The Sei Litepaper
Sei: the Fastest L1 for Trading
Sei Labs has one core thesis: the ability to exchange digital assets is the fundamental use case for crypto. Thus, the problem of how to scale trading apps and exchanges is instrumental to unlocking the next stage of growth for Web3 adoption. Sei is a general purpose Layer 1 blockchain built for trading, optimized at every level of the stack to offer the best infrastructure for trading apps and exchanges.
The exchange of assets forms the bedrock of crypto
Trading is not limited to the conventional understanding of candle charts, technical analysis, and derivatives. It encompasses a wide range of assets and activities, including trading tokens, NFTs, real-world assets, metaverse assets, risk, social-likeness, and more.
The success of the most prominent Web3 apps is rooted in trading and asset exchange. For example, Bitcoin's value comes from its ability to be exchanged. MetaMask users ultimately use a trading app like Uniswap or OpenSea for exchanging assets. It is the swap function that drives their use of the wallet. Similarly, people use Aave to get liquidity to buy something. These and other successful Web3 apps gain their traffic and value from trading and the exchange of assets. In this way, trading is the most fundamental use case of crypto, and its definition goes beyond what many people expect.
Notably, many successful Web3 apps are functionally exchanges, regardless of whether they market themselves as such. Examples of obvious exchanges include Uniswap, OpenSea, and Sushi. However, not trading apps are as clear-cut. Axie Infinity and StepN are both games, but the trading of the in-game assets is crucial to the user experience, so both are trading apps as well. Hence why both gaming projects built their own NFT marketplace and DEX respectively.
Why now? Trading is poised to grow exponentially
As Web3 continues to grow, the role of trading will only increase in importance. The proliferation of digital assets drives a greater need to exchange these assets, particularly since digital assets have a price set 24/7. Trading will become an integral part of the industry. Furthermore, the higher regulatory pressure on centralized exchanges (CEXs) is likely to drive even more volume and activity on-chain. This will require trading apps to scale and adapt to a huge wave of adoption. Trading will not only remain relevant in Web3 but will grow exponentially alongside the industry.
The problem
Over the past few years, it is abundantly clear that trading assets on-chain has reached deep product-market fit. The next natural step is scaling the applications to meet the oncoming demand. The problem is that trading apps face major scaling obstacles on existing Layer 1 and Layer 2 infrastructure. The challenge is referred to as the “Trading Trilemma” since trading apps cannot achieve decentralization, scalability, and capital efficiency simultaneously.
Given the unique requirements of trading apps around speed, throughput, reliability, and MEV, purpose-built infrastructure is necessary to address these issues. This is where Sei comes in, providing a solution that addresses the DEX scalability problem and enables trading apps to scale effectively while maintaining decentralization and capital efficiency.
If Sei is successful, trading apps no longer face a tradeoff to decentralization. They are able to offer the same user experience as any Web2 app while maintaining the non-negotiable benefits of decentralization, the trustless, permissionless ability to transact and prove ownership without risk of censorship.
Sei addresses the problem
Sei is an open-source Layer 1 blockchain that was built to address the trading scalability problem. Sei is the fastest Layer 1 for trading, optimizing every layer of the stack to offer the best infrastructure for trading apps. Sei's unique value proposition lies in its singular focus on the trading function. By optimizing its infrastructure for trading apps, any gaming economy, NFT marketplace, or DeFi DEX, will operate better on Sei than on any other Layer 1.
Sei features the fastest time to finality in the industry with a lower bound of 300ms and built-in parallelization, making the infrastructure ideal for trading functionality. By leveraging two novel advancements in consensus research, Sei features Twin-Turbo consensus to reach levels of performance that no other Layer 1 has gotten. Moreover, Sei's built-in matching engine and front-running prevention provide trading apps with valuable advantages out-of-the-box. Finally, Sei's automatic order bundling capability improves app throughput and improves the user experience for all trading apps built on Sei.
Why build Sei as a Layer 1? Sei Labs, the development team behind Sei, initially explored building Sei as a Layer 2 on Ethereum. There are several drawbacks of a Layer 2 rollup: 1) Decentralization. Every Layer 2 is currently using a centralized sequencer, which means there is a single entity responsible for validation and execution of user transactions. This leads to significant security, censorship resistance, and liveness concerns. 2) Throughput. The max throughput of Layer 2 is constrained by the blockspace of the underlying Layer 1 that it writes to. This results in significant scaling difficulties.
In focusing on trading, Sei has created a compelling offering for developers looking to build on a general-purpose Layer 1. Trading is universally important to all applications in Web3, including gaming, social, and NFTs. By catering to this fundamental need, Sei creates a gravitational pull for users to come explore any kind of application built on Sei because trading is general purpose. There are hundreds of promising teams building on the Sei ecosystem, some moving from the largest Layer 1s and Layer 2s such as Ethereum, Solana, zkSync, Polygon and Sui.
How to get involved?
If you’re a builder, come join the hundreds of teams building in the Sei ecosystem, experimenting on new Web3 apps made possible on Sei. Apply for funding from the Sei Ecosystem Fund.
If you’re just looking to learn more, explore the apps and partners in the Sei Ecosystem or follow Sei on Twitter for the latest and greatest. You can read more about Sei’s technological innovations in the official whitepaper.