Introduction

Sei is a general purpose, open-source Layer 1 blockchain specialized for the exchange of digital assets. Leveraging a novel consensus and technical breakthroughs, Sei is the fastest blockchain in the industry.

A common misconception is that Sei is a DeFi chain. However, the exchange of digital assets is universal across gaming, social, and NFTs. Trading is general purpose.

The Sei Vision

The Problem that Sei Solves

The fundamental use case of blockchains is the ability to exchange digital assets.

The most successful Web3 apps are: 1) Indirect trading apps (most Metamask users ultimately use Uniswap / OpenSea) or 2) Direct trading apps, disguised as a game or NFT marketplace (like Axie or Magic Eden).

There are major tailwinds driving the growth of on-chain trading and exchange of digital assets. As regulation increases on centralized exchanges, more activity flows on-chain. As crypto adoption increases, more assets are tokenized and the need to exchange these assets increases exponentially.

Exchanges face a major scaling problem on Layer 1s today. Exchanges face the Exchange Trilemma: between decentralization, scalability and capital efficiency, they cannot achieve all three.

Sei addresses the exchange scalability problem by building the first Layer 1 specialized for trading, optimizing every layer of the stack to offer the best infrastructure for the exchange of digital assets.

What Sei Offers

1. Sei is the fastest chain to finality - point blank - with a lower bound of 300ms

2. Twin-turbo consensus - achieves industry-leading performance

3. One of the only chains to conduct market-based parallelization

4. Native matching engine that exchange teams can leverage

5. Frontrunning protection - combats malicious frontrunning that is rampant in other ecosystems

Sei has only one value prop: exchange apps - whether it’s a NFT marketplace or gaming economy- will offer the best user experience by building on Sei.

Sei offers the functionality of a general purpose blockchain (i.e. allowing users to transfer assets and deploy smart contracts). In addition to that, Sei has created an order placement and matching engine (referred to as the ”matching engine”) that can be used by any exchanges building on top of Sei.

The matching engine allows decentralized exchanges that are building on top of Sei to deploy their own CLOBs. The matching engine maintains their respective order books at a chain level, and provides functionality to create markets and allow users to trade.

Creating a new orderbook (equivalent to creating a new market) can be done by a two-transaction process:

1. Deploying a smart contract onto Sei

2. Submitting a transaction to add a new order book to the registered smart contract. A new order book proposal needs to include the asset, the base denomination of pricing, and the minimum price interval

The matching engine supports the following order types:

• Limit orders: This is an order to buy/sell an asset at a specified price or better. When a limit order is submitted, it is generally added directly to the order book and will be matched against market orders

  that come in.

• Market orders: This is an order to buy or sell an asset at the best available price. Market orders will get executed immediately if there is any liquidity in the order book (i.e. there are any limit orders to match the market order that is submitted). To prevent orders getting filled at prices that are wildly different from what users expect, users placing trades can also submit a max slip-page parameter.

• Fill-or-kill order: This is a special market order type in which either the entire order gets executed immediately if there is enough liquidity in the order book, or the order gets canceled. There is no partial execution with fill-or-kill orders.

• Stop-loss order: This is an order to close out a position by buying or selling a security at the market price when it reaches a certain price known as the stop price. The stop prices of these orders will be

  visible on chain.

• Cancel order: This will remove an order from the order book.

Partial executions, where only part of the overall order is executed, are possible for limit, market, and stop-loss order if there is not enough liquidity to fill the entire order.

Run a Sei Node

A full Sei node is a fundamental building block of the Sei Blockchain. It consists of a local copy of the entire blockchain, including its history and state. Running a full node is essential for participating in network operations like validating transactions, joining consensus, and broadcasting events to other network participants.

Run Sei Validator

Validators are responsible for committing new blocks to the blockchain through an automated voting process. A validator's stake is slashed if they become unavailable or sign blocks at the same height.

Validators run full nodes, participate in consensus by broadcasting votes, commit new blocks to the blockchain, and participate in the governance of the blockchain. Validators can cast votes on behalf of their delegators. A validator's voting power is weighted according to their total stake. Only validators in the Active Validator Set are the only validators that sign blocks and receive revenue.

Validators and their delegators earn the following rewards:

• Fees are added to each transaction to avoid spamming and pay for computing power. Validators set minimum gas prices and reject transactions that have implied gas prices below this threshold.

• Mints periodically the chain will mint new tokens, this is configured in the mint module

Validators can set commissions on the fees they receive as an additional incentive.

For fees and mints, the tokens are distributed in every block relative to the number of tokens that a validator has staked.

If validators double sign, are frequently offline, or do not participate in governance, their staked Sei (including the Sei of users that delegated to them) can be slashed. Penalties can vary depending on the severity of the violation.

Token Standard

Many Sei development standards focus on token interfaces. These standards help ensure smart contracts remain composable, so for instance when a new project issues a token, that it remains compatible with existing decentralized exchanges.

Here are some of the most popular token standards on Sei:

• Token Factory: This offers a standardized mechanism for creating fungible tokens, which are interchangeable and identical. These tokens can embody various digital assets like voting rights, virtual currencies, or staking tokens. They are also native sdk.Coins and come with a variety of native functionality

• CW721: This contract provides a standard approach for handling non-fungible tokens. These are unique and are not interchangeable with any other token. Examples could include ownership rights to a piece of artwork, or the licensing for a specific song.

• CW20 [Deprecated]: Although not recommended, this contract provides another approach for handling fungible tokens. Similar to ERC-20 standard, contracts can implement this specification. CW20 contracts provide a standardized framework for the issuance, transfer, and tracking of fungible tokens.

Tokenfactory vs CW20

The Sei Foundation strongly recommends dapps use TokenFactory native sdk.Coins over CW20 tokens for the following reasons:

• Performance: Less computational cost and thus less gas fees for using natively integrated TokenFactory sdk.Coins as opposed to interacting with CW20 contracts

• Security: Tokens created with native module TokenFactory are sdk.Coins and share the same security model as the base blockchain. With CW20 smart contracts, there may be risks that poorly written or malicious contracts create security issues

• Standardization: Tokens created with native module TokenFactory are sdk.Coins and are directly integrated with the bank module. They offer better interoperability and are more accessible to bridging (like IBC)

• Simplicity: For basic fungible tokens that do not require extra functionality of a CW20 or similar smart contract, using native module like TokenFactory is simpler and more straightforward