Sei Network Helps Normalize Decentralized Financing With On-Chain Orderbook

Sei Network Helps Normalize Decentralized Financing With On-Chain Orderbook
In July 2017, only 15.2 million people worldwide owned cryptocurrency. Now, according to Statista, this number has jumped to 82 million cryptocurrency owners, and according to other estimates, it reaches 300 million. Despite the rapid growth, crypto holders remain a minority of the population. According to Morning Consult, only 20 percent of individuals report owning any cryptocurrency between June and December 2021, and 61 percent of this figure are millennials earning more than $100,000 a year.

There are many barriers to entry into the world of cryptocurrency ownership, including psychological factors when switching to new financial platforms, but one of the main drawbacks is the lack of interaction and liquidity in decentralized finance.

“In terms of liquidity, decentralized financing is still insignificant compared to traditional asset classes. Decentralized financing is still in its infancy, the infrastructure and tools for combining between ecosystems are being created,” said Dan Edlebeck, co-founder of the Sei Network.

The Sei network is working on creating just such an architecture. Launched as layer-1, which means its blockchains can verify transactions without using another network, and built on the Cosmos SDK, the most commonly used platform for blockchains, Sei Network has an order book as the base layer of the blockchain. The order books indicate the number of shares that are being bid on or offered at different prices, as well as the persons behind the purchase and sale orders, creating the transparency and trust needed for buying and selling by large institutional investors. Order books have become the gold standard for organizing and structuring orders and requests since Nasdaq introduced electronic order books thirty years ago.
Since the order book is stored in a chain that is completely stored in the blockchain, Ceo Network can optimize performance and speed. Many protocols have traditionally faced problems due to errors or delays in pricing: when a protocol uses an off-chain pricing oracle, there are delays between receiving trade information and the protocol, which leads to node failures.

Consider a recent pricing error in the Mirror Protocol for Luna Classic: validators on Terra Classic reported a price of $0.000122 for both the Luna Classic coin and the newly issued LUNA coin, but the LUNA coin was supposed to cost $9.32. In the end, the error was fixed, but the operator got away with more than $ 30 million.

Moreover, the Sei network is an authorized blockchain, which means that projects must pass a certain degree of verification to get on the list. Although this limits the number of projects on the blockchain, it also helps to ensure that the minimum quality threshold is met for large investors.

Since the Sei network is built on the Cosmos network, each blockchain works independently — this is an advantage in the market. Traditionally, congestion and problems in the tier 1 blockchain can have ripple effects for any other project on it, for example, the blockchain protocol encountered delays when the Solana blockchain was disabled. “Working on a sovereign, purpose-built blockchain, decentralized financial applications built on Sei receive the security and fault tolerance of the basic Cosmos and Tendermint infrastructure, the compatibility and compatibility of the communication protocol between blockchains, as well as the reliability and throughput of the Sei blockchain,” Edlback said.

This approach contrasts with automated market makers, which form the basis of the current decentralized financial community. Automated market makers facilitate peer-to-peer trading by establishing a rule that the product of any two assets should always be equal to some constant. When the holder takes out one coin, the other side must put in an equivalent amount to balance the equation.

Of course, market makers, especially Uniswap as a pioneer, have brought incredible benefits to the decentralized finance community, but they have problems. It is difficult for market makers to deal with the advance that occurs when another user places a similar deal as a potential buyer, but immediately after that sells it, which ultimately damages the buyer and costs him more.

The Sei network provides an alternative to automated market makers. “For larger assets, you need to have an order book online so that there is a market and information for trading options,” Edlback said.

The organization believes that from both a technological and human point of view, the main key to its scalability will be to maintain strong ties with the world of global decentralized finance — its protocols, vocabulary, channels, values, rules, subtle feelings and principles of community and interaction — and the world of Western finance.: Wall Street, leading tier 1 financial technology startups and the massive consumer audience they serve.

This is a management team with a pedigree in a hybrid approach to mass adoption. Sei Network lead engineer Jay Jog previously worked at Robinhood, other executives have experience working at Goldman Sachs, and Addlebeck is a household name in the Cosmos ecosystem, having launched Sentinel and Exidio, two high-profile decentralized financial projects that have recently received considerable attention. The Sei Network team consists of leaders that institutional players have not yet seen, and players that Sei hopes to attract, along with all these developer-oriented projects. Sei lovingly calls its emerging community “Seilors”, which is evident from the clever water branding content that plays with themes of depth and liquidity and even parodies the Zissou team. Its marketing is optimized for a savvy audience in the center of New York, located in the subway, and at the same time reminds of the good old days of the first blockchain startups.

It will still take some time until large public companies begin to participate more actively in decentralized financing, especially because of the rules and recommendations of “know your customer”. But there are solutions that provide a balance between complete anonymity and disclosure of all personally identifiable information.