NGC Designing intent-based in the popularization of blockchain systems

Propelling Blockchain Systems' Popularity Through NGC's Intent-Based Design

Author | Adam Arreola @NGC Ventures

Translation | Tudd Cai & Henry Zhang @NGC Ventures

Introduction

At this stage, using blockchain solutions for transactions can be too complex for the average user. Users may know what their goal is but the complex steps hinder their process of achieving their intent. Recently, a solution called “Intent-centric design” has gained attention in the community. Through intent, users can describe their desired outcomes without having to list every step required to achieve that goal. For example, if a user wants to receive a certain amount of Ethereum (ETH) and is willing to pay a certain amount of Bitcoin (BTC) to receive it, an intent-centric solution would be able to accomplish this goal without the user specifying the exact steps of a cross-chain transaction.

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This article will explore emerging intent-centric designs and how they will simplify blockchain interactions. It will delve into the lifecycle of intent, the current state of related design implementations, and the future applications of this technology. In addition to evaluating the risks and challenges posed by intent-centric systems, this article will also assess the value proposition of this innovative approach that is rapidly changing the blockchain landscape.

Users Need Simplified Blockchain Interactions

The complexity of blockchain transactions creates an unfair competitive environment where only the savviest users stand a chance to profit. Market makers, high-frequency trading firms, and MEV searchers leverage advanced resources, systems, and algorithms to compete for maximum profits.

Intent-centric design contributes to fair competition by simplifying how users engage with transactions on the chain, while increasing the overall capital efficiency of the system. For experienced participants, becoming solvers in an intent-centric system is not a major shift given their existing capabilities. Intent-centric systems provide better user interfaces, optimized gas fees, slippage handling, and improved composability.

Users only need to describe the desired outcome they want to achieve, making it easier for them to accomplish their goals. They do not need to know or understand the underlying processes required to achieve their objectives; they only need to know what end result they want. This makes on-chain transactions more accessible to everyday participants. Offering users an improved and user-friendly interface can lead to increased demand for blockchain systems, thereby boosting overall liquidity and enhancing the ecosystem.

Exploring further, intent-centric systems eliminate the common frustrations users encounter when dealing with gas fees and slippage. For example, in traditional blockchain transactions, users must pay gas fees, which may be unfamiliar to novice users who are accustomed to the abstraction of these costs in traditional financial systems. Account abstraction (introduced through ERC-4337) allows users to pay gas fees using any ERC-20 token or to sponsor and pay gas fees for their users through authorization protocols, making gas fee payment more flexible. This not only simplifies the interaction process but also enhances control over transactions. Intent-centric systems can optimize the gas fees required for each transaction to achieve the user’s desired outcome without requiring the user to painfully estimate the needed gas. Similarly, users are often affected when estimating slippage. Intent-centric systems can abstract and optimize slippage settings and transaction timing to minimize price impacts on users.

Lifecycle of Intent

While intent simplifies the user’s transaction experience, the technology behind it is quite complex. Multiple different teams are dedicated to building an intent system, but the transaction flow centered around intent is generally as follows:

Image from Flashbots article “MEV Supply Chain: Blazing the Future for the Industry”

1. Off-chain submission: Users use wallets to submit intent.

2. Enter mempool or send to block builder: Transactions can choose to enter the mempool or be sent directly to the block builder to accelerate execution speed. The choice between using alternate mempools, standard mempools, or bypassing the mempool entirely depends on the specific requirements of the intent. For example, high-value exchanges, especially those following the ERC-4337 standard, are often designed to bypass the public mempool completely. This is to mitigate risks associated with Miner Extractable Value (MEV), such as frontrunning and sandwich attacks. Instead, these transactions are sent directly from the bundler (usually acting as the block builder), ensuring a faster and safer transaction process.

3. MEV searchers finding opportunities: If a transaction enters the mempool, MEV searchers will see the data in the mempool and look for the best path to achieve intent and profit opportunities. MEV searchers can choose to process the transactions themselves or sell the information they found to “processors.” In most cases, MEV searchers not only discover opportunities but also act as processors themselves.

4. Processors competing for optimal transaction execution and bundling of intent: Processors act as market makers, competing to provide the best transaction execution for users. Naturally, users seek the cheapest and fastest solutions to realize their intent, and processors that can provide such solutions can earn fees. Processors aggregate multiple intents into bundles, allowing them to be executed in a single transaction. They then forward these bundles to block builders to accommodate them in upcoming blocks.

5. Block building and validation: Block builders choose bundles and package them into blocks. These blocks are then sent to validators to be included in the blockchain. This stage represents the final assembly and validation of intent, ensuring that they are executed correctly and recorded on the blockchain.

Existing Intent-Related Projects

Early design forms centered around intent can already be seen in existing applications and blockchains. Some notable projects include:

Cow protocol + Cow swap

Cow protocol is a permissionless transaction protocol that utilizes batch auctions to discover prices. By seeking opportunities for “coincidence of wants” (where two users each have what the other wants) and aggregating all available on-chain liquidity sources, Cow protocol maximizes liquidity. Unlike traditional trading protocols, Cow protocol processors compete to provide users with the best solutions to achieve their intent.

Cow swap is the frontend interface for Cow protocol, developed by the same team. It is a decentralized exchange (DEX) that employs intent-centric methods to help users find the lowest trading prices from all DEXs and aggregators. Additionally, Cow swap’s intent-centric design protects users from frontrunning and other harmful MEV (Miner Extractable Value) effects. The new feature of Cow swap, Cow Hooks, allows developers and advanced traders to write custom actions (such as trades, cross-chain interactions, staking, deposits, etc.) that can be executed before or after a transaction, all encapsulated within a single transaction to fully embody intent.

Soul wallet

Soul wallet (one of NGC Ventures’ portfolio companies) is an upcoming user-friendly smart contract wallet that employs account abstraction to enhance flexibility in gas fee payments and sponsorships. It also incorporates social recovery, a security mechanism for wallet recovery that doesn’t require the use of mnemonic phrases. The majority (e.g., three out of five) of the user’s wallets or trusted friends and family members, known as “guardians,” can sign recovery protocols to assist the user in regaining access to their wallet. In addition to social recovery, Soul wallet offers dual verification, allowing users to specify another wallet to approve transactions. Furthermore, Soul wallet abstracts underlying blockchain mechanics to provide a seamless experience when using Ethereum and its various Layer-2 solutions. Soul wallet’s one-click secure swap utilizes account abstraction, enabling users to trade without worrying about security risks and manual token approvals.

UniswapX

Uniswap’s new product, UniswapX, addresses some of the most pressing challenges in the DeFi (Decentralized Finance) space through its intent-centric architecture.

One goal of UniswapX is to solve the issue of fragmented liquidity. By aggregating various liquidity sources, such as Uniswap V2 and V3 pools for various asset pairs, UniswapX caters to each user’s intent in finding assets and providing them with the best asset prices. This is facilitated by third-party fillers who utilize the liquidity from different pools or their own private liquidity to execute trades.

UniswapX also brings users a gas-free trading experience by having the filler bear the exchange gas fee and include it in the transaction price. This eliminates the need for users to pay for failed transactions or hold native network tokens to pay for gas fees, further simplifying the Uniswap user experience.

The intent-driven design of UniswapX also helps mitigate harmful MEV. For example, UniswapX reduces user losses by returning the surplus generated from orders to users in the form of price optimizations. Additionally, UniswapX’s design protects users from front-running trades and sandwich attacks by using Permit2 and Reactor Contract, ensuring that transactions meet user expectations and adjusting transactions that do not meet user expectations. UniswapX utilizes Dutch auction orders that are executed with time-dependent execution, encouraging competition between fillers and minimizing the occurrence of harmful MEV.

Looking ahead, UniswapX plans to introduce additional features that align with its intent-driven philosophy. The upcoming support for Uniswap V4 is a notable development, but more groundbreaking is the introduction of gas-free cross-chain transactions. Users will be able to specify the assets they want to receive on their target chain, avoiding the high fees and delays associated with cross-chain transactions.

Upcoming Intent Protocols

Anoma

Anoma (another portfolio company of NGC Ventures) is a multi-functional intent solution being developed by Heliax, which will allow transactions with additional conditions. The protocol seeks to find the best match for a user’s intent across different blockchains, ensuring that transactions are completed based on the conditions specified by the user. This is achieved through a decentralized counterparty discovery mechanism, which eliminates the protocol’s reliance on centralized third-party institutions and strengthens the protocol’s alignment with the decentralized spirit of blockchain.

Through a distributed approach, Anoma enables processors to compete with each other to fulfill user intent. Decentralized counterparty discovery enables direct and trustless interactions established between parties, while the distributed solution utilizes the collective computational resources of processors to efficiently achieve user intent.

In addition, Anoma’s multi-chain atomic settlement capability optimizes the trading of digital assets across multiple blockchains by compressing the process into a single transaction. This feature eliminates the hassle of manually conducting a series of trades, enhancing the efficiency and overall user experience of cross-chain transactions.

SUAVE with Flashbots Support

SUAVE (Single Unified Auction for Valuation Expression) is a product developed by Flashbots (another portfolio company of NGC Ventures) that separates the roles of the mempool and block builder from existing blockchains and provides a highly specialized and decentralized plug-and-play alternative. SUAVE aims to promote decentralized block building to reduce the possibility of block builders within the blockchain ecosystem conducting censorship and abusing their power. As of the week ending August 25, 2023, the top five block builders on Ethereum have built approximately 90% of the blocks, and about 48% of the built blocks comply with OFAC requirements. This exposes users to the risk of centralized censorship, contradicting the decentralized and anti-censorship principles established by Ethereum.

SUAVE is developing MEVM, a professional version of EVM, which allows developers to create MEV applications as smart contracts in a flexible and expressive programming environment. MEVM consists of three main components: Universal Preference Environment (UPE), which is a chain and memory pool designed to express and aggregate preferences (intentions) across different chains; Optimal Execution Market (OEM), where processors compete to provide the best execution for intents submitted by users, and a decentralized network of block builders that merge the encrypted intents of users into blocks. This architecture makes it easier to build new MEV applications, encourages competition in resolving intentions, and decentralizes the MEV supply chain.

SUAVE’s roadmap (divided into three phases: Centauri, Andromeda, and Helios) describes their plan to reshape the MEV landscape through an intention-centered design. In the Centauri phase, SUAVE introduces a privacy-aware order flow auction that allows users to reclaim MEV generated by their transactions. In the Andromeda phase, the launch of SUAVE’s mainnet will enable users to express intents in SUAVE’s execution market and adopt SGX-based mechanisms to enhance auction and block generation efficiency and privacy. The Helios phase will further decentralize the architecture and lay the foundation for cross-chain MEV solutions. This intention-centered approach aligns with SUAVE’s mission to create a neutral home for users, searchers, builders, and validators across different blockchains.

Essential

Essential is developing an intention-based infrastructure, which is a suite of three products: a domain-specific language (DSL) for intent expression, a new intention-centered account abstraction ERC standard for Ethereum and EVM, and a modular intent layer.

Currently, there is a lack of standardized language for cross-blockchain communication of intents. This can lead to misunderstandings of cross-chain intents and result in undesirable outcomes, such as incorrect token exchanges. Essential aims to address this issue by generating domain-specific language (DSL) for intents, enabling users to effectively convey intents across different systems and be interpreted by processors.

According to the project team, the new ERC standard of Essential differs from ERC-4337 in that it assigns processors the task of building efficient transactions to fulfill user intents. As of August 25, 2023, the team has not shared more details about the upcoming ERC standard mechanism. This new solution will bring the advantages of an intention-centered design to EVM-compatible blockchains, extend intents beyond Ethereum through EVM, and provide a smoother experience for a wider blockchain ecosystem.

Lastly, Essential aims to go a step further by creating a modular intent layer. Intents will be grouped into batches, and the modular intent layer will handle each new block as a batch of intents. Essential’s modular intent layer will guide all order flows through a unified network of processors, facilitating transparent order flow aggregation and ensuring access to as much information as possible for transaction processing. Additionally, by encouraging competition between processors to provide the best implementation of intents for users, the modular intent layer will be able to resist harmful MEV in transaction-centric design systems. The modularity of this layer will enable the protocol to integrate into various ecosystems, creating an effective path for cross-chain intent execution.

Future Potential Applications of Intents

There are many innovative intent applications currently being developed that will be available to users in the future;

● Conditional intents will allow actions to be executed based on specific conditions, such as the outcome of certain governance decisions or reached prices.

● Continuous intents will enable actions to be repeated through a single intent, achieving cost balance or tasks such as market-making.

● Multi-step intents will implement a series of actions through a single expressed intent, where the completion of one action prompts the execution of subsequent actions in order.

Intent-focused design can also be combined with other unique technologies such as artificial intelligence. For example, by utilizing intent-focused design and combining it with AI through account abstraction, users can enjoy personalized and automated investment strategies. This allows each user to have a tailored blockchain experience, making on-chain operations easier while opening the doors to new innovative applications and services. Additionally, AI can enhance the capabilities of processors, helping them optimize trade execution and adapt more effectively to market conditions.

Another interesting potential application of intents is their combination with real-world assets (RWA):

● If a user wants to convert traditional financial assets into tokenized blockchain assets, intents can be used to bridge traditional finance and DeFi.

● Intents can be used in lending protocols, where users indicate intent to use RWAs as collateral for DeFi loans. The protocol can mark the assets for the users and use them as collateral without the need for the users to specify each transaction required to achieve their goals.

● In scenarios where users want to earn returns from tokenized real estate, intents can help generate RWA returns for the users. The protocol can represent the user’s investment in the properties, earning returns from rental income or property appreciation.

In addition, intent-focused design has the potential to be applied beyond the blockchain realm, revolutionizing many aspects of daily life. For example:

● Intent-based solutions can aggregate ride-sharing applications such as Uber and Lyft, allowing users to express their travel intentions and enabling the system to find the best ride options across multiple platforms.

● When booking flights, intent-based systems can analyze user preferences, such as travel dates, preferred airlines, and budget constraints, to find the best flight options for booking.

● Through intent-focused design, users can find the best prices in many online stores, enhancing the online shopping experience.

Unlike traditional aggregators like Expedia that compile options, intent-focused systems consider and interpret users’ potential needs. While aggregators provide a fixed set of choices based on predefined criteria, intent-focused systems actively accommodate each user’s unique preferences and dynamically adjust to provide more personalized solutions.

Risks and Challenges

Although intent optimization improves the user experience process, it also brings a range of risks and challenges. First, intent relies on outsourcing decision-making to third parties – processors and block builders. This means that users must trust these parties and the systems connecting them to a certain extent. Users need to beware of processors and block builders abusing their capabilities and charging high fees for intent execution or prioritizing intents that offer the highest rewards. This can result in users paying excessive fees to execute intents and making the system inefficient. Similarly, if a small group of individuals controls the execution of the majority of intents, the system faces the risk of a minority deciding the terms, setting prices, or reviewing transactions. This can lead to reduced competition, rising user costs, and decreased overall decentralization. To prevent these factors from stifling innovation and disrupting the user experience, crypto users must demand system designs that resist centralization and incentivize intermediaries’ good behavior through transparency and encrypted economic incentives, helping build a trusted and neutral ecosystem.

Users interacting with intent-centric systems also face the risk of their intents being misunderstood, leading to unexpected consequences from executing incorrect operations. Builders should cautiously develop standardized forms of communication centered around intent (e.g., Essential’s developing domain-specific language) to avoid this risk.

Finally, with the emergence of intent-centric systems, new security threats may arise. Examples include accidental granting of unauthorized account access, data breaches leading to user privacy leaks, and information leaks enabling other traders to front-run or manipulate markets. In such cases, expecting fair behavior from processors is unrealistic. Just as today’s MEV extractors exploit such systems for profit, intent-centric system processors also have an incentive to cheat if it is profitable. Therefore, the architects of these systems have a responsibility to build a framework that prevents malicious behavior while promoting outcomes most beneficial to users.

Ever-changing value flow in intent-centric systems

In an intent-centric architecture, the interests of MEV extractors, processors, block builders, and validators align with the accomplishment of user intent. Currently, in intent-centric blockchain systems, the value primarily flows to MEV extractors, processors, and block builders as they jointly strive to convey and execute the best possible outcomes for users and profit from this process.

Clearly, MEV extractors and processors accumulate value. They are the first to see intents and individual entities who discover the greatest value within a single scattered intent or groups of potential intents they can batch process. Processors essentially act as market makers as they compete to provide users with the best trades. Users want to achieve their intents in the cheapest and fastest manner. Delivering intents optimally is not only a service but also a profitable opportunity for these entities, incentivizing them to offer the best outcomes. The alignment of interests among users, MEV extractors, and processors facilitates efficient and transparent operation of the system, creating a competitive environment that benefits all participants.

A large portion of the value also flows to blockchain builders. The blockchain builders are responsible for constructing and determining the formation of blocks, playing a crucial role in fulfilling the intentions of each user. As searchers, processors, and users rely on the blockchain builders to execute their intentions, the role of the blockchain builders becomes particularly valuable to all participants as the system becomes more complex.

However, as competition intensifies among searchers, processors, and builders, the value is expected to be redistributed to validators, stakers, and users, reflecting the evolving nature of the MEV ecosystem.

Validators and stakers will gain significant profits from the intense competition among searchers, processors, and builders. As more processors, searchers, and builders enter the MEV space, individual profit rates will decrease. As the transparency of an intent-focused architecture on-chain continues to improve, and algorithms are combined with each other by all parties, gas fees may eventually erode the majority of the profits processors hope to gain. It is worth noting that the value does not disappear, but is redistributed to validators and stakers. This change is crucial to the long-term stability of the network. A well-compensated validator can enhance the network’s security budget, while higher staking rewards incentivize further staking, improving the overall security of the network.

In addition, as the system becomes more efficient and competitive, users (the initiators of transactions) will also benefit. The profits of processors and the reduction in gas fees allow users to execute their intentions at lower costs. Furthermore, the intensified competition among processors to provide the best execution path brings users better prices and faster transactions.

Conclusion

The paradigm shift towards intent-based systems is not just a technological advancement, but also a change in value preference. Project teams should focus their development efforts on realizing user intentions rather than complex operations. An intent-focused system provides a pathway for constructing a composable blockchain architecture that emphasizes user needs, efficiency, and transparency. Moreover, an enhanced user experience can accelerate the adoption of cryptocurrency applications, making complex blockchain technologies more aligned with users’ daily habits. Research on intent allows us to glimpse the future: the consistent alignment of interests among users, MEV searchers, processors, and blockchain builders simplifies the interaction processes of blockchain and drives the development of the entire crypto ecosystem. By prioritizing the realization of user intentions, developers are paving the way for a fairer and user-centric blockchain architecture where the flow of value is linked to the implementation of human intentions. The rise of intent-focused design marks the transformative moment of blockchain and the beginning of a new era, transforming the complex technological maze into a user-centered frontier.

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