Open Intents Framework: Can ERC-7683 solve the interoperability problems between Ethereum chains?

1. The Challenges of Ethereum Fragmentation Issues

With the rise of various L2 and DeFi projects, Ethereum is facing an increasingly serious liquidity fragmentation problem. This is mainly manifested in the fact that the liquidity of assets in the ecosystem is split into multiple small pieces by L1 and numerous L2s. Different L2s compete for TVL, causing assets and transactions to be dispersed across multiple decentralized platforms and protocols, but there is a lack of effective connections and interoperability between these platforms. The liquidity on each chain can only operate within its own independent "small circle", exacerbating the overall fragmentation cost problem of Ethereum.

In 2024, it is expected that over 100 new Ethereum chains will go live, creating a situation akin to entering a mall filled with various products but needing to use different currencies for transactions. To address this issue, the Ethereum Foundation announced the launch of the Open Intents Framework on February 20, aimed at providing a "single-chain-like" seamless trading experience for Ethereum. This framework garnered support from over 50 protocols within just a few days.

The Open Intents Framework consists of three core components:

1. Open-source solver: Written in TypeScript, capable of monitoring on-chain events and handling intents. It has protocol independence and supports features such as indexing, transaction submission, and rebalancing, allowing developers to customize and adjust based on their needs.

2. Composable Smart Contracts: Based on the ERC-7683 standard, it defines the logic for interpreting, executing, and settling intents. It defaults to support limit order trading and Hyperlane ISM settlement.

3. UI Template: Provides pre-built, customizable user interface templates designed to make intention products more accessible to end users.

2. ERC-7683: Core of the Open Intents Framework

ERC-7683 is a universal standard for cross-chain intents on Ethereum, jointly developed by Across and Uniswap Labs. It aims to provide a unified, standardized framework for expressing and executing cross-chain operations, particularly between multiple L2 solutions and sidechains.

The core content and components of ERC-7683 include:

1. Cross-chain order structure: Defines the format of cross-chain orders, ensuring consistency between different blockchains and platforms.

2. ISettlementContract Interface: Standardizes the handling of the settlement process, allowing cross-chain transactions to flexibly execute settlements between different platforms.

3. Fulfil mechanism: Allows participants to compete in completing cross-chain intents in a shared network, improving transaction efficiency.

4. Fill in the deadline: Mark the expiration time of the cross-chain intention to avoid long periods of waiting for invalid transactions.

5. Order Data Type: Use EIP-712 type hash to specify the structure and format of intent data.

6. Order Data: Contains the core parameters of cross-chain transactions, defining the expected results of cross-chain transactions.

The main advantages of ERC-7683 lie in achieving seamless cross-chain interactions and enhanced governance capabilities. It simplifies the cross-chain operation process, lowers the technical barrier, and provides a more efficient cross-chain governance solution for decentralized autonomous organizations (DAOs).

3. Intent and DeFAI: An Abstract Future

Intent and DeFAI both stem from the financial attributes of DeFi, but they approach problem-solving differently. The core issues that DeFi truly needs to address are scalability and liquidity. Intent integrates liquidity through UNI and ERC-7683, while DeFAI utilizes AI technology to achieve automated trading.

The core goal of Intent is to simplify the user interaction process through an "intention-driven transaction" mechanism. After users set their transaction intentions and strategies, the system automatically executes them without the need for manual intervention at every step. This not only enhances the usability of DeFi but also optimizes strategy execution, improving trading efficiency. Intent may also address liquidity bottlenecks in DeFi through cross-chain technology, breaking down barriers between different chains and optimizing liquidity pools.

DeFAI, as a decentralized finance protocol based on artificial intelligence, focuses on addressing compliance and risk control issues in DeFi. It utilizes AI technology to analyze and predict market trends, helping the protocol identify potential risks while ensuring the stability of the protocol and reducing operational risks. AI can process large amounts of market data, providing users with more precise decision-making support, optimizing market operations and risk management.

From account abstraction to chain abstraction, and then to intent and DeFAI, the level of abstraction continues to increase. However, the solution to the problem of liquidity fragmentation does not only rely on the increase in abstraction levels, but more on how to achieve ecosystem integration by optimizing existing protocols.

4. The Key Role of Uniswap in Promoting the Development of ERC-7683

The core support of ERC-7683 mainly relies on Uniswap for its implementation. The reason is that both Intent and DeFAI essentially aim to better serve DeFi. A key element in maintaining the healthy development of DeFi is market liquidity, and this dependence is based on two conditions: "efficient liquidity provision" and "deeply integrated liquidity."

1. The liquidity advantages of Uniswap V4: Uniswap V4 introduces a more flexible and efficient liquidity pool management mechanism, particularly for providing concentrated liquidity across different price ranges. The V4 version uses a single PoolManager contract, replacing the need to deploy a separate smart contract for each new pool as in V3, significantly reducing deployment and swapping costs. Additionally, the Hooks feature allows developers to customize AMM pools, enabling the ERC-7683 protocol to adjust according to different market demands.

2. The potential of Uniswap X: Uniswap X is expected to further enhance cross-chain interoperability, potentially incorporating new cross-chain bridging mechanisms or deep integration with ERC-7683, providing more efficient channels for cross-chain asset exchange. If Uniswap X can offer cross-chain liquidity solutions, it will become an important platform for executing cross-chain intentions with ERC-7683.

3. The implementation of cross-chain protocols relies on: Due to ERC-7683's reliance on standardized cross-chain transaction structures and settlement mechanisms, and given Uniswap's significant position in decentralized exchanges, the protocol is likely to depend on the liquidity pools, automated market making, and cross-chain trading capabilities provided by Uniswap. Uniswap not only supports the efficient execution of ERC-7683 but also ensures the stability and security of its cross-chain and multi-asset trading.

V. The Practical Significance of Intent

When we set aside the abstract definition of "intention", it can actually be understood as a clear trading goal or driving force. The concept of intention was initially proposed by Paradigm in the article "Intent-Based Architectures and Their Risks" published on June 1, 2023. Although it has remained in the conceptual stage, the launch of ERC-7683 seems to provide a better solution to the problem of fragmented liquidity.

The intention and ultimate goal of ERC-7683 is to inject new vitality into Uniswap, hoping to trigger a new wave of DeFi enthusiasm. This is not just about continuing L2 scaling, but rather achieving more efficient trading through Uniswap, creating richer functionalities and stronger cross-chain interoperability, and even introducing new incentive mechanisms or trading models to attract more users and liquidity.

If Uniswap V4 or Uniswap X introduces new smart contract logic or trading models at the protocol level, Uniswap can further enhance cross-chain liquidity, reduce transaction costs, and add more trading pairs and liquidity pools on the existing AMM model through ERC-7683. This will make Uniswap no longer just a liquidity-dispersed AMM, and these improvements will also become an important part of "intent."