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Sei Network is Defi specific layer-1 network built with the Cosmos SDK. It offers unique protocol-level features to support DeFi applications.

What is Sei?

The Sei Network is a layer-1 blockchain built to support DeFi. Sei is made with the Cosmos SDK, which means it is connected to the Cosmos ecosystem via IBC while Tendermint secures its consensus engine. The Sei execution layer connects to the Tendermint core via ABCI++, an upcoming upgrade to Cosmos ABCI that offers unique customizations to the consensus engine.

The first Defi-specific blockchain

A dapp developer in the early days of Defi had no other alternative but to deploy their program on the Ethereum mainnet. It did not matter if the dapp was a DEX, an NFT, a blockchain-based game, or a data analytics protocol; all dapps lived on one chain and constantly competed with each other for block space.

The Defi landscape is profoundly different today. A dapp developer in 2023 has several options; they may deploy their application on Ethereum or one of its rollups for better throughput. On the other hand, they may leave Ethereum altogether and choose one of the other L1 alternatives like Near, Fantom, or Solana or whip up a standalone chain.

The Sei network adopts a slightly different approach. Sei is neither a standalone appchain DEX nor a general purpose and permissionless blockchain, but a permission blockchain built to serve the needs of DeFi protocols like DEXs and lending platforms. It sets a middle ground between the two extremes. First, it is DeFi-specific, which prevents the network from being overcrowded. Then, it offers unique features like a native price oracle, single block order, order building, and batch auctioning that incentivize building on Sei over the appchain route.

Sub-second finality with ABCI++

The primary objective for the Sei network is to build an environment that can efficiently support order book decentralized markets, as opposed to liquidity pool AMMs. Order book markets need sub-second finality to work correctly. Sei offers near-instantaneous finality by leveraging the capability of ABCI++, which lets appchains customize every step of the consensus process, like modifying, adding/dropping, or reordering transactions.

With ABCI++, Sei offers these customizations –

Optimistic block production

Sei saves block processing time by optimistically verifying blocks once they are proposed during consensus. As a result, Sei can speed up processing by 30% by processing blocks during the prevote and pre-commit phases of consensus. If the optimistically verified block gets rejected during the prevote or pre-commit process, the consensus discards the block and runs again for that height, this time without optimistic verification.

Twin-turbo consensus

Tendermint is a partially synchronous blockchain, meaning the nodes do not verify blocks linearly. Once a Sei blockchain node verifies a block, it propagates this message to other nodes via network gossiping. Instead of gossiping the entire block data; Sei nodes reduce latency by propagating the block headers. This is because they already have access to 99% of the block data from the mempool, which they use along with the block header to reconstruct and verify the block. This method of block propagation reduces latency.

Parallel order execution

The Ethereum blockchain follows sequential order execution, meaning the transactions are processed linearly. Sei is built for Defi transactions like swaps and staking, which means many transactions take place in mutually exclusive markets that the blockchain can process in parallel. Sei reports that parallel processing increases the network’s throughput by 75–90%.

Besides the improvements made by leveraging ABCI++, Sei also offers additional features in the base layer itself.

Additional Defi-centric features

Native price oracle — Sei validators are required to participate as price oracles; their votes are used to calculate the price of assets at the end of every block and are penalized for non-participation and for providing bad data.

Native order matching engine — Sei order matching engine allows individual DEXs on the blockchain to deploy their respective markets. It offers general trading features like market orders, limit orders, and stop-loss orders. Moreover, the order placement and execution can happen in the same block, which reduces slippage (other order book DDEXs generally take several blocks to process orders).

Asset agnostic order book — instead of tokenizing positions, DEXs on Sei can track positions as a list in their smart contract state.

Frequent batch auctioning — Sei discourages transaction frontrunning by aggregating all market orders and executing them at the same uniform clearing price.

Transaction order bundling — Sei users can update positions on various markets in one transaction.

This concludes the features and innovations made by the Sei blockchain. In another article, we will soon explore the Sei ecosystem and some potential drawbacks and compare it with its competition.

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