Original author: YBB Capital Researcher Ac-Core
1. How to solve the Ethereum fragmentation problem
Image source: @ethereumfndn
With the rise of different L2s and various types of DeFi, Ethereums liquidity fragmentation problem has gradually emerged, mainly manifested in the difficulty of unifying the liquidity of assets in the ecosystem, and being cut into multiple small pieces by L1 and various L2s. Different L2s compete for TVL, resulting in assets and transactions being scattered across multiple decentralized platforms and protocols, but these platforms lack effective connectivity and interoperability, and the liquidity on each chain can only operate within its own independent small circle, which exacerbates the overall fragmentation cost problem of Ethereum.
In 2024 alone, more than 100 new Ethereum chains will be launched. It is like entering a shopping mall and looking at a wide range of goods, but they all need to be settled in currencies of different countries. On February 20 this year, the Ethereum Foundation announced the opening of the Open Intents Framework, just like Qin Shihuang unified weights and measures, allowing Ethereum to have a seamless transaction experience like a single chain, and obtained support from more than 50 protocols in just a few days.
According to the content of openintents.xyz, the Open Intents Framework consists of three core components (see extension link 1):
Open source solver: The framework provides an open source solver written in TypeScript that can monitor on-chain events and process intent. Unlike solvers that rely on specific infrastructure, its shared reference solver is protocol independent and supports functions such as indexing, transaction submission, and rebalancing. Developers can customize and adjust it according to their needs;
Composable smart contracts: The framework provides a series of pre-built smart contracts, but these contracts are based on the ERC-7683 standard, which defines the logic of how to interpret, execute and settle intentions. Limit order trading and Hyperlane ISM settlement are supported by default;
UI Templates: The framework also provides a pre-built, customizable user interface template designed to make intent products more accessible to end users.
2. Open Intents Framework Core ERC-7683
Image credit: @KanishkKhurana_
ERC-7683 is a universal standard for cross-chain intentions on Ethereum, led by Across (@AcrossProtocol) and Uniswap Labs (@Uniswap) to achieve intentions through standardized cross-chain. It aims to provide a unified and standardized framework for Ethereum and other blockchains to express and perform cross-chain operations, especially between multiple L2 solutions and side chains.
The core content and components of ERC-7683:
CrossChainOrder Structure: defines the format of cross-chain orders to ensure consistency across different blockchains and platforms. It standardizes the composition of cross-chain transactions so that operations on different chains can interoperate;
ISettlementContract interface: standardizes the way settlement is handled. ERC-7683 defines how to handle transaction settlement between different chains through this interface, allowing cross-chain transactions to be flexibly settled between different platforms and supporting customized transaction processes;
Fulfil: ERC-7683 introduces the Fulfil mechanism, which allows participants to compete in a shared network to complete cross-chain intentions. Participants reduce costs and improve efficiency by providing services (such as executing orders) in these networks, which enables cross-chain transactions to be completed more efficiently and optimizes the user experience;
Fill Deadline: This is a UniX timestamp that marks the expiration time of the cross-chain intention. If the intention is not completed within the specified time, it will become invalid, thus avoiding long invalid transaction waiting;
Order Data Type (orderDataType): Uses the EIP-712 type hash to specify the structure and format of the intended data. Through this type hash, developers and platforms can specify how the data is formatted so that it can be passed and interpreted between different chains;
Order Data: Order data contains the core parameters of cross-chain transactions (such as tokens, quantity, chain, recipient), which define the expected results of cross-chain transactions. It ensures that transaction participants can accurately understand and perform cross-chain operations.
One of the biggest advantages of ERC-7683 is that it enables seamless cross-chain interactions. By standardizing the expression of cross-chain intentions, users can perform operations between different blockchains, such as token swaps or NFT transfers, without complex settings. This simplifies the standardized framework of the operation process, greatly reduces the technical threshold for cross-chain operations, and allows users to conduct cross-chain transactions more conveniently.
Secondly, ERC-7683 also enhances governance capabilities. It simplifies the governance process between different blockchains, especially for decentralized autonomous organizations (DAOs), which can more easily manage proposals and decisions on multiple chains. The uniformity of ERC-7683 makes DAOs more efficient when conducting cross-chain governance on multiple platforms, and improves the flexibility and transparency of governance.
3. Where is the end of the abstraction of Intent and DeFAI
Image source: Homemade
Both Intent and DeFAI are essentially derivatives of DeFis financial attributes, but there are only two problems that DeFi really needs to solve: scalability and liquidity. Intent seems to be more practical in gathering liquidity through UNI and ERC-7683, while DeFAI has become more interesting with the wave of AI narratives and the automated AI transactions that Hey Anon (@HeyAnonai) has achieved. The solutions of Intent and DeFAI are mainly focused on improving DeFis user experience, optimizing transaction execution, and enhancing the stability and security of the protocol, but there are also differences:
The core goal of Intent is to simplify the user interaction process through the intent-driven transaction mechanism. Users can set the intention and strategy of the transaction, and the system will automatically execute it without the need for users to manually intervene in each step. This will not only improve the usability of DeFi, but also optimize strategy execution and improve transaction efficiency. In addition, Intent may also solve the liquidity bottleneck in DeFi through cross-chain technology. By enhancing cross-chain liquidity, Intent helps to break down barriers between different chains and optimize liquidity pools, thereby improving the market depth and transaction efficiency of decentralized exchanges.
As a decentralized financial protocol based on artificial intelligence, DeFAI focuses on solving compliance and risk control issues in DeFi. DeFAI uses AI technology to analyze and predict market trends, helping the protocol identify potential risks, thereby reducing operational risks while ensuring the stability of the protocol. AI can process a large amount of market data, provide users with more accurate decision support, and optimize market operations and risk management.
To solve the problem of liquidity fragmentation, we have gone from account abstraction, chain abstraction to intent and DeFAI. In the final analysis, abstraction is endless, and the needs of technology and the market are also driving the birth of more abstract levels. We need abstraction, but it should be moderate. The problem of liquidity fragmentation itself is more like an ecosystem integration problem, which does not only rely on the increase of abstraction levels, but more on how to optimize existing protocols.
4. Why is Uniswap the only one that can truly promote the development of ERC-7683?
Image source: @Uniswap
Although intention is a grand narrative concept, in my personal opinion, the core support of ERC-7683 can only be driven by Uniswap. The reason is that both Intent and DeFAI are essentially about better serving DeFi, and the key factor to maintain the healthy development of DeFi is market liquidity, and this dependency relationship must be based on the two conditions of efficient liquidity supply and deeply integrated liquidity.
1. Uniswap V4’s liquidity advantage
The introduction of Uniswap V4 makes liquidity pool management more flexible and efficient, especially for centralized liquidity provision in different price ranges. This mechanism optimizes capital efficiency and makes cross-chain transactions smoother. In the V3 version, each new pool needs to deploy a separate smart contract, resulting in high Gas fees. V4 replaces this with a single PoolManager contract, which reduces the deployment cost of centralized management of all mining pools by 99% and lowers the exchange cost. At the same time, Hooks also allow the development of customized AMM pools, allowing the ERC-7683 protocol to be adjusted according to different market needs and better match different trading pairs and asset liquidity.
2. The potential of Uniswap X
Uni X is expected to further enhance cross-chain interoperability. It may add new cross-chain bridging mechanisms or deeply integrate with ERC-7683 to provide more efficient cross-chain asset exchange channels. If Uni X can provide cross-chain liquidity solutions, it will become an important platform for ERC-7683 to execute cross-chain intentions. Therefore, ERC-7683 can achieve seamless cross-chain transactions on a larger scale by leveraging Uni Xs liquidity pool and technical optimization.
3. Implementation Dependency of Cross-Chain Protocol
Since ERC-7683 relies on standardized cross-chain transaction structures and settlement mechanisms, and Uniswap plays a pivotal role in decentralized exchanges, the protocol is likely to rely on the liquidity pool, automated market making, and cross-chain trading capabilities provided by Uniswap, especially the support of Uniswap X and Unichain. Uniswap can not only support the efficient execution of ERC-7683, but most importantly, ensure the stability and security of its cross-chain and multi-asset transactions.
What is the practical meaning of intention?
When we put aside the abstract definition of intention, it can actually be understood as a clear transaction goal or driving force. The concept of intention can be traced back to the article Intent-Based Architectures and Their Risks published by Paradigm on June 1, 2023, which explains the concept of intention. However, it has always been in the conceptual stage, and the problems of fragmented liquidity and the solution path of the solver have not been solved. However, the launch of ERC-7683 seems to give us a glimpse of the dawn of a better solution to the fragmented liquidity problem.
The ultimate goal is to inject new vitality into Uniswap, hoping that Uniswap will trigger a new round of DeFi craze. Therefore, the intention and ERC-7683 are not just to continue L2 expansion, but to achieve more efficient transactions through Uniswap, create richer functions and stronger cross-chain interoperability, and even introduce new incentive mechanisms or transaction models to attract more users and liquidity.
If Uniswap V4 or Uniswap X introduces some new smart contract logic or transaction models at the protocol level, through ERC-7683, Uniswap can further improve cross-chain liquidity, reduce transaction costs, and add more trading pairs and liquidity pools based on the existing AMM model. It will make Uniswap no longer just an AMM with decentralized liquidity. These improvements will also become an important part of the intention.
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