Author: YBB Capital Researcher Ac-Core

1.How to Solve Ethereum’s Fragmentation Problem

With the rise of various L2 solutions and DeFi protocols, Ethereum’s liquidity fragmentation problem has gradually emerged. This issue is primarily reflected in the difficulty of unifying asset liquidity within the ecosystem, as it is split into multiple fragments by L1 and various L2 solutions. Different L2 platforms compete for TVL, leading to assets and transactions being scattered across various decentralized platforms and protocols. However, these platforms lack effective connection and interoperability. The liquidity on each chain operates only within its own isolated “ecosystem,” exacerbating the fragmentation cost across Ethereum as a whole.

In 2024 alone, over 100 new Ethereum chains were launched, which is akin to entering a shopping mall where you are faced with a wide variety of goods but need to use different currencies for transactions. On February 20 of this year, the Ethereum Foundation, much like “Emperor Qin unifying measurements,” announced the launch of the Open Intents Framework, offering Ethereum a seamless trading experience akin to a “single chain” setup, and within just a few days, more than 50 protocols had pledged their support.

According to openintents.xyz, the Open Intents Framework consists of three core components (see extended link 1):

1. Open-source Solver: The framework provides an open-source solver written in TypeScript that can monitor on-chain events and process intents. Unlike solvers that depend on specific infrastructure, this one shares a reference solver that is protocol-agnostic, supporting functions like indexing, transaction submission, and rebalancing, and can be customized and adjusted according to developers’ needs.

2. Composable Smart Contracts: The framework offers a series of pre-built smart contracts based on the ERC-7683 standard, which defines how to interpret, execute, and settle intents. It supports limit order trading and Hyperlane ISM settlement by default.

3. UI Templates: The framework also provides a pre-built, customizable UI template designed to make intent-based products more accessible to end users.

2. The Core ERC-7683 of the Open Intents Framework

ERC-7683 is the universal standard for cross-chain intents on Ethereum, co-developed by Across (@AcrossProtocol) and Uniswap Labs (@Uniswap), aiming to standardize cross-chain operations for intents. It is designed to provide a unified, standardized framework for expressing and executing cross-chain operations, especially between multiple L2 solutions and sidechains.

The core components and features of ERC-7683 include:

1. CrossChainOrder Structure: This defines the format for cross-chain orders, ensuring consistency between different blockchains and platforms. It standardizes how cross-chain transactions are composed, allowing operations across different chains to be interoperable.

2. ISettlementContract Interface: This standardizes the settlement process. Through this interface, ERC-7683 defines how transactions are settled across chains, allowing flexible execution of settlements between different platforms and supporting customized transaction flows.

3. Fulfil: ERC-7683 introduces a “Fulfil” mechanism that allows participants to compete in a shared network to complete cross-chain intents. By providing services (such as order execution) on these networks, participants can reduce costs and improve efficiency, making cross-chain transactions more effective and optimizing the user experience.

4. Fill Deadline: This is a Uni X timestamp marking the expiration time of a cross-chain intent. If the intent is not completed within the specified time, it will expire, avoiding long periods of ineffective transaction waiting.

5. Order Data Type: This uses the EIP-712 type hash to specify the structure and format of intent data. With this type hash, developers and platforms can clearly define how data is formatted for transmission and interpretation across chains.

6. Order Data: Order data contains the core parameters of a cross-chain transaction (such as token, amount, chain, recipient), which defines the expected outcome of the cross-chain operation. It ensures that participants can accurately understand and execute cross-chain transactions.

One of the key advantages of ERC-7683 is its ability to enable seamless cross-chain interaction. By standardizing the expression of cross-chain intents, users can execute operations across different blockchains, such as token swaps or NFT transfers, without complex setups. This simplifies the process and reduces the technical barriers to cross-chain operations, making it more convenient for users to engage in cross-chain transactions.

Additionally, ERC-7683 enhances governance capabilities. It streamlines governance processes between different blockchains, especially for decentralized autonomous organizations (DAOs), making it easier to manage proposals and decisions across multiple chains. The uniformity of ERC-7683 allows DAOs to govern cross-chain operations more efficiently, improving flexibility and transparency in governance.

3. Where Does the Abstraction of Intent and DeFAI End?

Both Intent and DeFAI are essentially derivatives of DeFi’s financial properties, but there are only two core problems DeFi needs to solve: scalability and liquidity. Intent seems to be more practical in aggregating liquidity through UNI and ERC-7683, whereas DeFAI, riding the wave of AI-driven narratives and automated AI trading achieved by Hey Anon (@HeyAnonai), has become more intriguing. Both Intent and DeFAI focus on enhancing the DeFi user experience, optimizing trade execution, and improving protocol stability and security, but there are differences:

The core goal of Intent is to simplify the user interaction process through an “intent-driven trading” mechanism. Users can set the intent and strategy for a transaction, and the system will execute it automatically without requiring manual intervention for each step. This not only improves the usability of DeFi but also optimizes strategy execution and enhances trading efficiency. Furthermore, Intent may address liquidity bottlenecks in DeFi through cross-chain technology. By enhancing cross-chain liquidity, Intent helps break down barriers between different chains, optimizing liquidity pools and improving the market depth and trading efficiency of decentralized exchanges.

DeFAI, as a decentralized financial protocol based on artificial intelligence, focuses on addressing compliance and risk control issues in DeFi. DeFAI leverages AI technology to analyze and predict market trends, helping protocols identify potential risks and reduce operational risks while maintaining protocol stability. AI can handle vast amounts of market data, providing more accurate decision support for users, optimizing market operations, and improving risk management.

To solve the liquidity fragmentation problem, we move from account abstraction and chain abstraction to Intent and DeFAI. Ultimately, abstraction is limitless, and the demands of technology and markets are driving the creation of more layers of abstraction. We need abstraction, but it must be done in moderation. The problem of liquidity fragmentation itself is more of an “ecosystem integration problem” — it doesn’t just rely on increasing abstraction layers, but rather on optimizing existing protocols.

4. Why Only Uniswap Can Truly Drive the Development of ERC-7683

Although “intent” is a grand narrative concept, in my personal view, the core support for ERC-7683 can only be driven by Uniswap. The reason lies in the fact that both Intent and DeFAI essentially aim to better serve DeFi, and the key elements for maintaining the healthy development of DeFi are market liquidity, which must be based on two conditions: “efficient liquidity supply” and “deeply integrated liquidity.”

1. Uniswap V4’s Liquidity Advantage The introduction of Uniswap V4 has made liquidity pool management more flexible and efficient, particularly with the provision of concentrated liquidity for different price ranges. This mechanism optimizes capital efficiency, making cross-chain transactions smoother. In the V3 version, each new pool required the deployment of a separate smart contract, leading to high gas fees. V4 replaces this with a single PoolManager contract, reducing deployment costs by 99% and lowering swap costs. Additionally, Hooks allow for the development of customized AMM pools, enabling the ERC-7683 protocol to adjust according to different market demands and better match trading pairs and asset liquidity.

2. The Potential of Uniswap X Uni X is expected to further enhance cross-chain interoperability, possibly integrating new cross-chain bridging mechanisms or deep integration with ERC-7683, providing more efficient cross-chain asset exchange channels. If Uni X can offer cross-chain liquidity solutions, it will become a key platform for executing cross-chain intents under ERC-7683. Therefore, ERC-7683, by leveraging Uni X’s liquidity pools and technical optimizations, can enable seamless cross-chain trading on a larger scale.

3. Reliance on Cross-Chain Protocol Implementation Since ERC-7683 depends on standardized cross-chain transaction structures and settlement mechanisms, and Uniswap holds a pivotal position in decentralized exchanges, the protocol is likely to rely on the liquidity pools, automated market making, and cross-chain transaction capabilities provided by Uniswap. In particular, with the support of Uniswap X and Unichain, Uniswap not only supports the efficient execution of ERC-7683, but more importantly ensures the stability and security of cross-chain and multi-asset transactions.

5. What is the Actual Significance of Intent?

When we set aside the abstract definition of “intent,” it can be understood as a clear transaction goal or driving force. The concept of intent traces back to a paper titled “Intent-Based Architectures and Their Risks,” published by Paradigm on June 1, 2023, which explained the concept of intent. However, it has remained in the conceptual stage, and issues like liquidity fragmentation and solver pathfinding have not been solved. But the launch of ERC-7683 seems to bring a promising solution to the fragmented liquidity dilemma.

The ultimate goal is to inject new vitality into Uniswap, hoping that Uniswap will spark a new wave of DeFi enthusiasm. Thus, intent and ERC-7683 are not just about continuing L2 scaling; they aim to achieve more efficient trading, create richer functionalities, and strengthen cross-chain interoperability through Uniswap, even introducing new incentive mechanisms or trading models to attract more users and liquidity.

If Uniswap V4 or Uniswap X introduces new smart contract logic or trading models at the protocol level, Uniswap, through ERC-7683, can further enhance cross-chain liquidity, reduce trading costs, and add more trading pairs and liquidity pools. This will transform Uniswap from being just a decentralized AMM with fragmented liquidity to a more integrated and efficient platform, with these improvements also becoming an essential part of “intent.”

About YBB

YBB is a web3 fund dedicating itself to identify Web3-defining projects with a vision to create a better online habitat for all internet residents. Founded by a group of blockchain believers who have been actively participated in this industry since 2013, YBB is always willing to help early-stage projects to evolve from 0 to 1.We value innovation, self-driven passion, and user-oriented products while recognizing the potential of cryptos and blockchain applications.

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Extended Link:

(1) https://www.openintents.xyz/