Over the past year, “intents” has become one of the hottest concepts in DeFi and intent-based systems have gained significant traction in the space. 

‍An intent can be defined as a user’s desire to effectively sell X amount of token A for at least Y amount of token B. Solvers then compete to execute the trade on behalf of the user given the specified tokens and amounts.

While in many ways just a fresh take on limit orders, intents differ in their declarative nature - the user specifies what they want and the solver provides the instructions to make it happen. 

Intents arose in an attempt to solve many of the challenges faced in DeFi - the prevalence of MEV, liquidity fragmentation, and complex user experiences. This new paradigm holds the potential for enhancing the swap experience, including optimal pricing, speed, and abstraction.

In this article, we will take a deeper look into intents, including the evolution from limit orders, the UX benefits, and how exactly intents work.

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Limit orders as intents

Intents are in essence modern limit orders, meaning that input and output token amounts are specified.

With traditional orderbooks, orders are arranged by price, showing the highest bids, which are the buy orders, and the lowest asks, which are the sell orders. When buyers and sellers place limit orders, they specify the price and quantity of the asset they want to buy or sell, and then, in CeFi, an exchange matches those orders.

In 2017, 0x pioneered the model of “off-chain order relay with onchain settlement” in DeFi, combining the efficiency of orderbooks with the near instant settlement of onchain orders. With 0x Orders, X maker amount goes to the taker and Y taker amount goes to the maker, exactly as specified.

So, what exactly is the difference between traditional limit orders and intents?

• Limit orders are imperative - specific instructions are provided to complete the swap.
• Intents are declarative - the user specifies what they want and a solver provides the instructions to make it happen.

Limit orders in DeFi require users to sign and submit actual transactions, and these transactions include specific instructions for how the transaction is executed.

Intents enable users to simply express their desired outcome and outsource the task of achieving that outcome to third-parties. In other words, intents shift the paradigm from “how” transactions are performed to “what” outcomes are desired.

This small difference opens up a new design space.

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The benefits of intents

Intents reduce the complexities of swaps for users while still benefiting from decentralized custody and fast settlement.

This provides a number of benefits:

• Finding optimal prices for swaps, including the ability for price improvement.
• Protecting users from MEV by executing transactions on their behalf and utilizing off-chain liquidity.
• Providing abstraction that allows for gasless trades, bundling, and more. For this reason, many intents-based swap products have been marketed under a “gasless” banner.
• Better support for multisigs and hardware wallets as the signature expiration can be offloaded to a later point in time.

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How it works

One important aspect of intents is that they require a third-party that is aware of the intent and is incentivized to execute the intent.

DeFi is adversarial. While AMMs have grown to account for most decentralized trading volume, they also leak trading information that opens users up to exploitation. In DeFi, bots monitor the Ethereum mempool for opportunities to extract value from trades, resulting in worse prices for users. MEV bots have extracted over $2B in value over the past two years.

Intents based systems outsource transactions to solvers, who compete to execute the intent. Solvers run an algorithm to find the best possible route across liquidity pools, similar to how aggregators utilize smart order routing. The solver that can execute the order at the best price wins the trade.

Compared to AMMs, solvers have access to off-chain liquidity, be it CEX inventory, request-for-quote (RFQ), or their own proprietary liquidity. Intents promise to reduce MEV attacks by exposing less information for bots to exploit while also utilizing off-chain liquidity like RFQ.

Intents-based swaps can take various forms:

• Atomic Intents: Swaps are done atomically, meaning the trade is routed and tokens returned in a single transaction.
• Onchain CLOBs: Central limit order books, similar to traditional order books, can update quotes quickly and leak less trading information. Onchain CLOBs can be intent-based.
• Order Flow Auctions: OFAs batch transactions and then collect bids on the orders within the auction in order to optimize execution. OFAs can include both intents and normal transactions.

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Cross-chain intents

Intents also hold the potential for advancement in cross-chain bridging and swaps, where users submit an intent to transfer or trade X amount of a token on Chain A for Y amount of a token on Chain B.

Intents-based cross-chain swaps feature a settlement contract on a given chain while utilizing a cross-chain messaging protocol to pass messages and unlocks between chains. An intents-based approach to cross chain swaps enables faster bridging times and less risk for users.

One example is Across. Across’ intents-based bridging shifts risk from end-users to third-party relayers who accept the risk in exchange for a fee. This competitive network of third-party relayers also enables bridge orders to be filled in mere seconds, much faster than other bridges.

Across’ cross-chain intents are effectively cross-chain limit orders plus an action to execute, shifting from explicit execution steps directly to user outcomes.

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Conclusion

Intents represents a shift from an imperative to declarative paradigm, iterating on the limit order model with a new message format for interacting with smart contracts where the focus isn’t on how transactions are executed but rather on what the user wants.

Intents present the potential to reduce complexity in DeFi, unlocking a better swap experience with improved pricing, gasless transactions, and MEV protection.

Intents-based systems will likely play a major role in how the space evolves in the coming years, but are just one piece of the DeFi puzzle alongside AMMs, CLOBs, and RFQ.

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