October 17, 2024
Sei Is More Than Just Another Blockchain
Dear Subscriber,
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| By Jurica Dujmovic |
There’s a new Layer-1 blockchain on the block.
And it’s already making waves in the crypto community for three reasons.
First, as a Layer-1, it is an entirely independent network. In other words, not one that’s built on top of existing chains like Ethereum or Solana.
Second, Sei also bills itself as the fastest Layer-1 technology. So, right up there with Bitcoin and Ethereum … but faster.
Third, it was designed to address the needs of trading applications.
And that’s just part of what makes Sei (SEI) a standout in an increasingly crowded crypto universe.
At the heart of Sei's innovation is its parallelized processing capability.
Sei can handle up to 12,500 transactions per second (TPS) with a finality time of around 390 milliseconds.
That far outpaces Bitcoin, which processes about 7 TPS. Same with Ethereum, which manages 15-20 TPS.
This massive leap in speed is achieved through parallel execution of transactions and smart contracts.
Another key feature is Sei's use of WebAssembly (WASM) for its smart contracts.
WASM offers improved efficiency and flexibility compared to traditional Ethereum Virtual Machine (EVM) contracts.
The protocol also includes native order matching and transaction batching. This reduces the complexity and cost of building and operating DEXes on the platform.
And though Sei only launched in August 2023, it’s already improved its own tech.
It recently introduced EVM parallelization as part of its V2 upgrade. This now supports Ethereum smart contracts with no code changes.
Sei leverages Tendermint Core for its consensus mechanism. Transactions on Tendermint get settled immediately once those are added to the block.
This is crucial for trading applications where every millisecond counts.
Combining these technologies creates a blockchain environment that's particularly well-suited for high-frequency trading and complex financial operations.
Sei: More Than Just
Another Blockchain
Many new blockchains claim to be faster or more scalable than their counterparts.
Here, Sei's specific focus on trading applications really does set it apart.
Sei excels at enabling high-frequency trading on decentralized exchanges.
Blazing-fast transaction speeds and low latency make Sei an ideal platform for building decentralized exchanges that can compete with centralized ones in terms of performance.
Beyond simple token swaps, Sei is well-positioned to support complex DeFi applications.
Think automated market-makers, derivatives platforms and lending protocols that require rapid transaction processing and settlement.
The benefits of being able to execute complex financial operations at high speeds on-chain extends to those who enjoy blockchain gaming and trading NFTs.
That is, you can get lightning-quick transaction confirmations.
No wonder, then, that …
The Sei Ecosystem Keeps Growing
As an investor, I'm intrigued by three more metrics:
- The number and quality of projects building on Sei,
- Partnerships with established players in the crypto space, and
- The growth of total value locked (TVL) in Sei-based protocols.
One of the flagship projects on Sei is Vortex Protocol, a decentralized perpetual futures exchange.
Vortex is explicitly built to leverage Sei's high-performance infrastructure. It aims to provide low-latency trading for derivatives.
Another notable project is Nitro. This is a layer built on top of Sei that focuses on enhancing decentralized applications (dApps) that require fast transaction speeds and high throughput.
Nitro is particularly interesting because it's the first chain compatible with Solana Virtual Machine (SVM) in the Cosmos ecosystem.
This means it can run applications initially built for Solana, allowing a new world of possibilities.
Nitro bridges the Solana and Cosmos ecosystems. This allows developers to deploy their Solana dApps on Cosmos with minimal changes.
Users can access these apps using their familiar Solana wallets, which creates a seamless experience.
In terms of partnerships, Sei has made significant strides.
Perhaps one of the most exciting developments is the expansion of SushiSwap to the Sei ecosystem.
SushiSwap, one of the most well-known decentralized exchanges, is looking to take advantage of Sei's high-speed trading environment.
This move brings a major player into Sei's ecosystem and signifies growing confidence in Sei's capabilities.
Sei's connection to the broader Cosmos ecosystem through the Inter-Blockchain Communication (IBC) protocol is another strategic advantage.
This allows Sei to connect with multiple chains in the Cosmos network, expanding its potential for cross-chain functionality and interoperability.
To support this growing ecosystem, Sei offers developers a comprehensive set of tools.
Sei even launched a grant program to provide funding and resources to developers who build on the Sei ecosystem. The goal is to foster innovation and support long-term projects that contribute to the protocol's growth.
When it comes to Total Value Locked (TVL), Sei is showing promising growth.
As of October 2024, the TVL on Sei is $177 million, driven by new DeFi projects, liquidity pools and trading platforms.
With protocols like Vortex and Nitro operating on Sei and including popular projects like SushiSwap, Sei's TVL is likely set to rise further as liquidity from other blockchains flows into its ecosystem.
Tokenomics: The Fuel of
the Sei Ecosystem
At the heart of the Sei ecosystem is the SEI token. This serves multiple vital functions within the network.
First and foremost, SEI is used for staking. Holders can earn rewards while contributing to the security and decentralization of the network.
This incentive structure encourages long-term holding and active participation in the ecosystem.
Secondly, the SEI token plays a critical role in governance. Tokenholders can vote on important network upgrades and protocol changes.
This democratic approach to decision-making aligns with the ethos of decentralization. This is crucial in the blockchain space.
Lastly, SEI is used to pay transaction fees within the network. This creates a natural demand for the token as the ecosystem grows and activity increases.
Sei has opted for a fixed supply model for its SEI token. There's no ongoing inflation, which can be attractive to investors concerned about the dilution of their holdings over time.
The token distribution includes allocations for early investors and the development team.
There’s also a community treasury and incentives for network participants such as validators and stakers.
Some Pros & Cons
First, the positives.
Sei’s focus on trading applications could give it a significant edge in a specific, high-value niche within DeFi.
The impressive performance metrics — high TPS and low latency — set Sei apart from many competitors.
Sei has also garnered attention from both developers and venture capital, which could fuel its growth.
This interest from key players in the blockchain space suggests that Sei's potential is being recognized beyond retail investors.
Then there are the challenges.
While Sei is fast, other blockchains are also improving their performance.
Plus, it's not the only player targeting DeFi and trading applications.
The Sei ecosystem is still young, and it will take time to see if it can attract and retain high-quality projects.
Finally, like many new crypto projects, Sei is prone to price volatility. This could be concerning for risk-averse investors.
My Take
For investors, Sei represents an opportunity to get in relatively early on a project with significant growth potential.
It carries the risks associated with any young crypto project. But its focused approach and early traction suggest it could outperform many of its competitors in the coming years.
That said, investors can consider Sei as part of a diversified crypto portfolio, rather than an all-in bet. Start with a modest position and potentially increase it as the project hits key milestones.
Best,
Jurica Dujmovic
P.S. One crypto sits poised to SOAR if Trump gets elected … click here to see why.
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