A brief analysis of the order book project Sei Network: breaking through the scalability of DEX

Sei's focus on transactions has created a compelling product for developers looking to build on common layer 1.

Written by: IBCL

Sei: Fastest L1 transaction

Sei Labs has a central thesis: the ability to exchange digital assets is a fundamental application of encryption. The question of how to scale transactional applications and exchanges can help usher in the next phase of growth in Web3 adoption. Sei is a general-purpose layer-1 blockchain built for transactions, optimized at every layer of the stack to provide the best infrastructure for trading applications and exchanges.

Asset exchange forms the cornerstone of cryptocurrency

Trading is not limited to conventional understanding of candlesticks, technical analysis and derivatives. It covers a wide range of assets and activities, including trading tokens, NFTs, real-world assets, virtual-world assets, risk, social likeness, and more.

The success of the most famous Web3 applications is rooted in transactions and asset exchanges. For example, Bitcoin's value comes from its ability to exchange. MetaMask users end up exchanging assets using trading applications like Uniswap or OpenSea. It is the exchange functionality that drives their use of the wallet. Likewise, people use Aave to get liquidity to buy stuff. These and other successful Web3 applications derive traffic and value from transactions and asset exchanges. It would appear that trading is the definition of cryptocurrency more than many would expect.

It's worth noting that many successful Web3 applications are functionally exchanges, whether or not they market themselves as such. Obvious examples of exchanges include Uniswap, OpenSea, and Sushi. However, not a trading application is so clear cut. Both Axie Infinity and StepN are games, but the trading of in-game assets is critical to the user experience, so they are also trading apps. This is why these two gaming projects have established their own NFT marketplace and DEX respectively.

Transactions are expected to grow exponentially

As Web3 continues to evolve, the importance of transactions will only increase. The proliferation of digital assets has driven greater demand for exchanging these assets, and trading will become an integral part of the industry. Additionally, higher regulatory pressure on centralized exchanges (CEXs) could drive more on-chain volume and activity. This will require transactional applications to scale and accommodate huge waves of usage. Transactions will not only remain relevant in Web3, but will grow exponentially along with the industry.

the problem we are facing

Over the past few years, it has become apparent that on-chain trading assets have achieved a deep product-market fit. The next natural step is to scale the application to meet upcoming demands. The problem is that transactional applications face major scaling hurdles on existing layer 1 and layer 2 infrastructure. This challenge is known as the "transactional trilemma" because transactional applications cannot simultaneously achieve decentralization, scalability, and capital efficiency.

Given the unique requirements of transactional applications for speed, throughput, reliability, and MEV, purpose-built infrastructure is required to address these issues. This is the goal of Sei, to provide a solution to the DEX scalability problem and enable trading applications to scale efficiently while maintaining decentralization and capital efficiency.

If Sei succeeds, transactional applications will no longer face the trade-off of decentralization. They are able to provide the same user experience as any Web2 application, while maintaining the non-negotiable benefits of decentralization, namely the trustless, permissionless ability to transact and prove ownership without the risk of censorship.

Sei fixed this issue

Sei is an open-source layer-1 blockchain designed to solve the transaction scalability problem. Sei is the fastest layer 1 transaction, optimizing every layer of the stack to provide the best infrastructure for transactional applications. Sei's unique value proposition lies in its single focus on transactional functionality. Any gaming economy, NFT marketplace, or DeFi DEX will run better on Sei than any other Layer 1 by optimizing its infrastructure for trading applications.

Sei has the fastest finalization time in the industry with a floor of 300ms and built-in parallelization, making the infrastructure ideal for transactional functions. By exploiting two new advances in consensus research, Sei features Twin-Turbo consensus, achieving a level of performance unattainable by other Layer 1s. Additionally, Sei's built-in matching engine and anti-front-running offer trading applications valuable out-of-the-box advantages. Finally, Sei's automatic order bundling feature increases application throughput and improves the user experience of all trading applications built on Sei.

**Why build Sei as Layer 1? **

Sei Labs, the development team behind Sei, initially explored building Sei as a layer 2 on top of Ethereum. Layer 2 rollup has two disadvantages:

1. Decentralization. Every Layer 2 is currently using a centralized orderer, meaning there is one entity responsible for validating and executing user transactions. This can lead to serious security, censorship resistance, and liveness issues.
2. Throughput. The maximum throughput of tier 2 is limited by the block space of the underlying tier 1 it writes to. This leads to significant scaling difficulties.

Sei's focus on transactions has created a compelling product for developers looking to build on general-purpose layer 1. Transactions are important to all applications in Web3, including games, social, and NFTs. By fulfilling this fundamental need, Sei creates a gravitational pull for users to explore any type of application built on top of Sei, as transactions are universal. There are hundreds of promising teams building on the Sei ecosystem, some from the largest layer 1 and layer 2 such as Ethereum, Solana, zkSync, Polygon, and Sui.