A New Standard for Intent Collaboration Between Ethereum Chains: Can ERC-7683 Be the Key to Solving Fragmentation Issues?

1. The Roots and Challenges of Ethereum Fragmentation Issues

With the vigorous development of Layer 2 solutions and various DeFi protocols, the Ethereum ecosystem is facing an increasingly serious liquidity fragmentation problem. This issue mainly manifests as the asset liquidity being split between L1 and numerous L2s, making it difficult to form a unified and efficient liquidity pool. Various Layer 2 platforms, in order to compete for the Total Value Locked (TVL), have led to the assets and transactions being scattered across multiple decentralized platforms and protocols. However, there is a lack of effective connections and interoperability between these platforms, and the liquidity on each chain can only circulate within its independent ecosystem, further exacerbating the overall fragmentation cost problem of Ethereum.

In 2024, it is expected that over 100 new Ethereum-related chains will go live. This situation is like entering an international mall where a dazzling array of products needs to be settled in different currencies, greatly increasing the complexity and cost of transactions. To address this challenge, the Ethereum Foundation launched the Open Intents Framework on February 20, aimed at providing a "single-chain-like" seamless trading experience for the Ethereum ecosystem. This framework quickly gained support from over 50 protocols, demonstrating the industry's urgent need to solve the fragmentation issue.

2. ERC-7683: A Unified Standard for Cross-Chain Intent

ERC-7683, as a universal standard for cross-chain intentions on Ethereum, has been developed collaboratively by multiple well-known projects, aiming to provide a unified and standardized framework for expressing and executing cross-chain operations for Ethereum and other blockchains. This standard particularly focuses on the interoperability between multiple L2 solutions and sidechains.

The core components of ERC-7683 include:

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

2. ISettlementContract interface: standardizes the processing method of the settlement process, allowing flexible execution of transaction settlements across different chains.

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

4. Fill in the deadline: Use a timestamp to mark the expiration time of cross-chain intentions to avoid long periods of waiting for invalid transactions.

5. Order data types and order data: Use EIP-712 type hash to specify the structure and format of intent data, including the core parameters of cross-chain transactions.

The main advantage of ERC-7683 lies in achieving seamless cross-chain interactions and enhanced governance capabilities. It simplifies the complexity of users executing operations across different blockchains by standardizing the expression of cross-chain intentions, while also providing decentralized autonomous organizations (DAOs) with more efficient cross-chain governance tools.

3. Intent and DeFAI: Pursuing a More Efficient DeFi Ecosystem

Intent and DeFAI, as emerging concepts in the DeFi space, aim to address two core issues: scalability and liquidity. Intent integrates liquidity through the UNI and ERC-7683 standards, while DeFAI leverages AI technology to optimize trading strategies and risk management.

The core goal of Intent is to simplify the user interaction process through an "intention-driven trading" mechanism, allowing users to set trading intentions and strategies, which are automatically executed by the system. This not only enhances the usability of DeFi but also optimizes the efficiency of strategy execution. In addition, Intent is committed to addressing liquidity bottlenecks in DeFi through cross-chain technology, breaking down barriers between different chains.

DeFAI, as an AI-based decentralized finance protocol, 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 providing users with more accurate decision support.

Although Intent and DeFAI focus on enhancing the DeFi user experience, optimizing trade execution, and improving protocol stability, they collectively represent the trend in the DeFi space towards more efficient and intelligent development. However, addressing the issue of liquidity fragmentation relies not only on increasing the level of abstraction but also on integrating the ecosystem through the optimization of existing protocols.

4. Uniswap: The Driving Force Behind the Development of ERC-7683

Uniswap plays a key role in promoting the development of ERC-7683, mainly based on the following aspects:

1. Liquidity advantages of Uniswap V4: The V4 version significantly improves capital efficiency by introducing a more flexible liquidity pool management mechanism. The use of a single PoolManager contract reduces deployment costs, while the Hooks feature allows developers to customize AMM pools, providing better market adaptability for the ERC-7683 protocol.

2. The Potential of Uniswap X: It is expected to further enhance cross-chain interoperability and may be deeply integrated with ERC-7683, providing a more efficient channel for cross-chain asset exchange.

3. Dependencies of Cross-Chain Protocol Implementation: The efficient execution and security of ERC-7683 largely depend on the liquidity pools, automated market making, and cross-chain trading capabilities provided by Uniswap.

Uniswap not only occupies an important position in the decentralized exchange field, but its technological innovation and market influence also make it a core force in promoting the development of the ERC-7683 standard. With the support of Uniswap, ERC-7683 is expected to achieve seamless cross-chain transactions on a broader scale, providing strong support for solving the liquidity fragmentation problem in the Ethereum ecosystem.

V. The Practical Significance of Intent

The concept of "intention" is abstract, but it actually represents a clear trading objective or driving force. It originates from an article published by Paradigm in June 2023, aimed at addressing the long-standing issues of fragmented liquidity and solver path optimization in the DeFi space. The introduction of ERC-7683 provides new possibilities for solving these challenges.

The intention and ultimate goal of ERC-7683 is to inject new vitality into Uniswap, with hopes of triggering a new wave of DeFi enthusiasm. This is not just about continuing L2 scaling, but rather achieving more efficient trading, creating richer functionalities, and enhancing cross-chain interoperability through Uniswap. If Uniswap V4 or Uniswap X can introduce new smart contract logic or trading models at the protocol level through ERC-7683, Uniswap is expected to further improve cross-chain liquidity, reduce transaction costs, and increase the number of trading pairs and liquidity pools based on the existing AMM model.

These improvements will make Uniswap no longer just a liquidity-dispersed AMM, but rather a core hub in the cross-chain DeFi ecosystem. By achieving more efficient trading, richer functionalities, and stronger cross-chain interoperability, Uniswap is expected to lead DeFi into a new stage of development, providing a brand new solution to address the liquidity fragmentation issue in the Ethereum ecosystem.