Sei Network Review 2024: The Dual Application Layer Network

In 2024, the alternate layer-1 ecosystem has been bustling with innovation, attracting considerable attention from developers, users, and investors. Leading networks like Solana, Aptos, and Sui have become hotbeds of activity, each showcasing their advancements in scalability, speed, and user engagement. The Solana Breakpoint event during Token2049 Singapore captured immense developer traction and capital inflows, exemplifying the growing engagement in alternate layer-1s.

Amidst this rising competition, Sei Network has positioned itself as a critical player, aiming to surpass even the likes of Solana. Often touted as a potential “Solana killer,” Sei boasts a high-throughput layer-1 blockchain optimized for trading and decentralized exchanges. With its parallelization architecture designed to handle large volumes of transactions efficiently, Sei is quickly gaining a foothold in the rapidly evolving layer-1 landscape.

Sei is a delegated proof-of-stake (DPoS) layer-1 blockchain that supports smart contracts and is designed to prioritize speed and scalability. Unlike many layer-2 solutions, which rely on existing layer-1 blockchains for core functions like consensus, data availability, and execution, Sei consolidates all these critical layers into a single, cohesive framework.

This Sei review provides a comprehensive overview of the Sei Network, diving into its architecture, key features, ecosystem and future potential.

Sei Network Review Summary

Sei Network is a high-throughput layer-1 blockchain designed to optimize decentralized trading and exchanges. It operates under a delegated proof-of-stake (DPoS) consensus mechanism, which allows validators to participate in network consensus by staking SEI tokens.

The Key Features of Sei Network Are:

• Twin-Turbo Consensus: A unique combination of intelligent block propagation and optimistic block processing that enables the network to achieve transaction speeds as fast as 400 milliseconds (m/s) with near-instant finality.
• Parallelization: Sei leverages parallel transaction processing, allowing multiple transactions to run simultaneously, which significantly enhances network scalability and efficiency, making it well-suited for high-performance DApps.
• Cosmos SDK & Tendermint Core: Sei is built using the Cosmos SDK and Tendermint Core, benefiting from their modular architecture and Byzantine Fault Tolerant (BFT) consensus mechanism. The network is interoperable with other Cosmos-based blockchains via the Inter-Blockchain Communication (IBC) protocol.
• Application Layers: Sei supports both the Ethereum Virtual Machine (EVM) and CosmWasm for smart contract execution, providing developers with flexibility and compatibility with the Ethereum and Cosmos ecosystems.
• SeiDB: This database enhances storage performance and scalability, improving block commit times, reducing state size, and minimizing historical data growth, further supporting the network's high throughput.

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Sei Consensus

The Sei Network positions itself as a blockchain platform offering the speed of Web2 applications. Its performance is comparable to that of the Internet because Sei claims a transaction speed of 400 m/s and instant transaction finality. In contrast, Ethereum transactions take ~12 seconds to execute and 6-8 minutes to reach finality. Sei makes essential improvements to Ethereum’s design to achieve these numbers.

Sei Twin-Turbo Consensus

The Sei network adopts the Tendermint core for consensus and finality. Tendermint executes operations twice as fast as Ethereum, offering a speed of ~6 seconds. Validators can bond their and the delegator’s SEI tokens to participate in the consensus process. The protocol picks the top 39 validators by stake to participate in the consensus process. 

Sei adopts its unique “Twin-Turbo Consensus” mechanism to increase throughput from 6 seconds to ~400 m/s. It has two components:

Intelligent Block Propagation

Like any other blockchain, Sei propagates transactions to its validators via their P2P network, creating a mempool of pending transactions. A block proposer selects a bunch of transactions from the mempool, creates a block, and distributes it across the validator set. 

These blocks are compressed; they only include the hashes of the transactions that produced the block. The block proposer assumes that with a consensus involving just 39 validators, all validators maintain a complete local set of the transaction mempool. Sei validators take advantage of this network effect and reconstruct the block using transaction hashes and contents of the local mempool set. Advantages of this approach:

• Reduced Bandwidth Usage: Transmitting only hashes consumes significantly less bandwidth than sending full transaction data.
• Faster Propagation: Smaller block sizes allow blocks to propagate through the network more quickly, enhancing overall network responsiveness.
• Scalability: This method supports higher throughput and scalability by minimizing the data each validator needs to handle during block propagation.

Optimistic Block Processing

The Sei blockchain consensus process involves prevote and pre-commit steps for finalizing blocks, ensuring the participating validators carry out block voting and verification. Instead of waiting for each validator to complete these steps step-by-step, Sei processes the block optimistically to reduce latency. 

Validators immediately process the block optimistically and do not wait for the consensus to confirm the state. The Sei blog claims that the consensus sparingly rejects blocks created by block proposers, so processing the block as it completes commitment can improve the network's throughput.

If the consensus rejects a block, the commitment process for that block number is repeated sequentially, resuming optimistic processing from the next block. 

Conclusion

Twin-Turbo consensus helps the Sei network offer near-instant finality. However, the substantial modifications demand some infrastructural trade-offs to work as intended. One trade-off is the exponential number of messages shared between the validators every second, which limits the network from increasing its validator size due to latency constraints. The hardware specifications essential for running nodes are also significantly higher than in Ethereum.

Sei Technology

At its core, Sei leverages the Cosmos SDK and Tendermint Core for its consensus and data availability layers. This architecture enables the network to benefit from Cosmos’s modular approach and Byzantine Fault Tolerant (BFT) consensus mechanism. Additionally, Sei is fully interoperable with the Cosmos ecosystem through the Inter-Blockchain Communication (IBC) protocol.

Sei’s technology stack introduces several innovations to improve throughput, latency, and network efficiency. These include its application layer, Twin-Turbo consensus mechanism, optimistic parallelization, SeiDB, and an interoperable virtual machine (VM). These components enable Sei to offer high-speed transaction processing and a frictionless experience for decentralized applications (DApps), particularly those focused on trading and financial markets.

Sei Application Layer(s)

The Sei application layer offers unique flexibility and interoperability by supporting multiple smart contract platforms. Sei’s initial design supported the CosmWasm application layer in the Rust programming language. CosmWasm, built on WebAssembly (Wasm), is a widely adopted framework known for its versatility and security, particularly within the Cosmos ecosystem.

With the Sei v2 upgrade, the team added support for the Ethereum Virtual Machine (EVM), allowing developers to write smart contracts using Solidity. This dual-layer approach will enable developers to choose between two robust environments: the EVM, which provides seamless interoperability with Ethereum, and CosmWasm, which extends compatibility with Solana and other Cosmos-based ecosystems.

Sei runs both application layers in parallel, ensuring that each benefit equally and in real time from the network's high throughput capabilities. This composable layer, bridging the Ethereum and Solana ecosystems, enables greater flexibility and innovation for decentralized applications while providing developers with the freedom to build in the environment best suited to their needs.

Sei Optimistic Parallelization

With the Sei v2 upgrade, the network introduced optimistic parallelization, significantly improving its throughput capabilities. This innovation allows the Sei protocol to run transactions optimistically in parallel, further enhancing the network's speed and efficiency.

Optimistic parallelization works by running all transactions concurrently unless they interact with the same part of the blockchain state. If two transactions relate to the same state but touch different parts, they can be processed in parallel, significantly speeding up execution. However, when transactions involve the same part of the state, the protocol automatically switches to sequential execution to maintain consistency and avoid conflicts.

This process repeats continuously, allowing the network to maximize parallel transaction processing while minimizing the risks of state collisions. Sei significantly boosts its throughput by employing this flexible approach, making it ideal for high-performance applications such as decentralized exchanges and other financial services that require fast and reliable execution.

SeiDB

SeiDB is a part of Sei v2, designed to improve storage performance and scalability. By addressing the issues of state bloat and inefficient data management seen in other blockchain architectures, SeiDB optimizes data storage and retrieval, resulting in significant performance improvements across the network. Key benefits of SeiDB include:

• Improved Block Commit Times: SeiDB has achieved up to 287x faster block commit times, contributing to Sei's high throughput and fast finality.
• Reduction in State Size: Introducing a two-layer storage structure—State Commitment (SC) and State Store (SS)—helps reduce the active state size by 60%, improving overall performance for validator and archive nodes.​
• Faster State Syncing: Validators benefit from 1200% faster state syncing, which drastically reduces the time needed to catch up with the latest block, contributing to network stability and scalability​
• Reduced Historical Data Growth: SeiDB reduces historical data growth by 90%, which eases the storage burden on nodes and improves the blockchain's scalability, making it more cost-efficient to run a node.

These improvements make SeiDB a cornerstone of Sei's ability to handle high transaction throughput while maintaining low infrastructure costs and ensuring the smooth operation of decentralized applications.

Sei Parallel Stack

The Sei Parallel Stack is an innovative framework designed to enhance the performance and scalability of Layer 2 solutions and rollups. By leveraging parallel processing, the Parallel Stack allows rollups to use Sei validators for decentralized sequencing, significantly improving transaction throughput and reducing latency. This open-source framework is tailored to solve many bottlenecks currently hindering Ethereum Layer 2 solutions.

Key features of the Parallel Stack include:

• Parallel Processing: Allows rollups to run transactions simultaneously, maximizing throughput while maintaining security.
• Decentralized Sequencing: Rollups can leverage Sei’s validator set for sequencing, providing a decentralized and efficient ordering of transactions.
• Customization and Scalability: Developers can build fully customizable Layer 2 solutions, with parallelization enhancing performance.

This framework is part of Sei’s broader mission to scale the Ethereum ecosystem while maintaining decentralization, improving user experience, and reducing transaction fees across Layer 2 solutions.

SEI Token

The SEI token serves as the native cryptocurrency of the Sei network, with a range of critical roles within the ecosystem. It operates under a delegated proof-of-stake (dPoS) consensus mechanism, where validators secure the network by staking SEI tokens. In return, validators and delegators earn rewards based on their participation. 

The SEI tokenomics model incentivizes long-term staking, encourages network participation, and maintains a deflationary mechanism through transaction fees and staking slashes.

SEI Token Supply:

• SEI's initial token supply is capped at 10 billion tokens, and its structured release schedule aims to foster sustainable growth and network security.
• A portion of tokens is allocated for staking rewards, liquidity provision, and community incentives, ensuring an equitable distribution to early supporters and contributors.

SEI Token Utility

• Network Security: Users can stake SEI to help secure the network and validate transactions. Stakers earn rewards for their contribution to the consensus mechanism.
• Transaction Fees: SEI is used to pay for gas fees on the network.
• Liquidity and DeFi: SEI tokens are also locked within decentralized finance (DeFi) applications on Sei, where they can be deployed as collateral or in liquidity pools for decentralized exchanges (DEXs).
• Interoperability: SEI facilitates interoperability between Cosmos-based chains using the Inter-Blockchain Communication (IBC) protocol, enabling smooth asset transfers across the ecosystem.

Governance

SEI token holders can participate in governance decisions such as protocol upgrades, changes to network parameters, and the allocation of community funds. Any token holder can submit a proposal, and others can vote on it. The weight of each vote is proportional to the number of SEI tokens held or staked, ensuring that those with a vested interest in the network have a say in its future direction.

Where to Buy SEI?

You can buy the SEI token on every major centralized exchange such as BloFin and Bybit, Binance, KuCoin, OKX. Also, check out our top picks for the best crypto exchanges.

The Osmosis exchange on Cosmos is an ideal on-chain decentralized platform for purchasing SEI tokens.

Sei Ecosystem Analysis

In Q2 2024, research hub Messari reported that Sei Network saw mixed results in terms of ecosystem growth. On the one hand, the Total Value Locked (TVL) in DeFi protocols on Sei increased, reaching $60.9 million, primarily driven by new protocol launches following the Sei V2 upgrade. 

However, Sei's NFT sector suffered a steep decline in activity, with sales, sellers, and buyers decreasing, reducing user engagement with non-DeFi applications.

Staking Metrics

• Sei maintained 39 active validators, unchanged from the previous quarter. However, the total amount of SEI staked decreased to 5.9 billion SEI.
• The introduction of liquid staking protocols, such as Silo and Kryptonite, allowed users to participate in liquid staking. By the end of Q2 2024, 24.4 million SEI had been liquid staked.

Key Decentralized Applications (DApps) and Milestones

Sei's DeFi landscape saw a transformation in Q2, catalyzed by the launch of the Sei V2 upgrade and its EVM compatibility. Several new decentralized applications emerged, reshaping the network's composition of TVL:

• Yei Finance: As Sei's first borrowing and lending protocol, Yei Finance quickly captured 63% of Sei's TVL, closing the quarter with $14.8 million in TVL. Yei's growth was boosted by its status as a fork of Aave V3 and its points program, which incentivized borrowing and lending activity.
• DragonSwap: Sei’s first EVM-compatible DEX, DragonSwap, launched at the end of May 2024. By the end of Q2, it had $13 million in TVL, accounting for 21.3% of the network's TVL. 
• NFT Marketplaces: Pallet maintained its dominance in Sei's NFT sector, accounting for 99.8% of the NFT trading volume, even as overall activity in NFTs declined.

The Sei V2 upgrade, which went live on May 27, 2024, was a major milestone. It introduced features like optimistic parallelization, SeiDB, and dual execution environments supporting both CosmWasm and EVM. This upgrade set the foundation for future DeFi growth and allowed Sei to support the ERC-20 and ERC-721 token standards, attracting a wider range of DApp developers to the platform.

Sei Network Review: Closing Thoughts

Sei continues its mission to be the fastest network for digital asset exchange, driven by innovative technologies like Twin-Turbo Consensus and transaction parallelization that enhance throughput and efficiency. 

The Sei V2 upgrade is critical in maintaining the ecosystem’s momentum. It introduces EVM compatibility, optimistic parallelization, and SeiDB to boost performance and developer experience. Sei’s Parallel Stack offers scope for more significant expansion but competes against many other aggregated layers from prominent projects like Optimism, Polygon, and ZKsync.

One unique advantage that separates SEI is its dual application layer supporting EVM and CosmWasm, which Sei can use to leverage synergies between Ethereum and Solana ecosystems.