Intent System: Potential Solutions to the Complexity Issues of DeFi

Before the Luna crash, I managed stablecoin yield strategies for a cryptocurrency novice friend. We met weekly via Zoom, where I guided him on how to operate. We diversified funds into DeFi protocols across various chains, making a large number of approvals, transfers, swaps, deposits, and other transactions. This process is very cumbersome and complex.

Taking the exchange of USDC for FRAX/DAI LP on Polygon as an example, 12 transactions are required:

1. Exchange USDC for DAI on a certain DEX in 2 transactions (.
2. Cross-chain USDC and DAI to Polygon)4 transactions(
3. Merge USDC and DAI on Polygon ) ( transactions )
4. Deposit LP into the vault to earn rewards (2 transactions )

This process is cumbersome and time-consuming, especially when the portfolio size is large.

From a higher level, our operations have clear expected outcomes. For example, "We have USDC( on Ethereum) and hope to provide liquidity in the form of FRAX/DAI( on Polygon), and then deposit it into the staking vault." This is the "content" of the operation, while the 12 specific transactions are the "how" of the operation. A series of clear steps are needed from start to finish.

The powerful trading routing algorithm can simplify this process to 1-2 steps. We only need to express the desired outcome, and the algorithm can return the best path and execute the trade. This path mapping structure is called "intention" and is an essential component of Ethereum middleware in the future.

Currently, there is no consensus on the definition of "intention", but there are roughly two viewpoints:

1. The intention is to sign a set of declarative constraints that allow users to outsource the creation of transactions to third parties while retaining full control over the transactions.

2. Transactions are imperative, while intentions are declarative. Transactions specify how to run the EVM to produce state changes, while intentions only specify the desired state changes without focusing on the implementation process.

Both definitions emphasize the "declarative" nature of intent, which seeks external assistance through data sharing between the user and the "solver". The user declares the desired outcome, and the solver provides the means to achieve it. Unlike transactions with specific parameters, intent requires third-party mapping. There are also constraints to narrow down the possible set of paths.

In the example of my friend, the intent system allows us to broadcast the final goal to a group of solvers, which calculate the optimal path. We choose the price-optimal route and execute the transaction, with all intermediate steps handled by the solvers, and the user only needs to confirm 1-2 transactions.

The "intention" based architecture already exists in the EVM. For example, when using a DEX, it automatically finds the best trading route. After selecting buy and sell assets on the Curve interface, the UI automatically routes to the best LP. It also provides price impact estimates and suggests how to limit slippage.

This trading intent on Curve is just a basic example. In contrast, real intent sharing expects results and constraints, with the solver determining the optimal exchange rate.

Aggregators such as 1inch or DeFiLlama use an intention system to construct exchange transactions. Users provide execution parameters and then receive a set of potential trading relay options. Users can choose the best option based on fees and gas costs.

In addition to trading aggregation, there are several other types of "intents" on Ethereum:

1. Limit Order
2. Third-party order execution based on non-DEX liquidity
3. Use stablecoins to execute gas sponsorship for third-party transactions.
4. Whitelist and other entrustment mechanisms
5. Transaction Batch Processing
6. Cross-Chain Exchange

An intent can be simply understood as a new type of limit order. It consists of two parts: the user's expected final state, and the transaction initiated by the solver. The combination of the two enables the execution of the desired transaction.

Intent-based architecture design carries almost no risk. Solvers are motivated not to propagate intents that contain profitable MEV. The core characteristic of intent is data exposure; users are willing to extract MEV at the cost of convenience.

The intent cannot be directly broadcast to the Ethereum mempool, but is instead filled in a private off-chain Interpool. These Interpools can be permissioned, permissionless, or hybrid.

Permissionless Interpool adopts a decentralized API, allowing nodes to freely share intentions and grant access to executors. However, they are vulnerable to DDOS attacks and cannot prevent the spread of malicious intentions.

The permissioned memory pool uses trusted APIs, which can resist DDoS attacks and control the spread of intent. They rely on trusted intermediaries to ensure execution quality, but this trust assumption contradicts the spirit of open blockchains.

Hybrid solutions attempt to strike a balance between the two. For example, CoW Protocol uses trusted parties to operate auctions, but participation is permissionless.

Currently, the most popular Interpool is centralized and permissioned, with no incentive to share information with competitors. The risk here is that one party may monopolize most of the intention-based transactions and start introducing extra fees and other rent-seeking behaviors.

Intent can be seen as a form of MEV arbitrage. The arbitrage opportunities created by long-unsettled orders may be more valuable than regular trades, as solvers can determine the route rather than compete with other trades.

Unregulated and opaque solvers may provide the worst routes, as their profits are inversely proportional to execution quality. Users need to choose solvers carefully and leverage their negotiating power to force solvers to compete against each other. The solver that brings the highest returns to users will win the auction.

CoWSwap adopts this design by using batch auctions to find the best settlement price for traders. Orders are not executed immediately; instead, they are settled after being collected in batches. Solvers compete openly to match orders. This mechanism allows for uniform trading prices within the batch, avoiding transaction reordering. However, there is still some MEV in CoW orders, as market makers need to arbitrage in other venues to make a profit.

Currently, some protocols are developing intent-based hybrid system infrastructure. For example, Flashbot's SUAVE is building a private mempool and block building network to direct traffic to L2 and Ethereum. Anom, on the other hand, is attempting to build the next generation of completely permissionless infrastructure.

Although the ultimate winner of the intent system is still unclear, it is an important part of the middleware layer revolution taking place in the cryptocurrency space. The current crypto UI is not user-friendly enough, making widespread adoption difficult. Currently, intents are mainly used for token swaps and order batching, but they are expected to be applied to a wider range of data processing in the future.

This creates possibilities for building new applications on certain innovative chains. A robust intent layer can unlock new use cases for these new products and simplify the application development process.