Making Sense of Intents & its Ecosystem

Transcript

Hey. Um, good morning everyone. Are we ready? Okay, cool. Um, so hello. Good morning. My name is Clem. I work as a product lead at LeFi. In case you don't know Lifi, LiFi is one API to tap into all of DeFi's liquidity. We are aggregating bridges, dexes, uh dex aggregators and we are offering like kind of one comprehensive API for you to um be able to offer any route to your users for any token to any token and today uh the topic of the presentation is trying to make sense of intense and its ecosystem.

I think the presentation that was given earlier was uh more technical and developer oriented but this one is going to be more looking at it from the perspective of a product manager who I am uh and trying to uh understand a little bit the behavior of the different stakeholders their needs and then also give a little bit of background on like intents where they originated from and uh what are the current challenges that we see today with the ecosystem. I would love for us to go to the next slide. or do I have I have is this the Okay, cool.

Yeah. So, this is the rough agenda, but I'm not going to spend too much time on it because I want to make sure we have time maybe for questions. So, if we are um looking at uh intents and where they originated from, how many of you are completely familiar with the flow already? Okay, cool. So it's still like a minority but essentially um what intents are about uh they are about decoupling the execution from the verification logic for when users submit transactions on chain. And so what this means uh in practice is that historically because uh the EVM is primarily EOA based uh we've had users being responsible for

assigning and broadcasting transactions uh to the network themselves and also basically manually handling all the execution parameters. uh which is the reason why you know legacy UX like MetaMask for instance are still quite cumbersome for new users because users get exposed to all these parameters when they submit transactions on on chain and so that historically how transactions have been carried and have been made uh for a long time. Uh but then quite recently, well actually you could argue for a few years now depending on like which projects you're looking at. Uh but more and more there's been standardization uh to effectively push forward inbased uh transaction flows. And so what an

intentbased transaction flow is, I think the colleague Aliyah explained that quite well is that we are decoupling the execution um from the verification uh of the transaction and we are delegating the execution to third parties who are responsible for executing the transaction on our behalf. And so what we what we have in the end is a user simply signing an intent which can be any arbitrary message um that dictates the terms and conditions of what they want to execute uh being very user centric and that gets in the end executed uh by some solvers. Uh we will go into the detail of like what actually they do and how they organize themselves uh to to solve in a moment.

So what are the user benefits of that approach? There's actually many user benefits um for you know intents to take off and to I believe eventually take over the the the more classic uh transaction flow. Um from a UX perspective uh it's quite uh it's quite basic actually when you think about it the benefits that we get from it. Uh but it's 101 if we want to build products for for the mass market. Um so on one hand we have gasless flows. If you are familiar with 437 already for 437 is essentially an intest based flow because you're delegating the execution of your transactions to bundlers and to a bunch of other third parties who are uh executing the transaction for you. Then

you also have stuff like me protection. Uh that's also something that's you know very important in today's world where you have block builders who are looking to uh extract as much value as possible. um when when building blocks and uh effectively building that transaction offchain allows you to protect yourself from these uh these actors then you also have cheaper execution. So we we will talk about that in a moment but effectively routing and delegating the execution to third party solvers allow you to get like better execution price on your trades uh simply because they are they have much more context and they are much more context aware about all the different path and combination

possible for your trades uh than you are right like if you are um one a newbie user and you have just your MetaMask account and you want to transfer your front from one chain to the other likely if if you're not delegating that routing to someone else, um unless maybe you use LeFi, uh it's going to be difficult for you to get the best possible price. And then in the context of crosschain transactions, uh what you know, intense also allow us to do is that they allow us to have near instant crosschain all the fulfillments. And so this is really cool because um what it's what it what what it what was not possible before and where before using canonical bridges we would require you know minutes if not hours to get funds from one chain to the

other. Today we can effectively fully delegate the fulfillment of our orders um to solvers and get our uh intent executed before ourselves being uh debited. We'll also talk about that a bit more in a moment. Then there's uh a plethora of also new onchain functionalities that intense unlock not just like UX but uh functionality directly. Uh we can think um in terms of pro programmable orders, derivatives, swaps, limit orders. If you want to experiment a little bit with that, I recommend that you use cow, especially if you place like large trades because they allow for all of these kind of more sophisticated orders and uh ultimately this wouldn't be uh possible without

intense at least they wouldn't be possible on chain because you can do all of this stuff you know free of chain if you're just using like a regular uh or the book of chain order book. So solvers. So solvers I I don't know if anyone's going to get that here, but I wrote solvers handyman on steroids just because uh they do so much stuff um right now in the value chain that I think it's important to highlight uh especially for when we're going to talk about the challenges that they face in a in a moment. Uh but effectively story uh solvers are responsible for the routing of your transactions. So as we said earlier, if you want to go from point A to point B, you just simply, you know, share that as an intent to an off-chain

set of solvers. Uh who will then be responsible for for finding the best optimal path for you. And so that means that they're going to be scanning many different avenues for your trade and they will come back with the best. Now, how do we define what is the best for you? Well, we define what is best um through the competition type uh that the solver engages in. So that means currently we have uh different type of settlement networks and protocols that effectively have different competition types. uh 1 in for instance relies on Dutch auction but if you're looking at cow uh they rely on batch auctions also coupled with coincidence of wants and

all of these are designed in such a way that um the winner of the auction will be able to execute your trade on your behalf and you will get the best possible terms uh for your trade. uh these uh competition are um happening offchain for the for the for the most part um and uh they vary in in yeah in types today I would say we see a lot of solvers also operating cross protocol um we will also talk about that in a moment but um there is a good deal of solvers who are currently solving on multiple settlement networks just in order to increase the amount of order flow that they can they can solve for

another key task of solvers that they also do. So they do routing, they participate in this competition, but in order for them to do all these things, they also need to be liquidity sourcing. That's another key heavy lift uh task because what this means is that they need to bring the capital uh for you uh in order for you to be able to execute your your trades. uh there's many ways uh people do that currently either via public liquidity pools or private uh venues by private venues I mean that many solvers for instance strike deals either with private market makers or by getting funds directly from the organization that they they work with um to use these funds in the solving

process. uh and we see in the market that actually majority of solvers use some kind of hybrid model u mixing their own liquidity with public liquidity to be able to offer the best most competitive quotes and uh lastly you know another thing that's that solvers have to deal with currently is that they need to manage and monitor the positions on multiple settlement networks. Uh what this means here is that ultimately uh whenever you go and you front funds for uh users you effect you you you kind of open a credit line for them and you have to all take care of all the rebalancing and managing your assets in a multi-chain world. So yeah, they, you know, they do a lot of stuff for us.

Crossing all the I don't want to spend too much time on this actually because uh we only have 9 minutes left and uh I think there was a good deal of like uh explaining what the flow looks like. Uh but it's fairly simple. You have es an escro type of model or resource lock type of model from which effectively solvers are able to auction off your order and then once uh they take your order they have to submit a proof uh or they have to be able to generate a proof. They don't necessarily have to submit it uh that they execute it on the target chain. Um and uh that proof can be challenged in most optimistic designs. We're going to talk about that also in a second. Uh but yeah, the flow is essentially uh the following and as

highlighted on the graph uh once it's it's proven that that the transaction was fulfilled, it should be easy for the solver to claim back the funds from the user. So if we're looking at it from a stakeholder needs perspective, we have applications who want the best crosschain coverage. What I mean by best is I mean best execution price uh best routing most comprehensive also offering um for for for a multi-chain crosschain context best support for chains um as as possible so that they can cover uh as much a large target user group. Then for users we have um obviously the need for the best user experience. If I trade, I

want to have the best execution terms uh uh that that are out there. And for solvers, they want to win the auction for profit. Uh which I think I kind of purposefully added profit and not just revenue here because uh we're going to talk about it in a moment. uh but there is uh ultimately the need for everyone in this industry to build a sustainable business and uh it doesn't seem as straightforward as that currently given the the market conditions especially for solvers on the liquidity provider sides um you know we have solvers relying on these liquidity sources but if you're a liquidity provider you know it's fair to assume that you want return on your capital that beats the market and if we assume that the risk-free rate is maybe

the USDC yield in some lending contract uh then you know you should make sure that whatever you're charging on top of the the transactions you make and how you utilize this capital can provide you with a return on investment that's at least as good as the risk-free rate. So what are the challenges that these different stakeholders face? Well, if we look at users optimistic settlements are actually kind of a a potential challenge. You could assume that it's a big security assumption because uh what we're assuming is that we're delegating uh the validity of the execution to oracles that assume that the transaction was carried on properly by the solver.

So effectively we're shift we're shifting the risk uh to third party oracles and most of the time if your transaction doesn't get um if a transaction that's been executed doesn't get challenged this is what an optimistic settlement is about. um uh it just goes through um I hope I I don't know if that's actually a straightforward concept to to everyone but um in essence once a transaction is executed uh there is the need for a protocol and oracle system uh to communicate messages between chains to prove that the transaction was according to the was executed according to the user terms and uh currently that's a big you know that's that's a security

assumption that's that is not made when you follow the typical EOA uh transaction flow model. Another one is the offchain execution logic uh for users. That's also a challenge uh because actually most of the competition types whether Dutch auctions or others they sit offchain uh that means that any kind of settlement network or protocol orchestrating uh these competitions are free to design the competitions as they wish and hence there is uh you know a higher likelihood that these competitions can be temper tempered with and manipulated when you place these orders. Five minutes left.

Okay. for solvers. Um, another challenge that that I mentioned is capital efficiency and profitability. There is right now market data that suggests that uh, you know, the profitability and the basis points being charged on on transaction is just constantly decreasing. So the profitability for solvers is actually very questionable at this point in time. Uh, we see a lot of teams which connects actually to the third point bootstrapping their own solver network by running their own solver. uh just because they need to attract they need to be filling uh orders. Um and uh we see that this creates some um some some some some big sub subsidization strategies uh for a lot of protocols

where effectively they are paying solvers to solve on on their network. So these are challenging h happening right now for protocols teams looking to build those systems solvers looking to be uh profitable and users looking to be fully secure. So LeFi 2.0 I will be quick on this one but Lei 2.0 know is essentially uh the idea that we're going to be leveraging our existing uh DEX bridge uh aggregation and our API uh to open up the order book of our 400 plus I think now it's 500 plus uh uh customers uh that have integrated the API uh we work with clients like MetaMask, Robin Hood and others. Um and the idea for us is

that we're going to be pushing forward uh our own intens integration and implementation that should be accessible for all. The benefit of this approach is that for solvers well there's going to be a huge orderflow. There's going to be uh ultimately a lot of transactions uh to solve for and hopefully for those longtail assets and other type of trades there will be the opportunity for solvers to be profitable. Uh we also want to bring forward tooling for increasing the capital efficiency for solvers. Uh we have already worked on a direct integration with Everclear and more recently we also integrated with glacis to support interrupt token standards directly within the protocol

uh which should make rebalancing uh way more efficient and easier and out of the box essentially. Um when it comes to the implementation also uh that we go forward with we have not been opinionated with one particular oracle setup um on the optimistic uh settlements that I that I mentioned before which means you are free to choose uh your own uh proof and veric verification system for how transactions are being settled. Uh meaning that if you're an app developer or if you're a protocol developer you can also leverage that uh and tailor it to your security needs. And for users, well, you know, that means also that we will be offering the best execution price. Um, intents are great, but they're not fitting

necessarily all use cases because you're always constrained to the liquidity made available by a solvers. Sometimes you might just want to use, you know, a canonical bridge for transferring your funds from one J to the other or executing a large trade. Uh, if you're very concerned about security, you know, as I mentioned, it could make sense that you don't want to delegate that to solvers. Um and then another thing that we'll be doing is that we are also bringing forward a resource lock functionality. Uh we're doing that with the compact together with rhinestone and unis swap and uh that implementation would allow us to effectively um deliver this credible commitments that allow for uh a unified balance experience across multiple chains.

If you want to become a solver on Leifi, please reach out to us. We are currently like lining up applications and on boarding solvers. Um our first and our very own server should be available uh in a few weeks from now. We will be uh shipping a bunch of new stuff including zaps as well over the coming quarter and we're super excited to work with you all. That's it. Uh I am one minute. Cool. Anyone want to ask a question to KMA? I feel like I talked so fast actually it's uh was intense.

My question is naive but you talked about market conditions being unfavorable for solvers. Is that just a blip you think will pass or do you think there are other conditions affecting that? Um my opinion is that it's due to the lack of maturity of those settlement networks and I think the incentive design uh by protocol yeah yeah the incentive design from protocols is just just not mature enough. So I think that currently without um heavy subsidies uh is just very hard for a solver to be profitable and the market condition being that we are just early in in that race. I think they're here to stay, but I think they're just a commoditization of solving that's happening. Does Leifi solve what you just what does LeFi fix

what you just described? We are not looking at like incentives or token or protocol design uh uh uh at this point in time. What we are providing is an order flow uh that should make it possible for solvers to um uh to capture some some value. But it's a good question. Any more questions? Um is this like a white lab? Okay, no problem. Is this uh also meant to be like a white label for for new new entrance that want to offer this sort of routing? Yeah, absolutely. So the way it currently works is you integrate the API and we aggregate for you all the

possible routes uh via own algorithm and then we will simply include the intentbased uh route uh as part of the aggregated list of routes available for the for the end user and then you can configure and pick and choose the one you like also expose um the one you like to your customers. We have a white label B2B offering uh you can integrate the solution however you like. uh it will just guarantee you the best execution uh price for your users in for any crosschain or same chain also transaction swaps. Thank you. We will end the talk now. We need to Yeah, we need to be on time. Thank you.