Sei — blockchain for order book
Nowadays there are two types of cryptocurrency exchanges. These are centralized exchanges (such as Binance, FTX, Coinbase) and decentralized exchanges (there are quite a few of them and they tend to work on a particular blockchain).
The processing of orders on a centralized exchange takes place on its servers. We do not know how it all works, but these exchanges process orders rather quickly, the cost of such processing is quite low, failures at high loads are quite rare. Also all your funds on a centralized exchange are out of your control. You have to trust the exchange 100% if you keep your money there. There are also various regulatory risks. Your account can be blocked for various reasons. And even if it was a mistake and you were unblocked, the market situation can change not in your favor, if you did not have access to your funds at the time of blocking.
Now let’s see how decentralized exchanges work. Here your funds are on your wallet, which you connect to the exchange. Funds pass through the smart contracts of the exchange and then come back to the wallet. That is, your cryptocurrency is under your control. The risk can only be in bad smart contracts. As for order processing , it depends directly on the blockchain on which it is built. Here quite often there are such things as slow processing, increased network congestion and high cost of transactions (for example, the latter is more about the Ethereum network). These are of course serious disadvantages. For example, it is unacceptable for futures trading.
The Sei blockchain should solve the problems described above. Sei is an L1 blockchain specifically built for the order book. It is built using Cosmos SDK and Tendermint Core. Its distinctive feature is its own order matching mechanism. It provides scalability to the DEX order book built on Sei. Also Sei, designed to scale with the needs of decentralized exchanges, has made several Tier 1 optimizations to give exchanges an advantage:
- Frontrunning protection — combats malicious frontrunning that is rampant in other ecosystems
- Intelligent block propagation — improves latency and throughput
- Sub-second settlement — Sei is the fastest chain to finality at ~600ms
That is, Sei has the mechanisms with which to build sophisticated products such as options and futures trading, sports betting and other products where instant order processing is required.
Conclusions.
Sei-based applications, with their built-in order book infrastructure, incredibly fast execution, high liquidity, and fully decentralized matching service, will work much better than their competitors. We will be able to see a decentralized exchange that will be devoid of all the disadvantages that we have today.
We can assume that Sei will act as the infrastructure and liquidity hub for the next generation of the Cosmos ecosystem’s DeFi products.
More information about Sei can be found at the links below. The project also has a testnet and an active ambassadorship program. Join discord for more details.
I hope that my article was interesting and useful for you.