SevenX Ventures: Decoding INTENTS and how to completely change the Web3 user experience and order flow model

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SevenX Ventures
10 months ago
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Intent-driven interactions become the foundation for user-friendly Web3 experiences.

SevenX Ventures: Decoding INTENTS and how to completely change the Web3 user experience and order flow model

This article is original by the SevenX research team, written by Grace, onlyIt is provided for exchange and learning and does not constitute any investment reference. If you need to cite, please indicate the source.

The original English report was published on SevenXs Mirror platform in August 2023. For more Chinese investment research content, please follow the public account [SevenXVentures].

Special thanks to Liesl and Simon from Essential, George from Flashbots, Anna and Alex from Cow Swap, and Josh from Astria for providing valuable discussions, insights, and feedback on this article.

As Web3 technology gradually moves towards mass application, it is crucial to ensure that users can independently cope with the complexity of Web3. Unlike the early days of blockchain, users no longer need to decipher complex technical details. The future trend is to provide a user experience that guides and empowers users to seamlessly interact with decentralized systems. Drawing on the development history of Web2, user needs are becoming increasingly richly expressed through search engines and chatbots like ChatGPT. Web3 must provide an easy-to-use yet powerful user experience.

SevenX Ventures: Decoding INTENTS and how to completely change the Web3 user experience and order flow model

Intent-driven interactions become the foundation of user-friendly Web3 experiences. Although there are various definitions of intent, I prefer to divide intent into the following three groups of keywords:

  • Results, not paths: Users only need to express what they want, without caring about how to achieve the results.

  • Conditional authorization rather than code authorization: When users sign a blockchain transaction, they grant the transaction code the ability to perform arbitrary computations and modify the state of the blockchain. Instead, when users approve an intent, they are authorizing the release of their assets and tips (kind of like cash on delivery for online shopping) after ensuring that their desired outcome has been achieved.

  • Competitive solvers rather than trusted dapps: In a world dominated by transactions, users interact with the dapp of their choice, which will act as a service provider to provide users with the desired results, usually a long-running mainstream dapp like Uniswap. In an intent-dominated world, well-known or unknown solvers off-chain and on-chain compete with each other to implement users intents and obtain rewards. From an economic principle, the more intense the competition, the higher the efficiency.

In short, users can express their intentions clearly and directly; the platform can use solvers and executors to find the best execution path to achieve the users goals. Just like in Web2, black boxes worked behind the scenes to optimize results, Web3 executors can leverage algorithms and automated processes to handle the complexity of execution, ensuring users efficiently get the results they want and get paid.

By prioritizing user experience and focusing on expressing intent, Web3 can usher in a new era where the power and potential of decentralized systems are available to everyone. The future of Web3 lies in democratizing access, simplifying interactions, and guiding and liberating users through a decentralized landscape for a seamless user experience.

Explore different types of intent implementations

Intents can be divided into different types based on their commonality, as shown in the following figure:

SevenX Ventures: Decoding INTENTS and how to completely change the Web3 user experience and order flow model

In fact, various intents are everywhere because blockchain code = some degree of automation = extracts a certain amount of complexity and returns the desired results to the user. However, as we hope to have the most generic intents in the future, AA+ specific intent applications are not sufficient because they cannot run across domains and do not scale as efficiently as more permissionless intents.

To understand how intents work, we can analyze the solutions currently available, ranging from specific intent applications to general intent infrastructures like Anoma and SUAVE. The analysis will be divided into 5 main parts, focusing on different issues:

  • Intent expression and authorization: How do users enter their intents; what types and levels of intent can users express; what authorization do users give?

  • Candidate solvers: Permissioned or permissionless? Are there high standards for becoming a solver? Are there different types of solvers that focus on other specific areas?

  • Solution process: What is the main way to solve the problem; what determines whether the intent has been completed?

  • Solver Selection: What are the rules for selecting a winner from several candidate solvers? Is it winner-take-all or discrete competition?

  • Verification and settlement: How to check if the solver has completed the task? How to settle between user and solver?

Below is a comprehensive overview of current solutions. For more detailed information, delve deeper below.

SevenX Ventures: Decoding INTENTS and how to completely change the Web3 user experience and order flow model

Cow Swap 1inch fusion (limit order intent)

Intent expression and authorization

  • Traders on the Cow Swap and 1inch Fusion platforms express their intent by interacting with the platforms interface, providing clear instructions for desired trades or limit orders.

  • In terms of authorization, traders sign off-chain messages or transactions to grant permissions. Instead of using ETH to pay for gas, they pay fees in transaction tokens, and there are no costs if the transaction is not executed.

candidate solver

  • In the case of 1inch Fusion, the solver is the resolver, running in a permissionless manner. They need to register, go through a KYC process, and maintain a sufficient balance to cover order fees.

  • The solvers of Cow Swap are either whitelisted by creating a million-dollar binding pool (USDC Cow), or are included in the Cow DAO binding pool or Gnosis DAO binding pool, and are listed by Cow DAO according to DAO standards. Enter the whitelist.

Solving process

  • Solver evaluates existing trading packages to identify any Coincidence of Demand (CoW) that would provide the best price for executing a trade or limit order. They consider factors such as liquidity, order book depth and price slippage to ensure traders get the best possible execution.

  • In addition, solvers can directly explore other potential on-chain automated market makers (AMMs) such as Uniswap, or leverage DEX aggregation platforms like 1inch to discover optimal prices and paths.

Solvers Choice

  • In Cow Swap, traders execute trades at the best price determined by any external solver using batch auctions, allowing traders to maximize their profits. The solver that provides the optimal solution will be selected.

  • In comparison, 1inch Fusions resolver competition is more restricted and is tied to staking 1inch tokens using a Dutch auction.

Verification and Settlement

  • The verification and settlement process occurs after the solver executes the trade or limit order. Solver can transfer tokens on behalf of users using the ERC 20 approval granted to the settlement contract. The settlement contract verifies the signature of the user intent and ensures that execution complies with the specified limit price and quantity. This verification confirms that the intended trade or limit order completed successfully.

  • Once verified, the settlement contract can appropriately allocate funds to the solvers and users participating in the transaction.

Recently, Cow Swap just announced the launch of Cow Swap Hooks, which can perform more general swap intent by enabling custom coded DeFi operations to be executed directly before and/or after the transaction. It’s great to see that Uniswap v4 and Cow Swap are moving towards more universal intent activities and bringing us a new world of DeFi intents!

UniswapX(Swap Intents)

UniswapX’s new features can be divided into two main parts, namely order signing through the Dutch auction mechanism and cross-chain swap.

The orders signed by the Dutch auction are similar to the limit order intent of 1inch Fusion and Cow Swap, but are different in terms of intent expression and authorization, candidate solver, solver selection, verification and settlement.

Intent expression and authorization

  • Users have more freedom to define parameters (and potentially more complexity), including the decay function for the auction, the initial Dutch order price, etc.

candidate solver

  • The default is no permission mode, users can also set it to permission mode.

choice of solver

  • The Dutch order execution price depends on its block entry time. For swappers, the initial price estimate for the order is better than the current market price. For example, if the current market price is 1,000 USDC per ETH, and the sell order may start at 1,050 USDC per ETH, then, The order price gradually decays until it reaches the lowest price acceptable to the exchanger, such as 995 USDC per ETH. In order to make a profit, submitters (fillers) are incentivized to complete orders as quickly as possible or risk missing out on orders, benefiting other submitters who are willing to take a smaller profit.

  • UniswapX also supports the use of RFQ (which allows orders to designate a submitter who gets exclusive rights to submit orders for a short period of time) for initial Dutch auction price setting, in which case the selection process is almost identical to that of 1inch Fusion The auction method is the same.

  • Compared with the independent auctions of UniswapX and 1inch, Cow Swap is more like a batch auction, which can consolidate orders and match CoW.

Verification and Settlement

  • Cross-chain swap can be realized through a similar process. The main difference is that in order to realize the verification and settlement of multi-domain swap: the solver needs to deposit more bond assets on the original chain to ensure security and enable the optimistic cross-chain protocol; an additional The settlement oracle is used to provide data for the verification contract of the original chain; UniswapX needs to deploy corresponding settlement and verification contracts in different fields.

Account abstraction (wallet layer Intent)

Intent expression and authorization

  • The process begins when the wallet owner wants to perform a specific action, they typically generate a userop expressing their intent through a 4337 wallet interface.

  • Off-chain, wallet owners can request the bundler to handle the userop on their behalf, but are granted limited control based on the intent. For example, the wallet owner can authorize the private key to conduct main account transactions, but only using the hub contract of Dapp XYZ.

candidate solver

  • In the AA framework, bundler services are considered public goods. Most bundlers are open source, which makes them non-exclusive and non-rivalrous, and any RPC endpoint can copy the open source code and run as a bundler. Even if the bundler RPC endpoint wants to charge for its services, it can do so via an API key and keep the bundler non-exclusive as a public good.

  • The two main types of bundlers include bundler services built specifically for wallets that meet the wallets basic needs, and permissionless and modular bundlers that provide third-party infrastructure services.

Solving process

  • The bundler emulates the wallets validateOp method on the userop to determine acceptance or rejection off-chain, and then they send the transaction to the entry point of the AA system to call the handleOp method. The process also includes bundling multiple user operations together to optimize gas fees and extract MEV.

  • The entry point contract pushes the operation to the chain, and the chain nodes will verify the operation and bring it to consensus.

choice of solver

  • The choice of solver in AA depends on a variety of factors. The wallet used by the account owner may provide a bundler service or use third-party infrastructure, or the user may switch RPC endpoints to select their preferred bundler. In this case, the success rate and reputation of the bundler may influence the choice of solver.

Verification and Settlement

  • The AA systems entry point verifies and handles on-chain operations, and it ensures that userop meets requirements and security checks before performing the required operations. Once the operation is successfully executed, the entry point will refund the ETH from the wallets deposit to the bundler. This refund mechanism compensates the bundler for the work done and its upfront payment.

Essential (Intent-centered account abstraction standard)

Currently, Essential is still in its early stages, and parts of the description and design may evolve over time. In the short term, it will be an asset-based intent standard, similar to the ERC-4337 model, but supporting a wider range of intents and with a convenient infrastructure. In the long term, it will also provide a modular intent layer and a new constraint-based language that breaks away from the constraints of the Ethereum architecture to perform better intents.

Intent expression and authorization

  • Dapps or wallets that adopt the Essential standard can provide users with relevant intent-supported services and eliminate potential complexity. Users only need to interact with the interface and authorize. Intents can be expressed using the Essential standard in the short term, or more generally using its new constraint-based language in the long term. Compatible with EVM chain, no bridging funds required.

candidate solver

  • Essential supports code-expressed intents, and various solvers can join the Essential network to solve corresponding types of intents, such as the Cow Swap solver for swap intent or the builder that monitors and executes chain state-related intents.

  • A network of solvers will monitor and try to fulfill these intents. Essentials is considering existing solvers or bundlers, MEV seekers and market makers such as those from the CoW protocol or 4337 etc.

Solving process

  • Solvers identify the constraint environment they are solving for, and then attempt to solve these constraint-based intents both off-chain and on-chain.

choice of solver

  • The selection process is more like a Dutch auction, where the user specifies constraints and the solver decides when to enter to satisfy the intent based on the value that can be extracted. The first solver to come in and resolve the intent will be the chosen solver and will probably be the best solution the market can afford at the time.

Verification and Settlement

  • Both verification and settlement are performed by the solver triggering specific on-chain smart contracts to verify and split the fees. There will be a core contract into which all solutions and intents will be submitted, and can be extended using the Essential standard.

Flashbots SUAVE (multi-domain block related Intent)

Compared with the way smart contracts resolve intents in the previous example, SUAVE uses a dedicated chain for settlement, which also acts as a messaging layer. Unlike the application of account abstraction (AA) and specific intents, SUAVEs multi-chain capabilities allow it to introduce an extra step of bridging funds to the SUAVE chain, which can also enable better cost-effective and privacy-enabled transactions.

SUAVE has just announced the launch of MEVM, a powerful modified version of the Ethereum Virtual Machine (EVM) that includes new precompiled contracts for executing front-end transaction (MEV) related use cases. Through MEVM, the SUAVE chain will first effectively provide services to MEV-related participants, such as searchers, developers and other areas that wish to capture MEV.

intent expression and authorization:

  • SUAVE users express their intentions in SUAVE by writing EVM code. These codes outline the desired results and functions they wish to perform by defining a list of contracts that allow access to the users confidential data. There may be some templates available for the average user.

  • Through MEVM, developers can deploy different types of smart contracts for specific MEV applications (such as OFA, block construction, etc.), or deploy new DEX on SUAVE for calls by other users.

  • Users bridge funds to the SUAVE chain and deposit tips.

candidate solver

  • The main actors acting as solvers in SUAVE may be searchers and builders. Searchers and other solvers are responsible for exploring and discovering potential solutions to satisfy the users intent, while builders focus on implementing those solutions. They work together to build a robust ecosystem for resolving user-expressed intent. In order to satisfy block-related intents in different areas, there may be many solvers with expertise in different areas to support different virtual machines (VMs).

Solving process

  • The solver performs trusted and private off-chain computations that can be used for smart contracts on SUAVE through special pre-compilation in the TEE environment. The solvers work together to build a block containing a set of intents. The purpose of block building is to aggregate and organize these intentions into valuable blocks that can then be proposed to the network.

choice of solver

  • In SUAVE, solver selection follows two main approaches. First, the solver that completes the intended task first is usually chosen. This increases the efficiency and timeliness of delivering solutions. Alternatively, an order flow auction mechanism could be implemented, where solvers bid to users, returning a portion of the order flow value to the users.

Verification and Settlement

  • To ensure the validity of the intent and settle the transaction, SUAVE uses oracles and SUAVE validators. The oracle provides external data to verify the execution of the intent, and the SUAVE validator verifies and settles the intent on the SUAVE chain.

Anoma (general Intent of Anoma protocol)

Anoma is a universal architecture similar to Cosmos and is preparing to launch a first-layer proof-of-stake (PoS) chain that supports IBC. It combines an intent-centric design with a homogeneous protocol powered by the Anoma virtual machine (VM), while also providing heterogeneous security capabilities (different Anoma protocols have different consensus mechanisms).

intent expression and authorization

  • Users interact with Anoma DApps to express their intentions and define the final state or attributes they should have.

candidate solver

  • Anoma welcomes various types of solvers, each focusing on different types of applications. These solvers monitor memory pools consistent with their interests and goals. Depending on their specific focus, they may observe all intents or a subset of intents.

Solving process

  • solvers run solving algorithms, leveraging their expertise in areas such as Fungible Token (FT) trading or calculating rolling states. The solver is also responsible for matching intents. They receive intents and generate partially or fully matched transactions. The solver determines when to match, what to charge for partial solutions, and how to deal with excess parts. Once the solvers form a fully balanced transaction, they submit it to the Anoma ecosystem’s mempool nodes.

choice of solver

  • The choice of a solver can be influenced by its ability to complete the task efficiently and in a timely manner, following the first come, first served principle, that is, the solver that completes the task first will be selected.

Verification and Settlement

  • Verifiers from different Anoma protocols run Anoma virtual machines (VMs) to complete intent execution and verification. Anoma VM ensures the execution integrity and validity of the intent by checking whether all relevant validity predicates (declarative smart contracts) are satisfied. Fund allocation and rewards to solvers are based on the results of the Anoma VM executing and validating intents.

How intents are revolutionizing order flow

In the current state of trading order flow, users must navigate the execution path themselves, resulting in a relatively simple trading order flow.

SevenX Ventures: Decoding INTENTS and how to completely change the Web3 user experience and order flow model

However, envisioning a future where the web3 ecosystem adopts an intent-centric approach, the sequential flow of intents is likely to become more complex. In this new paradigm, users are free to express their intent and delegate complexity to a new role - the solver.

Before delving into it, I would like to summarize two trends in the intent field: First, major DApps that focus on specific types of intent, such as Uniswap and Cow Swap, are extending intent functionality by introducing solvers themselves. This means they are partnering with solvers who are focused on solving specific problems to provide a wider range of services. The second is a more general intent. In this regard, we need a relatively new architecture, including a new intent language, a new virtual machine, and so on. Projects like Essential, Flashbots, and Anoma are working hard in this direction. This means that in order to satisfy more general intents, new technologies and tools need to be developed to adapt to different types of needs.

In this case, different types of intents may be handled by specific platforms or protocols. For example, transaction intents can be handled by UniswapX and Cow Swap; intents with single-domain and wallet-related features can be handled by Account Abstraction (AA) wallets or Essential-compatible DApps and wallets; and platforms like SUAVE and Anoma Might handle more general and multi-domain intents.

SevenX Ventures: Decoding INTENTS and how to completely change the Web3 user experience and order flow model

In this new world, the intents order flow may follow a more complex path. Lets explore a possible order process:

  • User expresses intent, deposits funds and authorizes

    Intents are very expressive; average users may need help translating their intents into code. This could be achieved by dapps/wallets that extract this part by providing a user-friendly interface, or there could be an aggregator that provides a common interface to express any intent, like Google search with the help of artificial intelligence.

  • The intent is sent to the relevant intent memory pool

    Note that Anoma can have multiple memory pools, serving different types of intents, and trusted by different DApps or protocols.

  • The solver performs off-chain simulation and competes to solve the intent

    In the SUAVE ecosystem, solvers have both the ability to solve and the ability to build blocks. Some intents involve building blocks to solve cross-chain tasks, such as cross-chain MEV operations. Skilled block builders have an advantage in building valuable blocks and completing tasks faster. Other intents may require primarily algorithmic expertise, such as optimizing liquidity aggregation across multiple chains. These intents may be more dependent on a specific type of solver than on broad block building capabilities.

    In the AA ecosystem, bundlers perform simulation and bundling tasks. The bundled intent can then be sent to a public memory pool for searchers to unbundle and potentially preempt, or directly to a trusted builder. In the early stages, smaller bundles may be more effective because they can be sent privately to a trusted builder to avoid potential losses. As 4337 Wallet and other players with sufficient order flow enter the market, they can operate as bundlers, just like searchers.

  • Verify intent completion

    There are a variety of verification methods, each with its own set of trade-offs. Using smart contracts for verification, while reliable, often lacks scalability because different intents require specific verification logic and code; relying on oracles for verification introduces the risks associated with oracles, but provides seamless integration with multiple chains. The advantages of seamless integration; using the Anoma virtual machine requires the intent application to adopt the Anoma framework, but provides the ability to verify various intents.

    In summary, order flow in an intent-centric world is different than in a transaction-centric world: users sign and authorize transactions vs. users have more choices to express their intentions; there is a single memory pool for different purposes vs. multiple A memory pool; Dapps are responsible for execution vs. a new role that solvers choose to join and solve problems in a competitive manner; different chains settle one by one vs. multiple chains can settle together (new cross-domain execution)

The ripple effect of Intents on the Web3 world

An Intent-based world contains a large number of Web3 participants. Next, you can take a rough look at the current Intent landscape. Please note that this is just an overview. As intents gradually develop and change, more participants will come to this new world. For example, shared sequencers like Astria and Espresso can provide users with faster pre-confirmation in multi-domain Intent execution.

SevenX Ventures: Decoding INTENTS and how to completely change the Web3 user experience and order flow model

upstream

chain

  • New chains like SUAVE enable more frequent and cost-effective intent settlement.

  • The Anoma structure chain supports new virtual machines and can solve the Intent verification problem efficiently and universally.

  • L2 or more scalable chains are suitable for performing low-cost calculations related to Intent logical expression, verification, and settlement, because the entire process requires a large amount of computing resources due to the expressive nature of Intent itself.

Privacy

  • Privacy is crucial in the intent space to prevent malicious MEV issues such as front-running and enable more order flow value to be bid back to users/dapps. In addition, including privacy features can also support Intents that require stronger privacy protection.

  • SUAVE adopts SGX as a short-term solution, while Anoma supports zero-knowledge proof (ZK) and distributed key generation (DKG) encryption.

Oracle

  • Oracle now has an additional feature: assistance in verifying the implementation status of Intents.

Intent related standards

  • Common standards help reduce fragmentation problems caused by different types of Intents; Solvers can more easily integrate different Intent-enabled applications; it is easier for dapps and developers to extend to the Intent system. Intents also avoid rebuilding the public intent infrastructure.

Midstream (potential solver)

Certain types of solvers (such as CoW Swap and 1inchs routers), as well as market makers, have accumulated large liquidity networks and advanced routing algorithms that outperform other solvers and may receive partial exclusives directly from swappers. Order.

Builders: Builders play an important role as solvers, especially in the final settlement process involving different chains. An experienced builder can easily perform this duty.

Seekers: Seekers have expertise in routing and advanced algorithms, which makes them valuable when resolving Intents related to finding the best solution, or acquiring liquidity.

downstream

Intent has a broad impact on various dapps - enhanced user-friendliness; it can lead to large-scale adoption; the increase in multi-party participation brings more off-chain components, improving efficiency and flexibility; dapps can integrate Intent solvers To integrate more complex functions and expand to provide more functions and features.

For example, in DeFi, intents can be executed by using a third party (solver) to simulate atomicity in a cross-chain environment. Solver takes the risk of failure to realize the new field of cross-domain DeFi.

Additionally, more interactions and user instructions can facilitate the development of complex dapps. For example, in GameFi, users now have more gameplay options:

  • Custom Game Strategy: Intents allow players to define and execute custom game strategies. They can express game goals and actions in their own way and have the solver execute these Intents within the game. This gives players more freedom and control;

  • Support the economic system: Through Intent, players can participate in the in-game economic system, such as trading game assets, providing liquidity, or participating in lending. By expressing their Intent, players can perform financial operations similar to DeFi within the game and receive economic rewards.

Conclusion

While concluding this article, I noticed a striking similarity between the concepts of Intents and rollups: off-chain execution and final settlement and verification on-chain. With the explosive growth of the rollup ecosystem, we are now also witnessing the explosive growth of Intents, dapps are becoming more and more expressive, and many projects have developed Intent-specific languages ​​and standards.

However, I would like to draw everyones attention to the potential centralization issues that Intent may bring. As we saw in the case of private memory pools and private order flows, players that can handle complex user intents and provide a more efficient and user-friendly experience may come to the fore, attracting more private intent order flows, and thus Leading to better execution attracting more order flow.

In addition, how Intent players go about making the solver effectively implement Intent for users is also a real problem. For example, in the case of current small AA transactions, packagers or builders do not have sufficient incentives to spend extra time and effort to provide new types of services. This problem may also exist with more expressive Intents.

In short, the Intent space has huge potential and transformative power, and we must find a way forward that balances innovation, decentralization, and user empowerment. Lets embrace this exciting journey and work together to unlock the full potential of Intents!

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