What is Intent Technology | Web3
This week, we’re exploring a fairly new technology called intents. This is a hot topic now, why? Because it may be how we do things in the future.
What are Intents?
In essence, an ‘intent’ represents a user’s request, such as “I wish to purchase a specific token at a particular price.” Intents aim to simplify complex processes. Once a user makes a request, it is detected by “Solvers,” which then compete with each other to identify the optimal price to fulfill the order (intent). This system ensures transactions are executed in the most economically advantageous way, sparing users the need to navigate the intricacies of DeFi to secure the best deal.
The user simply tells the protocol what they intend to do and the solvers take care of the rest
Because solvers have access to liquidity from both on-chain and off-chain sources, the pairs they quote on will have good liquidity. This deep liquidity translates to reduced slippage and improved execution, leading to highly satisfied end-users. The liquidity can be obtained from various sources, including decentralized and centralized exchanges, CME futures, and any other available sources, making it incredibly scalable and efficient.
Amazing, But how?
Imagine the technology as a communication protocol facilitating messages from the trader to the solver. The solver verifies the feasibility of fulfilling the intent before determining the most optimal method to do so.
Essentially, the process goes like this: The user expresses their intent, which is then detected by a network of solvers. These solvers scour both on-chain and off-chain realms to assess the feasibility of the request. Once confirmed, they proceed to secure the best possible deal for the user.
Typically, the solver serves as your counterparty, maintaining delta-neutrality throughout the transactional process by hedging itself beforehand. For instance, if a solver fulfills your request for 5 ETH on an intents-based DEX swap, it will concurrently purchase 5 ETH from another source to balance its positions. This minimizes the fees you would incur on alternative trading platforms to mitigate counterparty risk.
Any actions undertaken by the solver off-chain are entirely isolated from the user. Thus, if the solver incurs a loss or encounters issues with its off-chain position (e.g., on a centralized exchange), it typically has no bearing on the user’s on-chain trade.
Surely it’s not all good news?
As incredible and user-friendly as this technology may be, it does come with its drawbacks. One issue is the significant trust users must place in the solver when expressing their intent. There’s a risk that a dominant entity could control the majority of these solvers, potentially monopolizing the transactions conducted through them. Platforms like UniswapX address this concern by employing a whitelisted set of solvers to prevent such a scenario.
Traditional Ethereum transactions hold monetary value as they encompass sending/receiving tokens and covering gas fees. Consequently, the expense of flooding the network with numerous transactions in a Denial of Service (DoS) attack is prohibitive, rendering it impractical. However, basic intent messages lack monetary value, which could enable attackers to easily flood the network and potentially overwhelm it.
Application developers will face the decision of whether to construct their intent architecture in a permissionless manner, enabling anyone to participate in the solver network, or to implement a permissioned design, controlling who can act as a solver. This choice entails a trade-off — a permissioned design requires users to trust the protocol to whitelist reputable actors who will prioritize their interests.
Conclusion
Since these solvers are essentially jostling for your order, they are compelled to seek out the very best deal attainable, ultimately saving you the highest possible amount of money. Also, many intent protocols aim to delegate their intents to an extensive network of solvers, thereby enhancing the decentralization of the entire process.
In conclusion, this sounds like a fantastic technology for all users to utilise for trades and more. Intent driven technology is in-line with Ponder’s desire to simplify Web3 & give the power to the user to find the best deals for their tasks. Let’s watch this space, with the rapid improvement and growing number of use cases, this sort of task handling may come to Ponder sooner rather than later!
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