SEI: A Tale of Two Metrics - Usage Growth vs. Capital Stickiness

The blockchain industry has long grappled with the tension between user activity and capital stickiness. For investors, this dynamic is both a puzzle and an opportunity. Nowhere is this clearer than in the case of the Sei Network (SEI), where explosive growth in on-chain activity contrasts sharply with a declining Total Value Locked (TVL). This divergence-between usage and capital retention-has become a critical signal for assessing the health and future potential of the ecosystem.

The Surge in Network Activity

Sei's usage metrics in 2025 tell a story of rapid adoption. Daily active addresses on the network rose by 93.5% quarter-over-quarter to 824,000, while transactions by active addresses surged by 87.1% to 2 million per day according to analysis. This growth has spanned five consecutive quarters, driven by gaming and decentralized trading. Gaming alone contributed 116 million transactions, reflecting a shift in user behavior toward on-chain entertainment as reported.

DeFi activity remains a cornerstone, though its composition is evolving. Protocols like TakaraLend have gained traction through aggressive incentive programs, while others, such as YeiFinance, have seen a 41.7% decline in TVL according to data. Meanwhile, liquid staking derivatives like spSEI have overtaken iSEI as users prioritize flexibility over yield as observed. These shifts highlight a broader trend: users are engaging with Sei's infrastructure but are less inclined to lock capital for extended periods.

The TVL Conundrum

Despite this vibrant activity, Sei's TVL has declined by 25.2% quarter-over-quarter to $455.6 million according to reports, and by 23.8% to $1.65 billion in another report as stated. This divergence is not unique to Sei but is particularly pronounced here. At its peak in July 2025, TVL hit $624 million according to analysis, yet the network's user base has grown to over 266,000 new wallets in the past year as reported. The disconnect suggests that while Sei is attracting users and transactions, it is struggling to convert that activity into long-term capital retention.

Why the Divergence?

Several factors explain this gap. First, user behavior is shifting. Traders and gamers are prioritizing speed and flexibility over yield, leading to shorter-term capital deployment. For example, the rise of spSEI-liquid staking tokens that allow users to trade or lend their assets-reflects this preference according to market analysis. Second, protocol upgrades are enhancing usability but not necessarily incentivizing capital lock-up. The integration of native USDC via Circle's Cross-Chain Transfer Protocol (CCTP V2) in December 2025 according to updates has improved liquidity and reduced transaction costs, but it hasn't translated into higher TVL.

Third, market dynamics are at play. Sei's trading volume surged nearly fivefold in 2025 according to data, driven by institutional interest and improved scalability. However, this volume is largely tied to spot trading and short-term speculation rather than long-term liquidity provision. The Giga upgrade, which aims to deliver 200,000 TPS and sub-400ms finality according to technical documentation, is a technical win but may not directly address the TVL challenge unless paired with stronger yield incentives.

Implications for Investors

The divergence between usage and TVL is not inherently negative. In fact, it may signal a maturing ecosystem where users value utility over speculation. Sei's inclusion in the Coinbase 50 Index according to market data and its growing institutional visibility suggest that the network is gaining credibility as a high-performance chain. However, investors must weigh this against the risk of capital flight. If TVL continues to decline, it could undermine the network's security and the value proposition of its native token, SEI.

For now, the data points to a phase transition. Sei is building infrastructure and user adoption, but it must address capital stickiness to sustain long-term growth. This could involve introducing new yield-bearing products, enhancing governance incentives, or leveraging its partnerships with gaming and DeFi platforms to create more value capture mechanisms.

Conclusion

Sei's story in 2025 is one of two metrics pulling in opposite directions. The network's ability to attract users and transactions is undeniable, but the challenge lies in converting that activity into durable capital retention. For investors, this divergence is both a warning and an opportunity. If Sei can align its technical strengths with stronger capital incentives, it may yet bridge the gap between usage and TVL-and unlock the next phase of its growth.