Some time ago, the cross-chain interoperability protocol Connext updated its brand to Everclear, and the official announcement tweet also attracted a lot of attention, gaining millions of reads on X. According to the team's update document, Everclear is the first "Global Clearing Layer" in the crypto world, which solves the problem of liquidity fragmentation under the modular trend based on the intention structure.
However, when it comes to "intention", most people are still confused. Since Paradigm called "Intent-Centric Applications" the top crypto narrative at the end of last year, this concept seems to have "disappeared". Everyone knows that the protocol is to "better understand" what the user is thinking, but how to achieve it specifically? How is it different from the current technology stack? It's hard to say why.
However, after further understanding Everclear, we may have a new understanding of the "intent market". Behind the confusion, there seems to be an incremental opportunity as huge as MEV.
Where does intentional narrative come from?
In fact, intention is not a new narrative. This concept was first applied to the DeFi field. Due to different views on AMM and order book matching methods, the DeFi protocol has gradually evolved into two technical development directions in its development path. One is the AMM on-chain LP trading pair represented by Uniswap, and the other is the on-chain + off-chain order book settlement represented by Cowswap.
Unlike the former, which calculates the final transaction price as "x*y=k" in the liquidity pool, Cowswap users sign their specific transaction intentions (such as price, subject matter, quantity and other transaction parameters) on the chain, and then the rest of the work is left to the protocol's "solver" to complete through an on-chain + off-chain approach.
Although the "on-chain + off-chain" solution does not sound very "Crypto Native", it does bring a significant improvement in user experience. The order book and off-chain batch processing trading method allows the protocol to aggregate the on-chain LP pool, counterparties, market makers' own funds and liquidity from CEX, with faster transactions and less wear and tear. Users do not even need to prepare additional Gas tokens for transactions, and the experience is extremely smooth (the detailed principle can be read in the Cowswap document ).
After the Uniswap team launched V4, especially UniswapX, the DeFi field and even the entire crypto market gradually leaned towards Cowswap in terms of technology choice. More and more projects began to use this on-chain and off-chain technology model, and institutions came up with a more noble story for them: "Intent Centric".
Simply put, in order to make the protocol understand what you want better, in addition to innovating in mathematical formulas, you can also make improvements in structure. The intent structure is like buying vegetables on Meituan. You no longer need to go to the fresh supermarket in person. Instead, you can choose the products on the platform and let the merchants and deliverymen do the rest for you. And because the trend comes first and the narrative comes later, many protocols have not been unified in the naming of the solver, causing many people to not understand what the "core technology" of the intent narrative is.
Didi’s business on the blockchain is not easy to do
After becoming a new narrative in crypto, the use of intent structures is no longer limited to the DeFi field. As the second largest use case in the crypto market besides trading, Connext has also taken the lead in exploring this new design structure and made the first intent cross-chain bridge. Different from the past fund pool cross-chain bridges such as Multichain or the current cross-chain interoperability protocols such as Wormhole and Layer Zero, intent cross-chain protocols such as Connext and Across also introduce the role of solver. Users sign the cross-chain intent, and then the solver completes the rest of the work for the user.
Under the intent structure, users transfer the complexity of inter-chain interactions, such as switching chains, preparing and paying native Gas, and asset security, to third-party service providers, namely Solvers. Compared with the intent used in the DeFi field, the cross-chain intent protocol is more like Didi Taxi in the blockchain world. You don’t need to change buses yourself, but directly tell the platform where you want to go, and then the Solver will take you directly to your destination.
This does sound like a good idea. Users no longer need to worry about finding a suitable cross-chain bridge. It also conforms to the concept of "chain abstraction" proposed by institutions at the beginning of the year, that is, users should never care about or even know which chain they are on. However, the crypto industry has always been keen on creating new words, but when it comes to specific scenarios, it is often thunder and thunder but little rain. Now it seems that the cross-chain intention has encountered the same problem.
In aresearch report published last month, the LI.FI team mentioned the centralization problem of current cross-chain bridges. The report uses Across, DLN and other current mainstream cross-chain bridges as research cases, and finds that in these protocols, a very small number of solvers win almost all order flows, and these few solvers are usually operated by the team behind the protocol. In the case of Across, the solver operated by the team (called Relayer by the Across team) accounts for more than 92% of the capital flow.
The report also found that the protocol solver had almost no competition when obtaining orders, and most order bidding involved only one bidder. After many twists and turns, the development of cross-chain protocols seems to have returned to the problems they originally wanted to solve. Compared with the early cross-chain bridges, today's intended cross-chain protocols have once again shown obvious centralization, and there are huge risks in terms of network activity, review resistance, and order flow execution.
What's the problem?
Let’s first understand the general process of the operation of the intention cross-chain protocol: first, the user expresses his cross-chain intention on the chain, and then the Solver network of the protocol will bid for the intention. The winning Solver will transfer the corresponding amount to the user on the target chain through various aggregated liquidity and obtain financial repayment from the assets pledged by the user on the source chain in the protocol based on the on-chain proof after completing the task.
In the above process, the solver's own inter-chain asset allocation is reversed from that of the user, because the funds provided to the user on the target chain need to be repaid on the source chain. The role of the solver is different from that of the user, and it often needs to continuously transfer its own funds to different users on the target chain. Therefore, in this case, the solver often needs to face the problem of balancing liquidity.
From the user's perspective, a cross-chain transaction ends after paying the service fee to the Solver, but for the Solver, it also needs to replenish the asset allocation on the target chain through CEX or OTC market makers. If you want to make a profit in the transaction, you must ensure that these additional costs are lower than the service fees paid by the user. But balancing liquidity is a difficult and expensive task. It is like a game where the strong get stronger. Connext founder Arjun also mentioned that among the current cross-chain solvers, almost only large market makers such as Wintermute are profitable, and any other small individual running a solver is unprofitable.
To make matters worse, each intent protocol seems to be building its own cross-chain settlement mechanism, adopting different bidding methods in the order auction, such as Across using a private order pool and DLN using a price inquiry mechanism. Although UniswapX and Connext have proposed standards such as ERC-7683 and ERC-7281 for cross-chain token interoperability, they may be difficult to implement in the absence of a solver standard.
The inability to unify standards has exacerbated the isolation of solvers, who can often only serve users of one protocol and find it difficult to achieve economies of scale. For cross-chain protocols, the liquidity fragmentation of solvers also hinders their ability to flexibly access various new chains in the modular world. Everyone has discovered that the business of Didi on this chain is not as easy to do as imagined.
The multi-chain universe is still missing Alipay
In 2021, the Connext team ran a cross-chain protocol with Solver (now the intention structure) for the first time in its V0 and V1 versions. After the intention cross-chain structure became popular, the team found that most protocols encountered the problem they tried to solve three years ago, namely, liquidity rebalancing. In today's crypto, the answer to this question seems obvious.
For most retail and institutional participants in the crypto market, the best, fastest, and most secure cross-chain center today is undoubtedly the mainstream CEX platform such as Binance, which has the deepest liquidity, connects the most chain ecosystems, and provides the lowest internal wear and tear. To a certain extent, the off-chain background of CEX has become the settlement center of the crypto world.
But relying on CEX as the settlement layer for industry liquidity may not be the result we want most. Is it possible to solve this problem in a more crypto-native way? The Connext team spent three years to come up with an answer.
In the latest blog post introducing Everclear, founder Arjun mentioned an interesting discovery: looking at the inflow and outflow of funds between chains in the entire industry, about 80% of the liquidity can be calculated on a net basis every day, which means that for every $1 transferred into a chain, $0.8 will be transferred out.
For example, of the 1 ETH that comes to Arbitrum through the cross-chain bridge, only 0.2 ETH will stay here for a long time, and the remaining 0.8 ETH will continue to flow in the ecosystems of various chains. For a solver, if there is a system that can integrate the order books of all on-chain capital flows, he will have the opportunity to find opportunities to balance his own liquidity in this flowing 0.8 ETH, without having to repeat the asset cross-chain configuration operation separately.
This concept is already very popular in traditional finance and Internet finance. Visa and Alipay are such settlement systems. When merchants and users set up accounts in Alipay and transfer funds for daily use, a large number of transactions are transferred to the background of Alipay, and no longer involve the flow of funds between bank accounts. Alipay integrates all transactions within a period of time into a net flow of funds, and then coordinates the settlement funds of various banks.
Based on this basic concept, the Connext team designed an on-chain fund settlement layer (Clearing Layer) - Everclear. Different from the blockchain settlement layer we often discuss, the fund settlement layer is like Alipay, which integrates the net fund flow for funds circulating between chains, so as to minimize fund wear and tear and solver operation threshold.
Everclear is a Rollup built on the Arbitrum Orbit technology stack, using Gelato RaaS to provide off-chain data availability, and currently connected to other chains through Hyperlane. In the future, intention protocols such as Across and UniswapX, users who need to complete cross-chain asset transfers, and solvers who complete intention tasks can all establish accounts on Everclear, use Everclear's integrated computing to reduce their own operation and maintenance costs, and greatly improve the capital flow efficiency of the entire on-chain ecosystem.
Everclear has three main message types: intent message (Intent), order message (Fill), and settlement message (Settlement). Intent messages are generated by user signatures and sent to Everclear from the source chain at regular intervals; order messages are generated after the Solver completes the intent task and are also sent to Everclear, containing information about which Solver should be credited in the relevant settlement; when both the intent message and the order message arrive at Everclear, a settlement message is generated and sent from Everclear to the Solver's settlement domain (Settlement Domain), and the Solver obtains fund repayment in its designated settlement domain with the message.
Its system also consists of two parts: on-chain and off-chain. The on-chain part is mainly the contract deployed on Rollup: users and solvers use Spoke contracts to establish accounts on Everclear to hold their respective fund balances, while the Hub contract is responsible for processing intent and order messages and scheduling solver fund settlements. The two send the processing results of intent and order messages to the Hyperlane transport layer through SpokeGateway and HubGateway respectively. The Auctioneer contract is similar to the majority intent protocol, which is used to determine the choice of solver through an auction mechanism.
The off-chain part includes three components: Relayer, Cartographer and Router. The Relayer will regularly process the order queue according to the generation time and amount. The Cartographer is responsible for drawing a real-time status view of the cross-chain funds of the Everclear network based on the index layer data of each chain. The router (Everclear's Solver) is responsible for executing cross-chain transactions broadcasted in the network. These routers can be integrated into applications that do not have their own solvers.
When a user creates a NewIntent cross-chain intent, the protocol will store its funds in the Spoke contract through the Deposit contract. The fund balance in the Spoke contract will increase accordingly and can be used to settle other Solvers in this domain. Once the intent is satisfied and the message is added to the FillQueue contract, the Solver can claim the corresponding liquidity in the Spoke contract and can complete the fund recovery at any time through the ProcessSettlementQueue contract. Solver can settle on any settlement domain configured by itself, so it is not limited to the settlement domain involved in a single transaction to complete liquidity rebalancing.
Of course, after the network is launched, Everclear cannot immediately obtain sufficient liquidity to settle each Solver, so Everclear will use the Dutch auction in the early stage to deal with the liquidity gap in the network. Specifically, Everclear will issue a "voucher" for all pending settlements, and gradually reduce the price of the voucher when liquidity is insufficient to attract arbitrageurs to deposit liquidity. Arjun gave an example in the blog post:
1. Alice and Bob are solvers of two protocols with different intentions. Alice prefers to settle in Arbitrum, while Bob prefers to settle in Optimism.
2. Now, Alice is ready to complete an intended transaction from Optimism to Arbitrum worth 10 ETH, and Bob is ready to complete a transaction from Arbitrum to Optimism worth 20 ETH. Both of them are ready to deposit their ETH into Everclear to complete the transaction.
3. Everclear immediately uses 50% of Bob’s 20 ETH deposit on Arbitrum to settle Alice’s 10 ETH at zero cost, but the 10 ETH on Optimism is not enough to settle Bob’s 10 ETH debt.
4. The system then starts auctioning Bob's voucher, and its price drops from $1 to $0.99.
5. After noticing the price difference, arbitrageur Charlie deposits 9.99 ETH on Optimism and holds a settlement certificate for 10 ETH, while Everclear uses the 19.99 ETH on Optimism to settle with Bob.
After attracting sufficient liquidity, Everclear hopes to introduce programmable liquidity settlement in the future. Anyone can use various cross-chain token standards or cross-chain messages on Everclear to write their own settlement strategies to improve the overall capital efficiency of the network.
As a Rollup, Everclear is like a shared computer that aggregates cross-chain liquidity and provides the best settlement solution. This not only reduces the wear and tear of user funds and the threshold for solver operations, but also further separates intent routing and solver settlement, allowing more protocols and participants to access the overall cross-chain settlement process.
In the team's vision, Everclear plays the role of Visa in the multi-chain universe. Solvers, market makers, centralized exchanges, and intent protocols deposit funds into the protocol, select settlement strategies, and set the target chain they wish to settle to. Everclear aggregates settlement for solvers based on various chain ecosystems and CEX platforms, and based on Everclear, various intent protocols can better improve their solver performance levels, and even attract more traditional protocols to use Everclear to build their own intent structures.
As end users’ demands for “not caring about the underlying blockchain, but only caring about the final result” become stronger and stronger, the concept of “chain abstraction” has received more and more attention. Through net settlement transactions, Everclear not only significantly reduces settlement costs and complexity, but also provides new chains with a permissionless liquidity entry through supported programmable settlement, putting itself at the center of the development of the chain abstraction narrative.
New PoS Market
The development direction of modularization seems to be a foregone conclusion. According to statistics, there are more than 50 Rollups and 250 public chains in operation in the current crypto world, and this number will continue to grow. In the modular world, liquidity fragmentation is the biggest problem. New chains must rely on the integration of mainstream cross-chain bridges to get a ticket to attract liquidity. However, due to the bottlenecks of security and cost, the speed of integrating new chains can never catch up with the speed of the birth of new chains. The ever-widening scissors gap makes it a "low-probability event" for the new chain ecosystem to survive the infancy, while the market liquidity is always concentrated in the top 5% to 10% of the head ecosystem, and the Matthew effect in the industry continues to strengthen.
The intention structure hopes to bypass the technical challenges that traditional cross-chain bridges need to consider and solve the efficiency problem of inter-chain fund flows through market means. For users, this means that the perception of "chain" is further weakened. For the new chain ecosystem, this means that the conditions for competing with the leading public chains have been improved. For capital, the market demand for solvers means a potential growth industry.
Some time ago, the news that Cysic completed a new round of financing became a hot topic among many VC friends. The concept of "ZK hardware acceleration" undoubtedly brought back some PoW color to the Ethereum ecosystem that turned to PoS, and also reminded many investors of the era when mining machines were sold out. Compared with chip acceleration, running Solver is more like a new PoS market, where participants use their own funds to act as "on-chain Didi" to earn on-chain service fees. Compared with the MEV industry, the Solver industry is a win-win for users and participants. Users express their destination intentions, and then the protocol finds the best solution to help users "find drivers" and "plan routes", and users pay a small fee to the protocol in exchange for convenience.
The emergence of Everclear has greatly solved the problem of too high a threshold for Solver operations, and has brought the possibility of industrialization and scale to this "intention porter" market. In the case that crypto infrastructure generally has not found a business model, the Solver market seems to have become an industry that brings "Real Yield" to on-chain funds. For funds looking for reliable annualized returns and potential token incentives, running or acting as a Solver and making extra money with your own money is not a bad thing.
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