Intent: Potential Solutions to the Complexity of DeFi Issues

Before the collapse of Luna, I operated a stablecoin yield strategy for a friend. He was not familiar with cryptocurrencies and had never even interacted on-chain. Our collaboration model was simple: he would deposit funds into a hardware wallet, and we would communicate via video conferences once or twice a week, where I would guide him on the actions he needed to take.

We distribute funds across almost all available DeFi protocols on various chains. In just a few hours, we will conduct dozens of transactions, including approvals, transfers, swaps, deposits, claiming rewards, and withdrawals. Funds are allocated to customized liquidity pools, voting locks, and various projects to maximize returns. We have utilized almost all mainstream cross-chain bridges, decentralized exchanges, and yield aggregators to optimize our stablecoin portfolio.

This process is extremely cumbersome. For example, to provide liquidity by exchanging USDC for FRAX/DAI on the Polygon network, the following steps need to be executed:

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

Just this one simple operation requires 12 transactions! The whole process requires manually searching for, creating, and executing each transaction, which is time-consuming and prone to errors, especially when managing large-scale portfolios.

However, from a macro perspective, our operational objectives are actually quite clear. For example, "We have USDC (on Ethereum) and want to provide liquidity in the form of FRAX/DAI on Polygon and deposit it into the staking pool". This is the essence of our operations, and those 12 transactions are just specific steps to achieve this goal.

If there is a powerful trading routing algorithm, this process can be simplified to 1-2 steps. Users only need to indicate their final goal, and the algorithm can provide the optimal path, even directly handling the transaction. This path mapping structure is called "intention" and is an important direction for the future development of middleware in Ethereum.

Although there is no consensus in the industry on the definition of "intention," there are some common views. One investment institution describes it as "users signing a set of declarative constraints that allow outsourcing the creation of transactions to a third party while maintaining full control over the transaction." Another perspective is that transactions are imperative, while intentions are declarative. In other words, a transaction is a clear instruction on how to change a state, while an intention focuses only on the desired state change and does not involve the specific implementation process.

Both definitions emphasize the "declarative" nature of intent, seeking external assistance through data sharing between the user and the "solver". Users declare the results they desire, and the solver provides implementation solutions. Unlike trading with specific parameters, intent requires third-party path planning. Additionally, there are constraints that limit the possible set of paths, helping to narrow down the options to a smaller, filterable range.

The intent-based infrastructure has begun to take shape in the Ethereum ecosystem. For example, when you use a decentralized exchange, it automatically seeks the best trading path. In the interfaces of certain liquidity aggregation platforms, after selecting the trading assets, the system automatically finds the optimal liquidity pools for routing, and it may even achieve the best execution through multiple intermediary steps.

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

1. Limit order: Allows asset withdrawal from the account when conditions are met.
2. Auction-style trading: Third-party order execution based on non-DEX liquidity.
3. Gas Sponsorship: Allows the use of other tokens to pay transaction fees.
4. Authorization: Perform whitelist checks before executing transactions.
5. Transaction Batch Processing: Allows for batching of intentions regarding Gas efficiency.
6. Cross-chain exchange: enabling asset exchange between different blockchains

Although the types of intents are becoming increasingly diverse, their essence can be simply understood as "an upgraded version of limit orders." A limit order specifies the desire to purchase a certain amount of an asset at a specific price, and it will only be executed when someone accepts the order. Similarly, an intent is composed of two parts: the user's desired final state and the transaction initiated by the solver.

However, intention-based architectures also face some challenges. First, solvers may have motives not to propagate intentions that contain profitable opportunities. Second, a core feature of intentions is data exposure; users are essentially exchanging convenience for MEV (Miner Extractable Value). Intentions are often stored in private off-chain "intention pools," which can be permissioned, permissionless, or hybrid.

Currently, the most popular intent pools are centralized and permissioned, which may lead to one party monopolizing most intent-based transactions, thereby introducing additional fees and other rent-seeking behaviors. This situation is similar to payment for order flow (PFOF) in traditional finance, which may trigger conflicts of interest.

To address these challenges, some protocols are developing intent-based infrastructure to support hybrid systems. For example, a certain protocol is building private memory pools and block building networks to route traffic to layer two networks and the Ethereum mainnet. Other projects are also attempting to build the next generation of completely permissionless infrastructure.

Although there is currently no consensus on the final form of intents, they represent an important component of the ongoing middleware layer revolution in the crypto space. The current crypto user interfaces are not user-friendly enough for widespread adoption, and intents may become the key to simplifying user experiences. While intents are currently mainly used for token swaps and order batching, they are expected to be applied to a broader range of data processing and arbitrary operations in the future.

This development opens up new possibilities for building more user-friendly blockchain applications. A robust intent layer can unlock new use cases for various blockchain products and simplify the applications built on top of them. As technology continues to evolve, we can expect to see more innovative solutions that make Decentralized Finance and blockchain technology more accessible and practical.