A Dive Into Sei - The Fastest Blockchain Ever

Today we’re going to do a dive into a newer blockchain I have been looking at, Sei, supposedly the fastest blockchain ever!

Below we’ll cover:

• What is Sei

• Why Sei was built

• Features

• Sei V2 - EVM

• Tokenomics of $SEI including comparisons with other L2s and VC unlocks

• Ecosystem - DeFi and NFT

• Team/Funding

• Bull and Bear Case

Now some of you may have seen my deep dive video or my thread on Sei already, for those who have - great! You guys are amazing and appreciate the support. For those who haven’t you’ll find this issue to be an interesting one for sure!

So let’s begin.

What is Sei and why was it built?

Sei is a cosmos SDK Layer 1 blockchain built to solve the issue that most blockchains have today - they aren’t very good at the exchange of assets!

The main reason why we use blockchains today is to trade, whether thats your core DeFi protocols like DEXes, derivatives or money markets to NFT marketplaces, Gaming ecosystems and even Social platforms. All of the above involve the exchange of digital assets which all need to occur on a blockchain.

Sei aims to solve the exchange trilemma which is the idea that the current apps we have today in crypto are either Scalable, decentralised or capital efficient, but never all 3.

Some example of this include:

• Uniswap which is decentralised but not capital efficient

• dYdX which is capital efficient but not decentralised

• Coinbase which is scalable but not decentralised

One of the founders, Jay, originally worked at Robinhood and was one of the leads there during the GameStop saga. For anyone who doesn’t know what happened, a short squeeze on GME was occurring when retail were heavily buying GameStop stock which was heavily shorted by big hedge funds at the time. During the mania phase, Robinhood stopped retail users from buying, effectively giving the hedge funds a way out whilst retail users were stuck left holding the bag as they usually do.

The idea Jay had was to then go and build a decentralised trading platform but after some research, they found that this was simply not possible on the current framework we have with the L1s in the space. Something different needed to be built and that is were Sei came from!

Features

Sei uses a twin turbo consensus mechanism that enables some very impressive feats including the fastest time to finality of any major chain at an incredible 390ms. Time to finality is the time is takes before blocks are confirmed - they can no longer be changed. This is a stark difference to main blockchains we have today.

In addition Sei enables a concept known as single slot finality which means once a transaction is submitted, it cannot be reorganised within the mempool. This differs to what other chains currently offer being multi slot finality. Interestingly it is on the Ethereum roadmap to have single slot finality in future.

Other benefits include having native MEV protection to stop harmful MEV like front-running from things like sandwich attacks which we all hate. Other forms of MEV are still present.

Sei V2 - EVM

One of the upcoming releases for Sei is moving towards EVM enabling parallelisation. This will be a game changer as apps on EVM chains can simply move over their code to Sei and utilise the great tech features Sei has to offer. Parallelisation enables time saving up to 300ms! It might not sound like a lot, but it’s more than 50% of the total processing time.

The plan is EVM will come in the first half of 2024. Interestingly, they’ve already been able to demonstrate this in their testnet.

Tokenomics

Sei is a proof of stake token that can be staked to secure the network. This currently yields a mild 4-5% APY. $SEI is the gas token for the network but with sufficient scaling, Sei gas fees are very low, around $0.01. $SEI is also the governance token for the network. Is this gas fee low enough though? Compared to Solana which is fractions of a cent, I think there is still some work to do here.
SEI can be staked which is what I’m currently doing. Why? Well just like Celestia and Injective, I think we’ll see a ton of protocols decide to airdrop tokens to SEI stakers and I want to make sure I get some too!

In recent times, SEI has increased significantly in price from a low of $0.08 back only a few months ago to an insane $0.80. 10x in such a short time period.

Current market cap is $1.6b with a massive FDV of over $7b. Is this too high? Lets compare it to some of the other alt L1’s.

Solana - $42b and $55b FDV
Cardano - $20b and $26b FDV
Avalanche - $14b and $27b FDV
Near - $3.6b MC and FDV
Injective - $3.3b and $3.8b FDV
Aptos - $3b and $10b FDV
Kaspa - $2.7b and $3.5b FDV
Sui - $1.2 and $11b FDV

It’s interesting when putting Sei in with the above, undervalued, fairly valued or overvalued? I think at current levels, possibly fairly valued but as developments continue, could Sei rank up with the big boys at the top with high double digit billion market cap? I think there is a chance.

VC unlocks are a big worry, however, the major inflation really starts to come towards the end of 2024 so until then, I’m not so worried about this. This is evident in the graph below.

Ecosystem

To be frankly honest, the ecosystem for Sei in its current form is immature. We’re still at early days and not much has been built for users so far. TVL is currently around $5m consisting mainly from Astroport, the main DEX currently on Sei. Interestingly this was one of the main DEXes around during the Terra days back in 2021 but it seems like they have pivoted to alt L1 chains like Injective and Sei now.

There is not too much else to do other than perpetuals via Levana although this too doesn’t have sufficient liquidity just yet.

Interestingly, in recent days, meme coins have been popping off on Sei with a few hitting multi million dollar market caps which has been good to see. Activity is activity and ‘Seiyans’ have been the talk of recent days in the Sei community.

Ultimately meme coins are not what Sei was built for and the real applications are coming. Firstly, Sei has a $120m ecosystem fund which it is using to help on board developers to build innovative applications on Sei. Currently there are at least 50+ that I can see are in the building process. A list of some of them can be seen below:

Nitro - EVM on Sei (using Sei for DA)
Kryptonite - money market / LST - This has recently launched
Protocol ION - RWA (luxury goods)
Vortex - Acquired by Sushi
ApolloDAO - auto-compounder
Black panther - asset management
Arkis - leverage for institutions
Coded estate - real estate on chain
Sushi - DEX
Satori - Perps
UXD - Stable coin
Stride - Liquid staking
Pharaoh Finance - RWA

NFTs

Pallet is the main NFT marketplace, I’ve seen a ton of collections pop up and perform fairly well although I haven’t myself dived into many of the individual collections to see what their community is like.

Team/Funding

One of the good things about Sei is firstly their team is pretty top tier. Jay and Jeff who previously worked at Robinhood and Goldman Sachs have tons of experience and it’s clear when they talk that you can see they’re smart people.
Here are some interviews worth watching.

Sei Labs also raised $30 million in two strategic funding rounds from top investors, including Jump, Distributed Global, Multicoin, Asymmetric, Flow Traders, Hypersphere, and Bixin Ventures. Good names including Jump which seem to have their toes in every top L1 chain these days.

Bull/Bear Case

I think overall with Sei, you have a top tier technical Layer 1 with a ton of innovative features like the fastest time to finality, parallelisation, EVM compatibility (in 2024), a team thats raised a ton of money, lots of apps coming and therefore hopefully a good ecosystem in due time with a very tight nit community. All the things you’d want to see from a chain.

At a lower marketcap than competitors, there is clear upside going forward from here but please note, Sei is already 10x up from the bottom! I think they need to get apps out there and not just forks, but innovative native apps on Sei. Getting EVM out without delays will be important too. My main concern is really around VC unlocks which can wreck the growth of Sei’s price action, so I’m very wary of the big unlock coming towards the end of 2024. Until then, I hold Sei in my portfolio which I’m currently staking to hopefully earn some juicy airdrops!