EVM allows different independent transactions or smart contracts to proceed simultaneously, greatly improving EVM processing speed and system throughput.
General parallel EVM processing methods:
- Partitioning or sharding: Partition or group transactions so that they can be executed in parallel. This means that different transactions can be executed on different processing units at the same time, rather than one after another. In addition, Solana's SVM uses similar processing logic.
- Optimization algorithms: Develop new scheduling algorithms and optimization techniques to effectively manage and execute parallel tasks while maintaining the correctness and order of transactions.
- Security and consistency guarantee: Implement complex synchronization mechanisms and consistency models to ensure that the security and data consistency of the entire system can be maintained even in the case of parallel processing.
In short, by processing transactions in parallel, EVM can process more transactions at the same time, significantly improve TPS, reduce network congestion, and improve scalability.
(2) Key to the implementation of sei v2
1) Backward compatibility of EVM smart contracts - allows developers to deploy audited smart contracts from EVM-compatible blockchains without requiring code changes, supporting reusability of familiar and widely used applications and tools (such as Metamask) sex:
Backward compatibility means that a new product is designed with previous products in mind and can be used as-is, even if it was made for the previous product. Backwards compatibility in the design of Sei V2 means that most existing smart contracts on Ethereum can be deployed on the Sei blockchain without any code changes.
Origin: Sei Labs
2) Optimistic parallelization - allows the chain to support parallelization without requiring the developer to define any dependencies:
Sei V2 processes transactions in parallel, executing them first assuming all operations are valid, and then re-running them if something goes wrong during validation. The result of processing should be the same as the result of sequential processing. In short, Sei V2 takes an optimistic approach, processing transactions first and using information about any issues that arise to process the transaction, rather than verifying the relationship of the transaction ahead of time. Optimistic parallelization will apply to all transactions running on Sei, including Sei native transactions, Cosmwasm transactions, and EVM transactions
Origin: Sei Labs
3) Interoperability with existing chains, allowing seamless combination between EVM and any other execution environment supported by Sei
Since Sei is an integrated chain, all transactions entering the different components of Sei (Cosmwasm, EVM, banks, staking) are able to communicate with each other. Although these transactions serve different purposes, they ultimately share many similar characteristics, such as gas, sender, and transaction subject. When these transactions are received by the link, they are processed as Sei native transactions and forwarded to the appropriate storage part (i.e. CosmWasm transactions are sent to the wasm module and executed). This results in a more seamless developer experience — EVM developers can easily access native tokens and other chain features (such as staking)
Origin: Sei Labs
4) SeiDB — Improvements to the storage layer to prevent state bloat, improve state read/write performance, and make it easier for new nodes to sync and catch up with state
(3) What is the significance of parallel EVM?
Former Polygon co-founder JD has previously stated on social media that he has a premonition that every L2 will rebrand itself in 2024 and label it "Parallel EVM", and Paradigm CTO Georgios also believes that 2024 will be " "The Year of Parallel EVM", which also means that Paradigm is also exploring and designing related technologies internally.
Blockchain development has always been quite unfriendly to developers. Every time a different virtual machine appears or a different language is used, builders have to adapt to the new environment. If the customers of the blockchain are builders, then these actions do not take the convenience of customers into consideration. Ultimately, blockchains are destined to change what they provide to adapt to the needs and environment of builders, and currently, the EVM ecosystem The system is the most active and parallel EVM can solve this problem.
Sei V2 supporting EVM does not mean abandoning WASM. It plans to support both virtual machines simultaneously and even support interoperability between the two virtual machines, providing a seamless development environment. If V2 is successful, Sei V2 could become the most successful integrated blockchain supporting multiple virtual machines.
Sei Labs Lianchuang Jay posted on social media at the end of 23 that Sei v2 will also be able to call each other through the use of stateful precompilation and chain-level message scheduling. Once the review is completed, the upgrade will be released on the public testnet in the first quarter of 2024 and will be deployed to the mainnet in the first half of 2024.
3. Ecological development on the chain
In the data of Sei Mainnet in the past 30 days, the total transaction volume was 728,000, the independent users were 62,500, and the average daily transactions were 23,500. The number of transactions and users were on the rise.
Source: Flipside
Data from the past 30 days shows that the current users and transaction volume on Sei Mainnet are relatively large, and the top four most active applications are Astroport, Tatami, Dagora, and Webump.
Source: Flipside
Astroport (Dex): Astroport’s vision is to become a mainstream next-generation AMM, providing deep liquidity pools and huge trading volumes for the Cosmos ecosystem. Better pricing will allow Astroport to attract more liquidity, creating a self-reinforcing cycle. Ultimately, Astroport aims to operate as the base liquidity layer for Cosmos. Astroport currently runs on four chains: Sei, Neutron, Terra2, and Injective.
Tatami (Gaming): Tatami fills a prominent need in the Web3 space - a dedicated game publisher. With countless games scattered across various chains, Tatami offers users a unique place to play games, collect assets and complete tasks on a single platform, bringing a unique blend of game development, market integration and launchpad services aimed at changing The way games are experienced, created and distributed in Web3 spaces.
Dagora (NFTs): It is Coin 98 ecological multi-chain NFT market, supporting BNB Chain, Polygon, Sei, etc. Dagora’s features include Marketplace (NFT trading market), Launchpad (NFT publishing platform) and Hot Drops (free minting section). In addition, Dagora allows C 98 token holders to participate in various activities such as auctions, Launchpad and Hot Drops
Webump (NFTs): Webump is committed to supporting the development team and creator community on the Sei blockchain and has partnered with Lighthouse to provide open source smart contracts designed for seamless creation of NFTs on Sei. Lighthouse is its open protocol and toolset that enhances the NFT creation process, making it more accessible and efficient for NFT creators and developers.
Sei is a blockchain that focuses on providing high-performance DeFi. The current TVL of DeFi on the chain is in the early stages in terms of data performance and product construction both in terms of the whole and individual projects.
Source: Defillama
Kryptonite: Kryptonite is a Sei-based decentralized AMM and staking protocol that works with any bAssets on the Cosmos blockchain and other blockchains, aiming to bring a powerful native currency market to the Cosmos ecosystem and promote Financial innovation and flexibility. Users can stake the Sei Network token SEI and obtain the liquidity staking token bSEI, and then use bSEI as collateral to mint the stablecoin kUSD at a 200% mortgage rate
Levana Perps: A perpetual contract trading platform on Sei that supports leverage up to 30x. Currently Levana supports leveraged contract trading including BTC, ETH, ATOM and OSMO.
Yaka Finance: The upcoming native Dex on Sei can currently be interacted with on the official website, and there may be airdrops in the future.
Sushiswap and Vortex Protocol: On February 23, 2023, Sushi announced the acquisition of the derivatives Dex-Vortex and cooperated with Sei, planning to launch a decentralized derivatives exchange on Sei in the future. However, no new progress has been disclosed on the project so far, Vortex The latest official recommendation is in February 2023.
2. Team, Financing and Cooperation
1. Team background
Sei Network was founded in 2022 by Jeff Feng and Jayendra Jog. Jeff Feng is the co-founder of Sei Labs. He graduated from the University of California, Berkeley. He worked in the TMT investment banking department of Goldman Sachs from 2017 to 2020. He founded Sei Labs with Jay in 2022.
Jayendra Jog is the co-founder of Sei Labs. He graduated from UCLA and worked as a software engineer at Robinhood from 2018 to 2021.
Phillip Kassab is director of growth and markets at Sei Network and is a graduate of the University of Michigan's Stephen Ross School of Business. , previously director of marketing at Trader Joe’s and Swim.
Other team members have worked at Google, Amazon, Airbnb, Goldman Sachs, and more.
2. Financing process
In August 2022, Sei Labs, the team behind Sei Network, completed a US$5 million seed round of financing, led by Multicoin Capital, with participation from Coinbase Ventures, GSR and others.
In February 2023, Sei announced that it was raising $400 million in Series A financing and said it had airdrop plans. In April, Sei Network announced the completion of US$30 million in financing at a valuation of US$800 million. Jump Capital, Distributed Global, Multicoin Capital, Bixin Ventures, etc. participated in the investment. This round of funds was used for development and market promotion in the Asia-Pacific region. In the same month, Sei Labs Ecological Fund completed a new round of financing of US$50 million, including OKX Ventures, Foresight Ventures, etc.
In November 2023, Circle made a strategic investment in Sei Network to support the network’s launch of native USDC.
Source: Rootdata
3. Operation and cooperation
(1) Testnet activities and airdrops: During the Atlantic 2 testnet phase, Sei made it clear that it would allocate token incentives to reward early members of the Sei community who use the chain. When the Pacific-1 mainnet is publicly released**, the rewards will be open to receive. , encouraging users to interact online.
(2) Sei Ambassador Program: Promote the Sei Marines Ambassador Program, and design levels and gradient rewards for ambassadors with different contributions to stimulate publicity and promotion in relevant regions.
(3) Sei Launchpad Accelerator Program: Launch the sei/acc program to invest and support on-chain ecological projects by providing resources, guidance and incentives, and will assign a product manager to assist in formulating a strategic roadmap and working with the Sei Foundation team Key members collaborate.
(4) Expanded promotion in the Asia-Pacific region: In December 2023, Sei sponsored Binance’s Maldives event; on December 21, Sei announced the establishment of a strategic partnership with KudasaiJP to expand market share in Japan; in January 2024, Korea Investment Research The agency Four Pillars stated that it and Sei are currently preparing various initiatives to further expand their influence and cooperation examples in the Korean market.
3. Token situation
1. Basic situation
SEI's current market capitalization is 1.674 billion US dollars, FDV is 7.947 billion US dollars, the total supply is 10 billion, the circulation rate is 23%, and the 24-hour trading volume is 793 million US dollars. The main trading venues are Binance (26.91%), Upbit (25.85%), Coinbase (8.37 %).
Compared with other new public chains, Sei's market value is lower than Aptos and higher than Sui, accounting for 0.5% of Eth's market value and about 3.9% of Solana's market value. In terms of TVL of Defi applications, Sei is far smaller than Sui and Aptos, only 12.19 million, which is at a relatively early stage.
Source: LD Capital
2. Token Economics
SEI’s token use cases have the following functions:
Network Fees: Pay transaction fees on the Sei blockchain.
DPoS Validator Staking: SEI holders can choose to delegate their holdings to validators, or stake SEI to run their own validators to secure the network.
Governance: SEI holders can participate in the future governance of the protocol.
Native Collateral: SEI can be used as collateral for native asset liquidity or applications built on the Sei blockchain.
Fee Market: Users can tip validators to receive prioritized transactions, and these tips can be shared with users who delegate to that validator.
Transaction Fees: SEI can be used as a fee on exchanges based on the Sei blockchain.
The total supply of tokens is capped at 10 billion, 51% of the tokens will be allocated to the community, 48% for the ecological reserve, 9% for the foundation, 20% for the team, 3% for the launchpool, 20% for private sales, and 40% for the team and investors. %. Among them, 48% of the ecosystem reserve will be divided into three parts:
Staking rewards
As part of Sei’s decentralized proof-of-stake mechanism, validators are responsible for securing the Sei blockchain and ensuring its accuracy. Validators run programs called full nodes that enable them to verify every transaction made on the Sei network. Validators propose blocks, vote on their validity, and add each new block to the chain. Users can stake their Sei to validators and receive staking rewards, while validators themselves can set fees to compensate them for their important role. Validators also play an important role in the governance of the Sei protocol.
ecosystem initiative
SEI tokens will be distributed through grants and incentives to contributors, builders, validators, and other network participants who contribute or meaningfully build on Sei.
Sei airdrop and rewards:
A portion of the SEI supply is allocated to airdrops, incentivized testnet rewards, and ongoing programs designed to quickly distribute SEI into the hands of users and the community.
Origin: Sei Labs
Unlock status
SEI will usher in the first large-scale unlocking by private investors and teams on August 15, 2024. Currently, regular unlocking on the 15th of each month is mainly for ecosystem release and foundation unlocking, with a monthly unlocking volume of 125 million tokens. coins, approximately US$91.61 million.
Source: CryptoRank
3. Recent transactions
The currency price of SEI has continued to decline since its launch on August 15, 2023, which lasted for about 3 months. Since November 22, it has significantly increased from around 0.14 US dollars to a recent high of 0.88, hitting a high of 0.88 on January 3. The Bollinger Bands fell back from the upper track, and daily trading volume declined slightly.
Source: Binance
In terms of contract performance, as the currency price has risen recently, the liquidation volume of long and short contracts has increased significantly, and the contract positions have decreased. The difference between the number of active transactions and the transaction amount in recent days has been negative, and the long-short ratio has increased.
Source: Binance
4. Summary
1. Fundamentals: The difference between Sei and other chain cores is that its underlying architecture based on the central order book is very suitable for the construction of Defi. However, from the perspective of the on-chain ecology, the overall application and TVL on the chain are in the early stages, and there is a lack of Excellent Defi application. The launch of parallel EVM in Sei V2 has given a new narrative, but in the future there will be many other chains and L2, etc. that may gradually support parallel EVM. If the launch of SeiV2 can effectively introduce funds, high-quality projects and users to Sei, it will be Has a certain first-mover advantage. The V2 upgrade will be released in the public testnet in the first quarter of 2024 and will be deployed to the mainnet in the first half of 2024.
2. Team background and recent development: The core team is young but has a good background, the capital is strong, and it has recently made continuous efforts in promotion and operation in the Asia-Pacific region.
3. Token Economics: The total supply of tokens is capped at 10 billion, 51% of the tokens will be allocated to the community, and the team and investors will account for 40%. Comparing the market value with other new public chains, Sei is lower than Aptos and higher than Sui, accounting for 0.5% of the market value of Eth and about 3.9% of the market value of Solana. The first large-scale unlocking by private investors and teams will be held on August 15, 2024. The current regular unlocking on the 15th of each month is mainly for ecosystem release and foundation unlocking, with a monthly unlocking volume of 125 million tokens. , approximately US$91.61 million.
4. Recent trading situation: Since November 22, the currency price has begun to rise, rising significantly from around 0.14 US dollars to the recent highest position of 0.88. Recently, the price has touched the Bollinger Band upper limit and has fallen back. Daily trading volume and contract trading volume have increased. A slight decrease.
5. The parallel EVM upgrade of V2 will be ushered in in the first quarter after the token is recently unlocked, which may benefit ecological development and price.
