Sei – Reshaping the Product Form of Web3
Sei - Transforming Web3's Product Form
Author: Kylo@Foresight Ventures
The emergence of blockchain technology and its ecosystem has provided many opportunities for innovators, developers, and users. However, so far, scalability, transaction speed, and issues related to front-running have been hindering Web3 from achieving true mass adoption. The emergence of Sei is to address these issues.
This article mainly explains the superiority of the Sei mechanism through the description of the basic mechanism of Sei. This report is divided into several specific sections, including “Introduction to the Sei Mechanism”, “The Flourishing Ecosystem of Sei”, “Comparison of Sei with other layer1 solutions”, and “Unique Advantages of Sei in Transactions”.
Sei: Introduction to the Mechanism
Sei is a universal Layer1 network designed to solve various problems commonly found in layer1. It operates through the Twin-Turbo consensus mechanism and uses transaction parallelization to achieve fast confirmation of transactions, high throughput, and scalability. This innovative approach makes Sei a versatile and powerful platform that effectively bridges the gap between decentralization and high performance.
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Sei is a high TPS parallel Layer1 network that is similar to DyDx’s Tendermint mechanism on the consensus level but with some differences. To better understand the Sei mechanism, we need to understand the traditional block generation model. Block generation is achieved through validators packaging transactions from their own mempool and reaching consensus across the network. Each network validator has their own mempool. When a transaction occurs, the user submits the information related to the transaction to a full node (which is also a validator), and the full node sends the relevant information to other nodes in the network, which is called gossiping. After receiving and verifying the transaction information, other nodes add the transaction to their mempool. The proposer, who builds the block, sorts the transactions from their mempool, produces the block, and broadcasts the block information across the network for validation by other validators. Once the validation is successful and consensus is reached, other validators will accept the full block information from the proposer.
FIG.1. Dumb block proLianGuaigation
From the above mechanism, it can be seen that there are two steps that can be optimized:
Since each validator has its own mempool, the transaction data in the new block may already exist in their respective mempools. Other validators can generate blocks themselves without waiting for the proposer to send them the detailed block data.
The confirmation of blocks requires several processes, including block proposal, validator voting, consensus, and block broadcasting. Since these steps are performed sequentially, there is no way to accelerate them. If these steps are processed in parallel, the performance of blocks can be significantly improved.
Based on the above two points, Sei has made optimizations at the consensus level. It defines its own consensus mechanism as Twin-Turbo Consensus, which means a smarter block propagation method and an optimistic block production mechanism.
The first turbo needs to solve two problems:
Ensure that the mempool of each validator contains as much transaction information as possible
Other validators can quickly know the transaction information packaged by the block proposer
It is ideal for all mempools to contain all transactions, but it is difficult to achieve in reality. Therefore, Sei has taken remedial measures. When the block proposer proposes a block, the block is broken down and sent to the entire network, along with a hash of all transactions in the block. Other validators find the corresponding transactions in their own mempools based on that hash. If there are missing transactions, they will look for the missing parts in the block fragments sent by the block proposer to reconstruct the block. In this way, Sei Network reduces the time required for other validators to synchronize block information.
FIG.2.intelligent block proLianGuaigation
The second turbo used by Sei is the optimistic block generation mechanism. “Optimistic” here means that by default, most block proposers will not make mistakes. Under this optimistic assumption, validators can process block data synchronously while performing prevote and precommit. That is, the block data proposed by the proposer is first written to the cache. If the block is verified, the cached data can be directly imported without waiting for prevote and precommit to pass in serial. Sei Network achieves the purpose of reducing transaction latency and improving blockchain performance through the Twin-Turbo Consensus described above.
Fig,3. comLianGuairison between “normal” and “intelligent”
Parallelization of Transactions
Transaction parallelization is a common method used by Layer1 networks such as Solana and Aptos to increase throughput. However, transaction parallelization has another meaning for Sei Network.
Sei Network, like DyDx V4, places the matching engine of the order book on the validator node, and each validator needs to maintain a mempool. When any validator is selected as the block proposer, it needs to directly match transactions through the built-in matching engine and propose a block. For DyDx, this mempool only contains transactions from DyDx. For Sei Network, due to the nature of its layer1 network, the transactions stored in the mempool come from various protocols on Sei. Most of these transactions from different protocols are unrelated to each other. If serialization is still implemented, different order book protocols on Sei will compete for block space, which is not conducive to the overall development of the ecosystem.
In summary, Sei’s parallelization design is actually to allow projects on Sei to run independently without interference, while increasing the system’s throughput.
A major issue that transaction parallelization will face is the interdependence of transactions, which can only be achieved through transaction serialization. For example, the minting process of NFTs needs to ensure that the NFTs being minted have not been fully minted, so it can only be done in serial. Therefore, how to distinguish between independent transactions and related transactions is a problem that transaction parallelization systems need to solve. The UTXO model is one of the commonly used ways to achieve parallel transactions, while Sei adopts the DAG (Directed Acyclic Graph) technology. DAG can be simply understood as a polyline with directions, where the polyline connects each transaction, and the two transactions connected to this transaction are the associated transactions of this transaction. Sei will set up a DAG for all transactions in the entire network to identify associated transactions.
Fig. 4. Sei’s transaction LianGuairallelization
MEV Prevention, Order Bundling and Oracle Pricing
Sei’s MEV Prevention function is mainly to prevent block proposers from maliciously extracting MEV when matching transactions and constructing blocks. The implementation is achieved through Batch Auction. Batch Auction is the solution proposed by Cowswap to address the MEV problem in AMM transactions. It packages transactions of the same type within a certain period of time into a batch and executes them uniformly. All transactions in this batch have no execution order and have the same execution price, thereby avoiding frontrunning.
Order Bunding is a mechanism designed for market makers. Market makers can update the status of all order books with a single transaction instead of updating them one by one. This means that market makers can adjust their risk exposure in different order books quickly and at a low cost.
In terms of oracles, Sei has built-in oracle system that provides pricing services for assets within the ecosystem. The main implementation method is to introduce oracle price quotes into the consensus process. When each block is generated, all validators need to provide their own price quotes for assets and reach consensus on the quotes. Therefore, the asset prices in the entire Sei system will be updated in each block time.
Current Development Status of Sei Ecosystem
As of now, the thriving Sei ecosystem includes more than 150 projects across various web3 domains, including social, NFT, gaming, and DeFi.
Fig.5. Sei’s ecosystem
The top projects in the Sei ecosystem include Fable, Dagora, and Fuzio, etc. They are exploring gameFi, NFT, and DeFi based on Sei’s special mechanisms. Developers choose Sei mainly for the following reasons:
Scalability: Sei’s high-performance architecture can process thousands of transactions per second, making it suitable for dApps that require high throughput and low latency.
Low transaction fees: Sei’s low transaction costs will incentivize developers and users to actively interact on Sei.
Ecosystem resources: Sei provides developers with rich development tools and resources, as well as an open community forum. Sei also has support from well-known investors and mature blockchain projects.
Interoperability and composability: Sei seamlessly interacts with other networks, allowing for the combination of various protocols and applications.
Security: Sei’s consensus mechanism ensures the security of transactions, allowing developers to focus on application development.
Community: Sei’s growing user base and active community are attractive to developers.
Grants ecosystem fund: The 120 million Sei ecosystem fund can help projects expand faster.
Sei provides developers with a fully functional platform that allows them to focus on exploring new possibilities for dApps through Sei’s special mechanisms. In addition, Sei guides on-chain liquidity flow through its “Liquidity Alliance Program” and provides exposure for web3 users to various projects through its large community. Currently, Sei has active on-chain users, with over 100 million transactions and over 5 million wallet addresses according to testnet data. The active on-chain user behavior will provide tremendous development potential for the Sei ecosystem.
Sei’s DEX: Balancing High Performance and Low Cost
Speed and scalability are among Sei’s characteristics, along with its flexibility and adaptability for developers. Developers can freely build various applications on Sei. With its high throughput, low transaction costs, and fast finality, Sei provides an ideal infrastructure for building next-generation Web3 applications.
One of Sei’s areas of advantage is decentralized exchanges (DEX). Generally, DEXs are easily affected by blockchain performance issues. When the number of transactions increases significantly within a given time, DEXs face more prominent problems due to blockchain congestion. High transaction fees, long transaction settlement times, and poor scalability often undermine user experience and reduce profitability.
Sei presents an effective solution for the above market. It introduces an on-chain matching engine that utilizes its fast finality, high throughput, and low transaction costs to make transactions on-chain more efficient. This means better performance and lower transaction costs for decentralized exchanges, making them potentially competitive alternatives to centralized exchanges.
Compared to Serum and DyDx, Sei’s DEX on Sei has multiple advantages. DyDx’s problem lies in the fact that the mechanism design of the entire chain only serves one application, lacking the survival soil for other DeFi protocols. As a result, it loses liquidity sharing between protocols and the space for combination. It needs to connect with off-chain DeFi applications through some cross-chain means to achieve the so-called DeFi composability. Serum, on the other hand, faces stability issues due to interference from on-chain non-transaction activities, despite having abundant liquidity and a large ecosystem to easily achieve protocol combinations. However, Sei Network’s Layer 1 design can solve the problems faced by DyDx and Serum. In short, Sei Network’s characteristics of decentralized off-chain matching and DeFi protocol composability give Sei a strong advantage at the transaction level.
Comparison Analysis of Sei and Other Layer 1s
The current Layer 1 landscape is diverse, with each platform having its unique features, advantages, and limitations. To better understand Sei’s advantages, we will compare Sei with well-known platforms such as Sui, Aptos, Solana, and Ethereum.
Sei’s key advantage lies in its unique network structure design that addresses common scalability, transaction speed, and front-running issues found in other blockchains. Sei achieves high throughput, fast finality (as fast as 0.5 seconds), and scalability through its innovative consensus mechanism. Sei’s transaction parallelization design further enhances these capabilities, enabling Sei to process a large number of transactions.
Although Sui has its unique advantages, compared to Sei, as its transaction speed increases, its scalability will face bottlenecks. Although Sui also emphasizes decentralization, its consensus mechanism is different from Sei in terms of flexibility and does not have the same freedom in selecting validators as Sei.
Solana is similar to Sei, it parallelizes the production of blocks and achieves high transaction speed and low transaction costs through its unique Proof of History (POH) timestamp system. However, its excessive focus on performance requires it to make concessions in terms of decentralization. Due to the issue of centralization, Solana’s stability can be affected by special circumstances.
Ethereum is currently the most robust layer1 in terms of dApp ecosystem. Especially in the DeFi field, it is the leader in terms of total value locked (TVL) and composability between protocols. However, Ethereum is currently facing high transaction fees and scalability issues. Its current solution is to use rollups for offloading. However, the migration of applications and TVL from layer1 to layer2 still takes a long time. In summary, although Sui, Solana, and Ethereum all bring unique features and advantages, Sei stands out due to its innovative design and powerful performance. Sei’s blockchain architecture has optimized speed, scalability, and security without compromising decentralization. In the future, it may even surpass mature platforms like Solana in terms of performance.
Fig.6. Comparative Analysis
The Future of Sei
The potential of blockchain technology is huge. By providing a highly scalable, secure, and user-friendly environment, Sei paves the way for mass adoption of blockchain technology. However, in the competition between layer1 and layer2 as a whole, Sei still faces fierce competition from other Layer 1 and Layer 2 solutions. Although Sei’s mechanism and testnet data have laid a foundation for its development, its subsequent prosperity still requires continuous cultivation of talent within its ecosystem and promotion to the community.