A LOT OF NEW THINGS WILL LOOK LIKE OLD THINGS, BUT THEY ARE DIFFERENT.
As though we didn’t have enough buzzwords in this industry, lately, we’ve been inundated with the words "intent", "intent-based architecture", and "intent-centric protocol". However, this isn't just trendy jargon; this signifies a major shift in how we interact with DeFi protocols. We're moving from a transaction-based system to an intent-based one, which is all about making DeFi more user-friendly and efficient.
Intent-centric designs seek to level the playing field for all users. Historically, blockchain transactions have favored sophisticated actors, such as market makers and high-frequency trading firms, who possess advanced resources and algorithms. Intent-centric systems simplify on-chain transactions and improve user interfaces and address key issues such as gas fees and slippage.
Account abstraction, exemplified by ERC-4337, enables flexibility in gas fee payments, allowing users to use various tokens for fees. Intent-centric systems optimize gas fees for each transaction, eliminating the need for users to estimate gas requirements. Similarly, these systems abstract and optimize slippage settings and trade timing to minimize price impact on users.
In an intent-based system like Bebop, users state their goals or "intents", and the protocol orchestrates the necessary transactions. This approach is particularly useful for complex operations across various DeFi platforms and chains. For instance, a user can express an intent to buy Ethereum under specific conditions, and a resolver, like a market maker, executes this intent.
For example, a user might express the desire to buy $ETH on Polygon on Bebop with their $USDC tokens on Ethereum, specifying a maximum slippage of 0.1%, when $ETH's price drops below $1,600. The intent is then sent to a resolver, often a professional market maker, through a dedicated API.
The resolver competes with other solvers to execute the user's intent. Instead of just bridging assets, the resolver can arbitrage and facilitate the transaction, even covering the gas fees (although sometimes they may charge users upfront). The result: the user receives $ETH on Optimism, using $USDC on Ethereum, without the need for bridging.(Although Cross-Chain Swaps are not yet supported on Bebop, the efficient design mechanism makes this theoretically possible. Some of Bebop's competitors, like Hashflow, have already executed such transactions.)
This intent-based approach extends beyond trading and can be applied to a wide range of DeFi activities, especially those involving multiple transactions. Users sign an off-chain message expressing their intent, which is then executed on-chain by an entity or API.
In short, an intent-centric approach effectively outsources the complexity of constructing transaction pathways to solvers. Users, on the other hand, only need to create and sign intents, simplifying the process for end-users.
This sequence of steps shows that there is a desired-end state specified by the user but there is no exact specification about how to reach that end.
By adding “intention” and “expressiveness” into how we interact on-chain we ran into Occam’s razor – do we really need to complicate something simple? While AMMs serve a purpose and allow retail to become passive market makers, the fact that most passive LPs lose money has revealed that we can achieve higher efficiency by outsourcing work to professionals and specialized actors.
While this might seem contradictory, we are moving from “extracting value” to “user satisfaction” thanks to customization and specialization.
TradFi was primarily designed with institutions in mind, but the rise of cryptocurrency has shifted the focus towards retail investors, granting them access to financial opportunities that were previously out of reach.
As the crypto space evolves, we're beginning to see a trend where services fall in the hands of more centralized, but specialized, entities. These entities, thanks to developments like Proposer-Builder Separation (PBS), MEV Boost, and innovations like Uniswap X, are able to offer better pricing and efficiency in the market.
This shift towards professionalization in the crypto industry is also marked by the introduction of new technologies and strategies. For instance, 'intents' are being developed to enhance cross-domain user experience and facilitate peer-to-peer trades. Shared sequencers are emerging as a new way to interact with wallets, and active market makers like Wintermute, GSR, and Flow Traders are becoming more prominent in DeFi.
We're also seeing the standardization of intents and EIPs, along with the development of solver APIs. CEXs are being used as sources of liquidity, and off-chain pricing mechanisms are being implemented.
One significant trend is the convergence of liquidity into Singleton Contracts, where execution occurs in rollups or off-chain. This isolates the costs of MEV and simplifies the process of MEV extraction for applications, shifting the burden away from chain validators.
All of that said, intents are not without their shortcomings. A common critique of using intents and involving solvers, fillers, or relayers is that they can lead to centralization. For example, when market makers are involved, it can resemble using a centralized platform like Binance.
However, it's important to recognize that different blockchain projects are designed to solve different problems. Not every application needs to be completely immutable, decentralized, or permissionless to be useful. Each project offers its own unique solutions, and sometimes a degree of centralization can be beneficial for certain use cases.
Conclusions: I believe that 'intents' will be one of the most used marketing buzzwords of 2024. Bebop, at the heart of 'intents' and powered by one of the most sophisticated actors in DeFi, Wintermute, boasts a great and friendly UI/UX, a supportive community, an efficient design mechanism, MEV-resistance, and zero slippages on trades. This project is poised to become one of the most successful in DeFi, pushing the trading experience one step forward."
In my upcoming article, I will compare intent-centric decentralized exchanges (DEXs) and explore why I believe BeBop has the potential to emerge victorious in the intent race among its competitors.