Sei is a Layer-1 blockchain designed exclusively for DeFi. It is built on the Cosmos SDK and includes an order book as the base layer of the blockchain and Tendermint Core as its consensus mechanism. Order books are used by almost every exchange to improve market transparency as they provide information on price, availability, depth of trade, and the identity of entities behind buy and sell orders.
Unlike automated market makers, which form the basis of the current DeFi applications, Sei uses on-chain order books to match buy orders and sell orders at given prices. This enables the development of DeFi applications that can use Sei’s built-in central limit order book (CLOB) to access its deep liquidity.
Sei can optimize its performance and speed as the order book is kept on-chain. Moreover, Sei is built on the Cosmos SDK, which should result in more stability since each blockchain operates independently. In the past, congestion and problems on a Layer-1 blockchain had ripple effects on other projects built on it (e.g., Serum encountering delays when Solana was down).
Besides tweaking the Cosmos SDK design to provide sub-second finality, Sei is also implementing Intelligent Block Propagation and Optimistic Block Processing.
Intelligent Block Propagation (parallel execution) reduces transaction processing times by equipping a validator with all relevant transaction hashes instead of waiting for the hash and the block to be relayed to other validators. This optimizes throughout by 40%.
Optimistic Block Processing reduces latency and improves throughput by 33%. It allows blocks to be processed at any given height, including in the course of pre-vote and pre-commit operations.
In addition, Sei is built to protect users against front-running, which happens when another user (usually a malicious actor) places a similar trade as a prospective buyer and sells it immediately after, ultimately hurting the buyer and costing them extra. Sei employs Frequent Batch Auctioning to prevent front-running while enabling users to extract maximal extractable value (MEV). Transactions are bundled together into batches within every block, and orders are executed simultaneously at a uniform clearing price. This ensures that ordering trades within a batch doesn’t affect the price.
Also, Sei is a permissioned blockchain, meaning that projects must go through some degree of vetting to get listed. This will undoubtedly limit the number of projects on the network. However, it provides a more optimized environment for the ecosystem.
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