Introduction
Intent-based systems are a relatively new design space where users specify their desired outcomes, and specialized actors work to fulfill these intents. While some criticize intents as being just limit orders or cross-chain swaps, this model unlocks limitless possibilities. In the future, users could express complex desires as intents with guarantees of best execution and pricing. Although we are far from a fully intent-centric paradigm and the end state is unclear, this paper aims to explore how value will flow through the different layers of the intent-centric stack in the short, medium, and long term.
Intent-Centric Stack
The above diagram illustrates our conception of the different layers of the intent-centric stack at a high level:
User Layer: this is the person expressing their intent. Today this is mostly users interacting with frontend interfaces, but in the future, we expect to see AI agents and bots expressing intents. Intents can be expressed through a frontend UI, chatbot interface, APIs, and potentially more yet-to-be-seen interfaces.
Application Layer: captures the intent, and translates it into something that can be solved or executed. This layer consists of dApps, protocols, and wallets.
Solver Layer: consists of specialized actors known as “solvers”, who compete to fulfill user intents. This typically consists of finding the optimal transaction route and either executing or passing along to a dedicated executor.
Intent Settlement Layer: where executed intents are settled. These can be specialized settlement layers like Anoma, or the blockchain the user is interacting with.
While this is how we conceptualize these layers, different approaches are being developed that may not fit within this framework. The biggest challenge facing the intents paradigm is setting standards for how intents are interpreted and executed. A user likely needs to express an intent in a Domain Structured Language (DSL) that can be understood by a VM before it can be executed. We need a common standard for expressing intents, as each protocol will decode and parse user intents differently. With a unified standard, differing protocols can connect to a wider solver network, solvers will benefit from lower entry barriers and costs, and users should get a seamless UX. Additionally, it’s unclear which layer should be responsible for this translation. For some applications, it might make sense for this to happen at the app layer, while for others the solver layer will be better equipped.
User and Application Layer Value Accrual
Our thesis is that the most value will accrue to this layer in the long run. We can combine the User Layer and Application Layer into one, as both benefit in similar ways. In a mature intent-centric landscape with robust solver networks and efficient settlements, we believe most of the value will flow to end users and the applications or protocols they use. Apps and users benefit in the following ways:
Better Execution: Users typically gravitate towards platforms that offer faster transaction times, lower slippage, and better prices.
Enhanced User Experience: A smooth and reliable experience provided by a strong solver network can lead to higher user satisfaction and retention.
First-Mover Advantage: Early adopters of advanced solver networks can capture significant market share before competitors catch up.
dApps that integrate with a highly performant network of solvers via something like Across can differentiate themselves from competitors. A protocol that can more efficiently fulfill user intents is likely to attract and retain more users, thereby increasing usage and fees back to the protocol.
Since the dApps are generating all of the order flow, it is natural that apps and their users are the main beneficiaries of cheaper and faster execution resulting from efficient solver networks. DApps with a vibrant user ecosystem will naturally attract solvers. Eventually, we will likely see solvers paying these dApps for their order flow, similar to how market makers in TradFi pay for order flow.
Solver Layer Value Accrual
Solvers can capture value in the short to medium term due to natural inefficiencies and low competition. This mirrors the early Maximal Extractable Value (MEV) landscape, where early actors initially captured value, but eventually led to the centralization of block builders and searchers. A similar trend is expected for solvers.
While we expect the value solvers can capture to diminish over time, it may be abundant in the short term. For example, solvers on intent-based bridges assume finality risk for cross-chain transactions. Unlike native bridges, which can’t relay messages faster than the finality period without risk, solvers capture value by charging users for faster fill times in exchange for assuming finality risk. The solver also captures value by internalizing any MEV generated by the order as price-improvement.
In the medium term, innovations could make solvers’ jobs easier. ZK validity proofs could reduce the finality risks associated with challenge periods on Optimistic rollups, reducing risk for the solver.
Long-term, solver value will likely be capped as oligopolies naturally form in intent markets. The barrier to entry to becoming a solver is too high. Solvers need costly infrastructure and must take on massive amounts of inventory risk which can be hard to hedge. The UniswapX filler market is currently concentrated amongst the large market makers in the space:
Additionally, if these entities wish to fulfill intents containing long tail assets that they don’t hold inventory of, they will all rush to purchase this asset at the same time and price out smaller players. More on the oligopolistic tendencies of solver markets here. For any hope of value to accrue to the solver layer long-term, the solver experience and barrier to entry to become a solver need a massive overhaul.
Settlement Layer Value Accrual
In the short term, value accrual at the settlement layer is primarily driven by its indispensable role in ensuring the finality of transactions across chains. The defensibility of this layer is inherently high due to the technical and operational complexities involved in facilitating secure and efficient cross-chain settlements. Protocols that can offer fast and reliable settlement mechanisms - especially those capable of integrating with multiple chains and solvers - will capture significant value. Solvers should have the ability to connect with multiple intent settlement networks. If several networks are competing to settle intents they will improve the experience in the form of faster execution and cheaper fees, leading to increased usage. As more solvers choose a particular network for settlement, that network becomes more valuable due to increased volume.
Intent settlements can also be batched to amortize costs, with one transaction fee for the entire batch. This is what Across does - solvers compete to quickly fill intents and instead of settling after every fill, settlement is done in large batches. This results in cheap and fast cross-chain transfers, which is a value that ultimately flows to the user and application layer:
In the long term, the Settlement Layer’s value proposition evolves alongside advancements in blockchain interoperability and scalability solutions. However, the increasing convergence towards standardization in cross-chain communication protocols may lead to heightened competition among settlement solutions. Ultimately, the Settlement Layer’s ability to accrue and sustain value hinges on its capacity to evolve and prioritize security, efficiency, and adaptability.
Conclusion
Value accrues at all layers of the stack, but its distribution depends on the specific mechanics and economic design of each layer. The user and application layers capture value through improved service quality and increasing order flow, and the solver and settlement layers capture value through fees and provide a foundational service that enables the entire system to function effectively.
In our view, the user and application layers will be the long-term winners. As applications with order flow attract solvers, competition at the solver and settlement layers will lead to better prices and execution speeds for the end user. Applications leveraging this infrastructure will attract more users, generating even more order flow and setting the flywheel in motion.
The application and user layers are the biggest beneficiaries because they capitalize on improved service quality and competitive pricing driven by the solver and settlement layers. In traditional finance, market makers pay for order flow, and we will likely see solvers adopting a similar approach. This allows applications to monetize their order flow by selling it to solver and settlement networks, further enhancing their revenue streams and value proposition.
Disclosures:
For informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. The views expressed herein are those of the author as of the time of writing and may not necessarily represent the views of CMT Digital and its affiliates. Certain information contained in the piece has been obtained from third-party sources. While taken from sources believed to be reliable, CMT Digital has not independently verified such information.
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