1. Returning to the Genesis Vision: Sei's Trading-First Ethos

Monaco is built on a counter-thesis to the prevailing narrative of liquidity fragmentation. In a world of countless appchains and siloed L2s, each battling for its own pool of users and liquidity, Monaco makes a deliberate choice to build crucial, specialized infrastructure within an existing, high-performance ecosystem: Sei.

This also marks a return to Sei's roots, and the fulfillment of the vision for a decentralized financial stack where specialized layers work in concert, avoiding the cold-start problem that plagues so many new ecosystems.

Sei V1 was launched with a native, onchain order matching engine built directly into the protocol, a radical design at the time aimed at creating the optimal environment for trading applications. While this initial approach faced challenges with builder adoption on CosmWasm and the rigidity of a native module, the core thesis remained.

Monaco represents the evolution and fulfillment of that original vision, delivering the same trading-first ethos but with a far more powerful and flexible architecture: a composable execution layer on top of a hyper-performant, general-purpose EVM, rather than a monolithic, built-in feature.

This deep integration is made possible by Sei's own architectural evolution, culminating in the upcoming Sei Giga upgrade, a ground-up reimagining of the EVM designed to provide a 50x performance improvement over its predecessor.

Giga pushes the theoretical limits of blockchain performance, targeting over 200,000 transactions per second (TPS) with a staggering 5 gigagas of throughput and sub-400ms finality. This isn't an incremental update. It's an architectural paradigm shift achieved through groundbreaking innovations detailed in the Giga whitepaper, most notably the Autobahn consensus mechanism.

To understand Autobahn's breakthrough, one must first understand the limitations of traditional BFT consensus mechanisms like Tendermint. In those systems, each block is processed sequentially: a single leader proposes a block, all validators must download and fully execute the transactions within it, and only then can they proceed through multiple rounds of voting to reach consensus before the next block can be proposed.

This tight coupling of data dissemination, execution, and consensus creates a severe bottleneck, limiting the chain's throughput to the speed of a single proposer and the time it takes for the entire network to complete the lockstep process.

Autobahn fully overhauls this model. It decouples these processes and introduces a multi-proposer architecture where every validator continuously disseminates its own independent stream of data proposals in parallel "lanes", hence the name “Autobahn”. Instead of waiting for a single leader, the network benefits from simultaneous data propagation.

The consensus layer then periodically commits a "tip cut," which is a compact snapshot that aggregates the latest proposals (tips) from every lane, allowing multiple blocks' worth of data to be ordered in a single consensus instance.

Furthermore, Autobahn separates data availability from the critical consensus path. Validators can vote based on compact Proofs of Availability (PoA), which certify that a block's data is accessible without requiring every validator to download it immediately. This, combined with a reduction in voting rounds from three to just 1.5, drastically lowers latency.

The most critical innovation, however, is asynchronous execution. Because EVM execution is deterministic, the network only needs to reach consensus on the ordering of transactions. The actual state computation can happen asynchronously in the background, completely removing execution as a bottleneck to consensus and finality.

Monaco is purpose-built to harness this immense power. An off-chain execution engine is only as good as its settlement layer, and Sei Giga provides the fastest and highest-throughput decentralized settlement layer in the industry.

This synergy is what allows Monaco to function as a hyper-performant execution layer that perfectly complements Sei’s role as a global settlement layer. As Sei Giga's capabilities are proven on mainnet, it also provides a clear roadmap for Monaco to progressively move more of its execution logic onchain, allowing for a gradual increase in decentralization over time without ever compromising its Wall Street-grade performance.

2. The Monaco Engine: Microsecond Performance Onchain

The core of Monaco is a high-performance, off-chain matching engine built in Rust. This is where the magic of microsecond latency happens. By moving the computationally intensive process of order matching off-chain, Monaco bypasses the inherent bottlenecks of any virtual machine-based execution.

This is a critical and deliberate engineering trade-off. While fully onchain CLOBs are decentralized, they are slow and expensive, limited by block times and gas fees for every state change (place, cancel, modify). CLOBs on blobs, which outsource execution to L2s, dump data onto specialized DA layers, and ultimately settle to programmable chains like Ethereum, face potentially significant settlement times (e.g. over eight minutes if using Ethereum for settlement), an eternity in modern financial markets.

ZK rollups on the other hand, while promising on the security/trust assumption front, introduce their own latency issues via the computationally very expensive proving process, making them largely unsuitable for the high-frequency domain if the goal is to rival the performance of TradFi infrastructure like Nasdaq or NYSE.

Monaco’s hybrid model offers the best of both worlds. The off-chain engine handles the lightning-fast execution, with initial backend benchmarks showing 5-25 microsecond (µs) cancel/replace trade execution latency.

To put this in perspective, the Nasdaq, the gold standard of electronic trading, operates at around 50µs (0.05 millisecond). While there is additional latency as trades hop from the SDK to the frontend, this translates to a virtually instantaneous median execution speed of under one millisecond (p50, a.k.a. 50th percentile), providing the typical trader with an experience that rivals the world's best centralized venues.

Crucially for professionals who demand unwavering consistency, the platform ensures that 99% of all trades execute within a tight 10-20 millisecond window (p99), offering predictable, worst-case performance even during peak volatility. This makes it the first microsecond-grade trading layer in the industry, a performance increase of up to 1000x over even the currently leading onchain CLOBs. For reference, Hyperliquid as the current “CLOB King” of DeFi achieves a median latency of 200 milliseconds.

Crucially, this performance does not come at the cost of decentralization where it matters most: asset security and settlement. After an order is matched offchain, the Merkle root of the new state is committed and verified onchain by Sei's decentralized validator set. The final trade settlement then occurs on the Sei EVM L1 in under 400ms.

This represents a 200,000x improvement over the T+1 settlement standard in traditional finance. Meanwhile, user funds are secured in non-custodial smart contract storage, and the final state of the ledger is secured by Sei’s L1 validator network. This architecture allows Monaco to function as a shared infrastructure layer, not a monolithic DEX, meaning that Monaco is solely a back end layer and does not have a frontend. Its open-source SDK allows a diverse ecosystem of frontends and specialized trading platforms to build on top, all tapping into the same core engine (more on this in later chapters).

It is essential to understand this hybrid model as a conscious and strategic decision on the decentralization spectrum. The architecture prioritizes decentralization where it is non-negotiable: transparent onchain balances and final, verifiable settlement on a trustless public ledger.

It then pragmatically centralizes the component where speed is the absolute priority and the trust assumptions are lowest: the order matching process. This approach acknowledges that for high-frequency trading to be viable onchain, a degree of centralization in the matching process is, for now, the only path to rivaling the microsecond performance of legacy systems, creating a system that is maximally performant without compromising on core blockchain principles.

This hybrid architecture unlocks another crucial advantage that is often overlooked but is paramount for market makers: the elimination of gas fees for non-settlement actions. On a fully onchain CLOB, every single action, placing an order, canceling an order, or modifying an order, is a state change that incurs a gas fee.

For market makers who may update their quotes thousands of times per minute in response to market movements, these costs can become prohibitively expensive, forcing them to quote wider spreads to remain profitable. Because Monaco handles matching offchain, actions like order cancellations and modifications consume no gas, allowing market makers to provide the tightest possible liquidity without being penalized for active risk management. This creates a more capital-efficient and competitive market environment for all participants.

3. The Anti-Thesis to Fragmentation: A Unified Liquidity Ecosystem

Beyond its market-leading performance, Monaco’s most powerful innovation may be its solution to one of the most persistent problems in DeFi: liquidity fragmentation. The proliferation of chains and DEXs has scattered liquidity into thousands of isolated pools, resulting in high slippage, poor price discovery, and the dreaded "empty order book" problem for new applications that emerge.

Monaco is the counter-thesis to this fragmented model. It is built around a unified liquidity pool, seeded from day one with Tier 1 and Tier 2 market makers. This means that any application building on Monaco, whether it's a professional trading UI, an RWA platform, or an in-game exchange economy, doesn't need to spend months and millions of dollars trying to bootstrap its own liquidity from scratch.

They can simply plug into Monaco’s deep, shared order book and offer their users tight spreads and best-in-class pricing from the moment they launch. This creates a powerful flywheel effect: more apps bring more traders, which attracts more market makers, which deepens liquidity, making the platform even more attractive to new builders in a virtuous cycle.

This design choice also positions Monaco as a more democratized alternative to models like @HyperliquidX. While Hyperliquid has a similar high-performance architecture, its core team also operates the primary frontend, Hypercore, which inevitably competes for market share with other builders on its infrastructure. Monaco, by design, has no frontend of its own. It is purely an infrastructure layer, creating a level playing field for an entire ecosystem of DEXs to thrive without fear of being cannibalized by the core protocol. It acts as a credibly neutral "decentralized Nasdaq," providing the rails but not competing with the brokers.

This ethos is codified in PitPass, Monaco’s novel and sophisticated approach to democratizing order flow revenue, creating a powerful economic engine for its entire ecosystem.

To fully appreciate the innovation of PitPass, it's essential to understand the fundamental flaws of its traditional finance counterpart, Payment for Order Flow (PFOF). In the legacy system, a retail broker's legal duty to provide "best execution" for its clients is often in direct conflict with its financial incentive to route orders to the highest bidder, a market maker or wholesaler, not necessarily the venue offering the best price. This creates an opaque system where retail traders collectively lose billions annually to infinitesimal price disadvantages, a misalignment of incentives that benefits intermediaries at the expense of the end user.

PitPass reinvents this model from the ground up, built on the Web3 principles of transparency, permissionlessness, and aligned incentives. At its core, a PitPass is a unique onchain identifier, similar to a referral code, that any builder can generate. When a user interacts with a frontend built on Monaco, be it a professional trading UI, a DEX aggregator, or even a crypto-powered game, the orders they send are programmatically tagged with that application's unique PitPass code.

When these trades are executed against Monaco's unified liquidity pool, the protocol automatically calculates and distributes a share of the trading fees back to the holder of the PitPass code. This entire process is programmatic and permissionless. There are no backroom deals, no lengthy commercial negotiations, and no need for a business development team. A developer can build a new trading interface, integrate Monaco's SDK, generate a PitPass, and begin earning a share of the revenue from their users' volume from day one.

Furthermore, PitPass offers builders additional flexibility. On top of the programmatic protocol revenue share they receive, builders can also choose to implement their own custom frontend fee, giving them direct control over their business model.

This two-pronged approach, a baseline share of protocol revenue combined with the option for custom fees, drastically lowers the barrier to entry and cost of bootstrapping for new projects. Builders are freed from the immense challenges of sourcing liquidity and negotiating with market makers, allowing them to focus entirely on what they do best: creating world-class products and user experiences.

Because all builders, regardless of size, tap into the same unified liquidity pool, best execution is an architectural guarantee, not a choice. The PitPass revenue share is then layered on top as a transparent reward for contributing order flow, perfectly aligning incentives between the core infrastructure, the application builders, and the end traders. This creates a truly democratized ecosystem where value is shared fairly, fostering a collaborative environment that stands in stark contrast to the competitive, zero-sum nature of both traditional finance and other onchain trading ecosystems.

4. The Market Opportunity for Monaco

The addressable market for a Wall Street-grade trading layer is, in a word, colossal. The vision extends far beyond the current crypto landscape. While Monaco will support spot and perpetual trading from launch, its architecture is designed for a much broader universe of assets. Why? Because the true prize is the tokenization of the $30 trillion traditional financial markets, stocks, bonds, commodities, and currencies. Monaco’s microsecond latency and deep liquidity make it the ideal venue for these RWAs, offering a level of performance and capital efficiency that TradFi institutions expect.

This creates an enormous opportunity for builders. Monaco is not a single, monolithic "everything exchange." It is an enabling layer that will foster an ecosystem of specialized platforms. The Monaco Research team has already put out Requests for Proposals (RFPs) for a variety of high-conviction applications, including:

• Pro Trading UIs: Sleek, professional-grade interfaces for sophisticated traders to deploy complex strategies, integrate quantitative tooling, and manage portfolio margin across a range of instruments.

• RWA Trading Platforms: Dedicated markets for tokenized stocks, indices, and commodities, bringing real-world assets into a high-speed, 24/7 trading engine.

• Short-Duration Options Markets: High-frequency derivatives that settle in minutes, with up to 1000x leverage, enabling new forms of speculative and hedging strategies.

• Institutional-Grade Prediction Markets: Purpose-built for hedge funds and financial institutions to build out event-trading desks with features like yield-bearing positions and OTC flows.

• In-Game Economies: Providing a high-performance trading layer for the next generation of web3 games, allowing for seamless and instant trading of in-game assets.

• Perpetual Contract Markets: Dedicated markets for perpetual contracts, offering leverage exposure to any RWA or digital asset.

Each of these verticals is unlocked by the unique convergence of Monaco's core features: the microsecond latency required for high-frequency products, the unified liquidity needed for deep markets, and the gasless mechanics that make sophisticated market-making economically viable.

These are not just arbitrary examples; each of these application types is uniquely enabled by Monaco's specific architecture. Short-duration options, for instance, are only viable in a microsecond-latency environment where the price of the option can be updated in real-time relative to the underlying asset's price movements.

Institutional-grade prediction markets require deep, centralized liquidity to support large-scale positions from hedge funds without massive slippage. Similarly, bringing tokenized stocks onchain is meaningless if the trading experience is a thousand times slower than the Nasdaq; Monaco is the first onchain venue to actually compete on that metric. This demonstrates that Monaco isn't just building a faster DEX, it's building the foundational layer for a new generation of financial products that are simply impossible to build on any other onchain infrastructure today.

An entire new design space for onchain trading apps will emerge. From day one, Monaco will launch with a thriving ecosystem, including platforms like @m1markets, @trademontecarlo, and @SymphonyAg, with many more to follow. This is a key differentiator. While most CLOBs are a single backend with a single frontend, Monaco is designed to be the foundation for dozens, if not hundreds, of applications.

This creates a powerful infra premium and a multi-faceted flywheel for the entire Sei ecosystem. Monaco is the key pillar in Sei's vision to build a full-stack decentralized Wall Street:

• App Layer: A diverse ecosystem of DEXs, aggregators, and trading platforms built on top of Monaco, earning revenue from PitPass builder codes.

• High-Performance Execution Layer: Monaco, the decentralized Nasdaq/NYSE, providing microsecond execution and shared liquidity.

• Global Settlement Layer: Sei, the T+0 clearing system, providing sub-second, decentralized finality.

Trading on Monaco-powered apps unlocks a two-layer rewards system: incentives from your chosen trading application plus rewards from Monaco's execution layer itself. It's a new way to capture value across an emerging ecosystem of decentralized trading platforms.

5. Conclusion: The Wall Street-Grade Trading Layer

The performance gap between centralized finance and decentralized alternatives has long been the primary obstacle to institutional adoption. Monaco's architecture represents a pragmatic and technically sophisticated attempt to bridge this long-standing chasm. It is built on the thesis that the trade-offs between speed, cost, and decentralization are not immutable laws, but rather engineering problems that can be addressed through a hybrid design, leading to unparalleled performance, while retaining the decentralization and permissionless composability of a battle-tested EVM execution layer (Sei).

By deliberately choosing an off-chain matching engine for execution and onchain settlement, Monaco is designed to deliver a fully verifiable, non-custodial system without sacrificing microsecond-grade performance. The combination of a unified liquidity layer, a democratized revenue-sharing model via PitPass, and a commitment to fostering a diverse builder ecosystem presents a compelling blueprint for a new era of onchain capital markets. This approach, however, is not without its own set of challenges and dependencies, primarily the successful execution of its roadmap and the network effects it aims to generate.

If it plays out, this is not merely an iteration on existing DEX models in DeFi today, it is a game-changing effort in building the foundational infrastructure that the next generation of finance may require. The journey is just beginning, and the upcoming testnet launch in November will serve as the first critical test of this ambitious vision, offering the first real data on its performance and viability in a live environment.

Take the next step

• Explore the Vision: Check the website at 0xMonaco.com and the announcement article here.

• Experience the Future: Prepare for the Testnet and Season 0 Points Program coming in Q4.

• Builders of Monaco’s select RFPs receive early access to docs. DM @MonacoOnSei on X to get access

———————————————————————————————————————————————————

The content provided in this article is for educational and informational purposes only and should not be construed as financial, investment, or trading advice. Digital assets are highly volatile and involve substantial risk. Past performance is not indicative of future results. Always conduct your own research and consult with qualified financial advisors before making any investment decisions. A1 Research is not responsible for any losses incurred based on the information provided in this article. This campaign contains sponsored content. A1 Research and its affiliates may hold positions in the projects and protocols mentioned in this article.