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What Are Intents? A Beginner’s Guide

November 30, 2023

In conclusion

Introduction

If you intend to simplify the crypto world with the hopes of onboarding the next generation of users, then intents are likely the way to do so. No, I don’t mean camping in tents and trading in the wilderness (none of you go outside anyway). I’m talking about an exciting development in the way exchanges are looking to make trading and cross-chain ordering more efficient and effortless for their users.

AMMs were our 0-to-1 innovation, but the high fees, the fragmentation of liquidity, and the slippage issues simply can’t be accepted any longer. It’s time to take the next innovative leap as an industry, and the advent of intents could be exactly that. 

Even big players like Uniswap have jumped on board with their UniswapX platform so you know there’s something big brewing. Potentially even a new narrative of its own!

So WTF are Intents?

In a nutshell, an ‘intent’ is a request by the user like “I want to buy a certain coin at a certain price”. 

If a traditional transaction is made on an AMM platform then it can encounter issues with order flow and impermanent loss leading to subpar execution for the end user. This led to the creation of Central Limit Order Books (CLOB) and vAMMs that are let down by other factors like block time and Oracle-based price feeds. In order to solve these issues some protocols have opted to launch their own app chains but this creates issues around decentralization. Nothing is simple in the world of crypto!

Intents look to solve all these issues. As stated earlier, the intent itself is the request made by the user. This request is then picked up by “Solvers” who then compete with each other to find the best price available to fill the order (intent) made. This means transactions are completed in the most cost-efficient way possible without the user having to dig around in the depths of DeFi to find the best deal themselves.

The user simply tells the protocol what they intend to do and the solvers take care of the rest. Too easy! 

Due to the fact that solvers can access liquidity on and off-chain, the pairs they are quoting on will have deep liquidity. Deep liquidity means lower slippage and better execution, resulting in a very happy end user. This liquidity can be sourced from a decentralized or centralized exchange, over-the-counter trades, CME futures, or any other source available making it infinitely scalable and highly efficient. 

How does it all work?

It’s easiest to picture the technology as a communication protocol that sends messages from the trader to the solver. The solver will check to make sure the intent is able to be filled before going off to find the best way of filling it. 

Basically, the flow is: User expresses their intent, intent is picked up by the network of solvers, solvers search the on and off-chain world to find the best match to the user’s intent and the best deal wins.

In most cases, the solver itself becomes your counterparty and remains delta-neutral during this transactional process by hedging itself before it completes the trade. For example, if a solver fills your request for 1 ETH on an intents-based DEX swap, they will then simultaneously buy 1 ETH from another source in order to even out their books. This reduces the fees that you would pay on other trading platforms to offset counterparty risk.

Whatever the solver does off-chain is completely air-gapped from the user. Therefore if the solver takes a loss or something goes wrong in their off-chain position (i.e. on a centralized exchange) this will generally have zero impact on your trade on-chain.

The Ups & Downs

As awesome and convenient as this technology is, it of course has its downsides. 

The first is that a great deal of trust has to be placed in the solver by the user who is expressing their intent. It is possible that a major player could have control of the majority of these solvers and therefore secure the bulk of all transactions made through them. Platforms like UniswapX utilize a whitelisted set of solvers to prevent this problem from occurring. 

Another more technical issue involves the Ethereum mempool (where all transactions wait) and the fact that it is only designed to handle transactions and not intent messages. 

Standard Ethereum transactions have monetary value as they involve sending/receiving tokens and paying gas. Because of this, the cost of spamming the network with a ton of transactions in the form of a Denial of Service (DoS) attack is too high to make it worthwhile. Basic intent messages don’t have monetary value, therefore allowing these intents would make it easy for an attacker to spam the network and potentially overload it. 

Application developers will have to decide if they will build their intent architecture in a permissionless way that allows anyone to join the solver network, or if they will control who can be a solver by permissioned design.  There will always be a trade-off to make – permissioned design will mean that users have to trust the protocol to whitelist good actors who will act in their best interest. 

Permissionless design will mean that any potential bad actor will be able to enter the solver network and act in malicious fashion. Typically such a bad actor would have little impact as they would be out-competed by the good actors over time but the potential for issues remains. 

It’s for this reason that platforms like UniswapX are opting to start off with permissioned solvers to test their system and will then look to open up to a more permissionless design to achieve a greater level of decentralization as time goes on. 

Another possibility is a hybrid of both permissioned and permissionless structures.

Despite the tradeoffs that need to be made, it still looks like the upsides to using intents majorly outweigh the downsides. So exploring a combination may be viable. 

First up, because these solvers are effectively competing for your order they are forced to find the absolute best deal available and save you the maximum amount of money possible.

Most intent protocols will look to outsource their intents to a vast network of solvers, thus increasing the decentralization of the entire process.

Major price impact will also be avoided, something that is important for big fish when placing large orders. This is because the solvers can find deals almost anywhere on and off-chain and can use multiple sources to complete a trade. This prevents large orders from moving the price in the way that occurs when using traditional order books.

Possibly the most obvious advantage to all of this is its simplicity and the massive improvement in user experience. This is something that has potentially held normies back in the past and prevented them from getting the true, glorious experience that DeFi can provide. 

There is pretty much no limit to the complexity of intent that can be solved using this technology making it a likely go-to option for any kind of crypto user, no matter their experience or knowledge. This goes beyond just placing trades and buy/sell orders and can also include intents to bridge from one chain to another meaning this tech also threatens to change the bridge landscape as well. 

Notable Projects

IntentX

IntentX is a perpetual futures exchange that utilizes intent technology to have orders filled in the most efficient way possible. It currently has 185 different trading pairs that can be traded with up to 60x leverage and is adding new pairs all the time. 

This showcases another advantage of this technology and that is its ability to onboard any perp pair that has liquidity anywhere on the market without having to fragment that liquidity like a normal order book would. 

IntentX intends to allow trading on any chain you want in the near future. Using their beta platform will also stack points that will count toward a future airdrop of their $INTX token. For more info on all of this greatness check out the recent interview Jedi did here, and this article here on the project itself.

CoWswap

CowSwap is another protocol that has adopted the intent/solver architecture to give it an edge over traditional DEXs. It is a fully permissionless trading platform that uses batch auctions to maximize liquidity using, as they coined it, ‘Coincidence of Wants” (CoW). 

In the same way that other intent platforms settle transactions, CoW uses solvers that compete to find the best price available for the user. Doing this provides the user with better prices, bigger savings, and optimization in fees and gas.

If you need any proof that there is a demand for this kind of product then just check out their chart!

UniswapX 

Another project worth mentioning is Uniswap and their UniswapX platform that launched on the Uniswap Lab’s interface. On UniswapX the user signs an off-chain order, this order is then submitted on-chain by “fillers” that use private transaction relays to route orders. 

This means that orders cannot be sandwiched and these fillers even pay the gas fee on the user's behalf. The fillers achieve lower transaction costs by batching orders together to compete for the best price possible. By doing the above, UniswapX is able to improve its swap service in the following notable ways:

  • Gas-free swaps
  • Increased MEV protection
  • No cost for failed transactions
  • Best possible prices
  • Gas-free cross-chain swaps

You can get all the information you need on UniswapX by checking out the whitepaper here.

Anoma

Anoma is another interesting project within the intent space. What they are building is a unified architecture for building full-stack decentralized applications. Essentially a “plug and play” intent infrastructure. This looks to improve upon the programmable settlement architecture currently applied by the use of smart contracts. 

Anoma uses intent-centric execution in which users express what they want and rely on third-party middlemen to make it happen. They are also working on a fascinating privacy technology called Taiga. Taiga is used to categorize intents into three different types of privacy state, transparent, shielded and private. 

The state is chosen by the user and decides what aspects of the intent can be seen by others. Once again this aims to vastly improve the user experience and simplify the entire process, its use cases are almost infinite.

For a deeper dive into the Anoma architecture check out this article.

Final thoughts

Intent architecture certainly looks to be a game changer. As more protocols adopt this technology more use cases will become apparent. The world of crypto can be a complex one for those who have not spent much time here and any advances in making life easier for the average user are definitely welcome. 

Could this finally be the tech that will onboard the new wave of DeFi enthusiasts and their much-needed capital?  

One thing is for sure, this won’t be the last you will hear of intent architecture. Watch this space!

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