The $SEI thesis unfiltered - the pro's and the con's

Dec 19, 2023

Hey, friends!

New day, new opportunity in the market.

This newsletter is about the token $SEI, a thesis shared by a good friend of mine that originally was meant to be shared several days ago before the pump. But it’s never too late I guess?

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The $SEI thesis unfiltered - the pro's and the con's

Let me just start first by saying that this thesis is from my friend Zoomer Oracle.

Zoomer has called so many coins this year, and everything he shares pumps. He was the first one to $TIA for example at $2.50 and called $WLD at $1 this autumn. Give him a follow on Twitter ;)

Let’s start with some bulletpoints and important takes:

Injective has been one of the big champions of this recent run but also earlier this year. Overall a beast.

Injective ($INJ) is a blockchain designed to facilitate advanced DeFi applications

See, where L1’s try to compete on TPS for example, Injective seems to put their focus on DeFi applications with cex tier speed. They chose cosmos SDK, just like Celestia, to customize everything.

Long story short: It seems that Injective is a Cosmos based sdk that enriches DeFi protocols. Even though TVL and apps are lackluster, it seems like the market is projecting a bullish thesis around customized L1s for specific goals (DeFi for example).

The advantage Injective has, is that for this thesis, they were basically the first one as they launched in prior cycle. It’s backed by Binance, Pantera, Jump, and Mark Cuban. They made an ecosystem fund including Kraken, Kucoin, Delphi, flow traders, and Gate.

This is where my bullish thesis for SEI comes in: It’s, just like Injective, a cosmos SDK layer 1 launched in august 2023. It’s a general purpose layer1 specialised for trading (where did we see that before?). Sei closed a 30 mil round and an 800 million valuation.

Cofounder Sei Jay worked previously at Robinhood, building crypto and margin loans (lots of experience in fintech trading space as an engineering lead)

Solving the trading trilemma on existing blockchain infrastructure, a new approach.

They wanted to build a decentralised version of RobinHood initially, a dex. Obviously realised the shortcomings of dex’es within the current infrastructure. Hence the birth of SEI.

They have one core thesis: exchange of digital assets is the most fundamental use case for blockchains. Every app is either directly or indirectly a trading application. Like Nasdaq / Robinhood.

More regulation will come to centralized entities (due to ftx) so more people will be forced to use onchain applications. This will require an infrastructure that supports massive influx of users.

Tokenization getting popular means more demand for 24/7 trading of these tokenized assets.

More demand for exchanges: SEI solves the exchange ceiling problem.

Exchange trillema is made by SEI team:

Decentralisation
Capital Efficiency
Scalability

Every exchange right now is only able to get two of the three. Binance misses point 1, and Uniswap v3 misses point 3. They don’t think that hopping from uniswap v2,v3 or v4 is going to fix this issue. Hence they started SEI, as a way to rewrite the underlying infrastructure so apps can focus on user acquisition rather than infra. This is how innovation works.

This whole way of thinking by the team reminds me a lot of Celestia in the way that to solve the blockchain trilemma, they simply started all over again focusing on one specialized blockchain component (Data Availability) rather than the other blockchain components (scaling, etc.).

SEI focuses on specialized infra for trading applications. Exchanges have genuine market fit, other apps don’t unless you enable liquidity mining or other token incentives. Optimizing every single part of the stack to help give exchanges the tools they need.

The reason why this is so important to highlight is not necessarily because we love the tech: it’s because this seems to be a new playbook for L1’s this cycle. Monad is another example, I’ll dive more into it later when they launch. But their playbook is the same: launching an L1, fully optimized for trading applications/nfts/whatever.

Founder of Monad (Keone), is also ex-Jump trading as a quant developer (almost similar to SEI founder at Robinhood). Again, focus on ultra high-performance EVM that 1000x’es the throughput of Ethereum apps.

Ex-employees of centralized entities of either fund (Jump trading) or exchanges (Robinhood) are waking up to the fact that most digital assets trading apps are lacking infra. It seems like they stepped up and all started their own project for it. It’s a very interesting thing to see as I noticed most don’t even understand what INJ does (outside of going up only), let alone being able to see the pattern here of a potential big narrative this cycle (SEI/INJ/MONAD/TIA).

As INJ already pumped a lot (will likely be 3 digits in 2024) and Monad hasn’t been released yet, I think SEI is mispriced for that reason. Sitting at a 500m mcap, I think most either don’t understand what it does or the bigger picture. It’s also backed by very big names like:

Multicoin (main vc behind Solana), Coinbase, Jump, Delphi, Flow traders, 0xmaki, Sam Kazemian (frax), GSR and more. Outside of that, SEI also (apparently) has a huge Korean community. The top ingredients to pump during this cycle when people start comparing the projects with each other. Just like INJ, SEI has a 120 million USD ecosystem fund to deploy.

Some drawbacks with SEI after talking with gigabrains in the space: The founders don’t have that much experience (no Phd brains as Celestia/Arbitrum eg.), they have yet to deliver anything and instead pivoting into different narratives and VCs probably know this and as a result don’t buy their token. There’s also been some conflicts with Cosmos devs earlier on, but we won’t go into this here other than it might have to do with that Jump pulled out right before the last hour.

In conclusion: SEI is probably underrated. INJ is getting all the spotlights and most don’t even know what it does and why it pumps. By the time people do, they will buy Monad/SEI as an alternative as they learn that their main focus is also trying to optimize applications. Especially as both SEI and INJ are cosmos sdk built, just like TIA (another popular main coin this cycle). Optimized L1s for specific reasons will be a narrative, if not already. Think most are not awake to that idea yet.

Here’s an interesting video with the co-founder of SEI: