Welcome to the future of decentralized finance, where the Sei Network is making waves and challenging conventions. A groundbreaking concept, Sei Network merges the best of blockchain technology with a user-centered approach to revolutionize the finance landscape.
But what exactly is Sei Network, and how does it work? Strap in for an enlightening journey into a new frontier of finance, where transparency, efficiency, and innovation are at the heart of every transaction. Dive deep with us into the Sei Network and discover the power of decentralization.
What is Sei?
Sei is a layer 1 decentralized finance (DeFi) network that aims to break traditional financial barriers by leveraging blockchain technology. At its core, it is designed to democratize finance by giving complete control to the users over their financial activities. Unlike traditional finance systems, Sei is not controlled by any central authority or institution.
It is a community-driven project where decisions are made collectively. By bringing transparency and efficiency to the table, Sei is not just a platform but a movement that seeks to bring about a paradigm shift in how we perceive and handle finance, moving us away from centralized to decentralized systems.
The Sei Network was built by a team of accomplished blockchain developers, finance experts, and technology enthusiasts who shared a common vision – democratizing finance and making it accessible to all. The development of the Sei Network commenced in the late 2010s.
How Does Sei Network Work?
Sei Network employs a host of pioneering solutions to tackle issues confronting Decentralized Exchanges (DEXs), harboring the intention of transforming the trading landscape by blending the swiftness of off-chain transactions with the security of on-chain operations.
Key features of Sei include on-chain order matching, a ‘Twin-Turbo’ consensus protocol, and beyond. These mechanisms contribute to a bespoke L1 blockchain specifically designed for trading activity, accompanied by an on-chain order book and readily accessible liquidity for smart contracts.
The modularity of Sei permits the creation of composable applications. Consequently, the Sei Network promises both reliability and speed to its partners.
Sei Network Frontrunning Prevention
Frontrunning is malpractice where someone uses insider information to trade a financial asset before upcoming transactions influence its value. This kind of activity can happen in Ethereum and other similar blockchains.
When a transaction is initiated, it waits in a place called a mempool before being processed. Miners or bots then search the mempool for transactions to exploit. In a system like Ethereum, miners give priority to transactions with high fees, leading to a problem known as MEV. Bots locate the transaction and then:
- Purchase using a slightly higher gas fee than the original transaction.
- Sell using a marginally lower gas fee.
This so-called ‘sandwich attack’ allows bots to profit from frontrunning. However, Sei network has developed five key strategies to halt frontrunning:
- Keep transaction discrepancies small, by using counters in smart contracts.
- Lessen the effect on users.
- Make use of off-chain ordering.
- Restrict gas prices to discourage frontrunners.
- Improve security and fairness in blockchain systems.
Sei Network Solves the Exchange Trilemma
The “exchange trilemma” is a challenge faced by trading platforms when they try to offer a system that is scalable, decentralized, and capital-efficient at the same time. It is about balancing these three aspects: being able to handle a lot of trades (scalability), not being controlled by a single authority (decentralization), and making good use of resources (capital efficiency). While solutions have been proposed, so far, only two of these three aspects can be achieved at the same time.
Sei aims to evolve into a decentralized version of NASDAQ by solving the ‘exchange trilemma’. It plans to do this by offering DEX modules for apps to create a more efficient, decentralized, and scalable exchange infrastructure. Essentially, Sei provides a CLOB engine that developers can incorporate into their DEXs. This ensures that exchanges based on Sei don’t use AMM structures that lead to capital inefficiencies, where LPs face IL when trades are made via the smart contract.
Additionally, as a blockchain with a broad group of validators under the Tendermint BFT consensus model, which operates like a delegated proof of stake (dPoS), the CLOB isn’t centralized. This enables Sei to offer its users a decentralized exchange infrastructure.
Final Thoughts
The Sei Network presents a thrilling venture with the capability to transform the digital asset trading landscape. At present, Sei is in its incentivized testnet phase, referred to as the “Seinami.” Upon successful completion of all testnet stages, the project will advance to the main net phase.