Intent-based Swap and Its Impact on the DEX Market

This article will explore Intent-Based Swap and its potential impact on the decentralized exchange (DEX) market. We will first review the mainstream trading models of current DEXs, then introduce the concept of intent and the principles of intent-based trading, and finally discuss the advantages, challenges, and application prospects of this new trading model.

Current Mainstream DEX Trading Models

Currently, DEX mainly adopts two trading modes:

1. Automated Market Maker (AMM) model:

   • Adopt a simple x*y=k design
   • Advantages: Users can trade at any time.
   • Disadvantages: Low capital utilization, liquidity providers may face capital losses.
   • There are issues such as transaction sniping and price fluctuations leading to transaction failures.
   • Representative products: a well-known DEX, a certain curve protocol, and a certain balancer protocol

2. Request for Quotation (RFQ) mode:

   • Off-chain matching, on-chain settlement
   • Advantages: User-friendly experience, no slippage issues, not affected by MEV attacks.
   • Disadvantages: High requirements for market makers, need to balance multiple factors

AMM and RFQ models each have their advantages and disadvantages, complementing each other in practical applications.

Concept of Intent and its Application in Trading

Traditionally, users need to provide complete transaction information when interacting with DApps. The Intent model focuses only on the transaction intent, leaving the specific execution steps to be handled by professional Solvers.

In Intent-based Swap:

• Users only need to clarify their trading objectives (such as price, timeliness, counterparties, or transaction volume)
• The Solver is responsible for filling in other transaction details and putting the order on-chain.
• Users define "what they want", and the Solver decides "how to execute"

Advantages of Intent-Based Swap

1. User zero gas fee: Users only need to sign, no on-chain fees are required.
2. Improve Efficiency: Professional Solver handles the on-chain process, avoiding users from setting complex parameters.
3. Powerful Composability: Solver can flexibly combine various liquidity sources and price feeds.

Areas for Improvement

1. Canceling an order requires on-chain operation.
2. Direct sale of ETH is not supported.
3. Difficulties in order tracking
4. It is difficult to accurately predict the details of trade execution.

Application Cases and Future Exploration

RFQ and limit orders can be seen as simple applications of Intent-based Swaps. There are several related products in the market, such as the fusion model of a well-known DEX aggregator, a certain bull trading platform, and the order placement function of a certain NFT trading platform.

In addition to traditional trading models, Intent-based Swap has also opened up new possibilities:

• As a proxy authorization method
• Implement advanced strategies such as grid trading, large batch buying, time-weighted average price (TWAP) trading, etc.

With the continuous development of technology, intent-based trading models are expected to bring more innovation and opportunities to the DEX market.