Some time ago, the cross-chain interoperability protocol Connext updated its brand to Everclear. The official announcement tweet also attracted a lot of attention and received 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 intent structure.
However, when it comes to "intention", most people are still confused. Since Paradigm called "Intent-Centric Application" 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 users are thinking, but how to achieve it specifically? What is the difference with the current technology stack? It's hard to say why.
However, after further understanding Everclear, we may have a new understanding of the "intention market". Behind the confusion, there seems to be an incremental opportunity as huge as MEV.
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, DeFi protocols have gradually evolved into two technical development directions in their development paths. 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 in the liquidity pool with "x*y=k", Cowswap users sign on-chain specific transaction intentions (such as transaction parameters such as price, subject matter and quantity), and then the rest of the work is handed over to the protocol's "solver" to complete it through on-chain + off-chain methods.
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 methods allow the protocol to aggregate the on-chain LP pool, counterparties, market makers' own funds, and liquidity from CEX, with faster transactions and less friction. 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).
CoWSwap transaction volume, source: Dune Analytics
After the Uniswap team launched V4, especially UniswapX, the DeFi field and even the entire crypto market gradually leaned towards Cowswap in terms of the choice of technical direction. More and more projects began to use this on-chain and off-chain technical model, and institutions came up with a more noble story for them, "Intent Centric".
In short, 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 intention structure is like buying vegetables on Meituan. You no longer need to go to the fresh supermarket in person, but choose the goods on the platform and let the merchants and deliverymen do the rest for you. Since the trend came before the narrative, many protocols have not been able to unify the naming of solvers, causing many people to not understand what "core technology" the intent narrative actually has.
After becoming a new crypto narrative, the use of the intent structure is no longer limited to the DeFi field. As the second largest use scenario in the crypto market besides trading, Connext also took the lead in exploring this new design structure and made the first intent cross-chain bridge. Different from the past cross-chain bridges of fund pools 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 cross-chain intentions, 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 Solver. Compared with the intentions used in the DeFi field, the cross-chain intention protocol is more like Didi Taxi in the blockchain world. You don’t need to switch buses yourself, but directly tell the platform where you want to go, and then 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 rain. As it stands now, cross-chain intentions seem to have encountered the same problem.
In a research report published last month, the LI.FI team mentioned the centralization problem of current intent-based cross-chain bridges. The report uses Across, DLN and other current mainstream intent-based 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 team-operated Solver (called Relayer by the Across team) accounts for more than 92% of the capital flow.
In addition, the report also found that protocol Solvers have almost no competition when obtaining orders, and most order bids involve only one bidder. After many twists and turns, the development of the cross-chain protocol seems to have returned to the problem it originally wanted to solve. Compared with the early cross-chain bridge, today's intention cross-chain protocol has once again shown obvious centralization, and there are huge risks in terms of network activity, review resistance, and order flow execution effect.
Top Solver traffic share breakdown chart, source: LI.FI
Where is 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 the funds repayment from the assets pledged by the user on the source chain in the protocol with the on-chain proof after completing the task.
In the above process, Solver's own inter-chain asset allocation is reversed with that of the user, because the funds provided to the user on the target chain need to be repaid on the source chain. Solver's role 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, 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 Solver, but for 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. Arjun, the founder of Connext, also mentioned that among the current cross-chain solvers, only large market makers like 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 link, such as Across adopting a private order pool, while DLN adopts an inquiry mechanism. Although UniswapX and Connext have proposed standards such as ERC-7683 and ERC-7281 at the level of cross-chain token interoperability, they are unlikely to be implemented in the absence of Solver standards.
The inability to achieve unification at the standard level has exacerbated the isolation of Solver, who can often only serve users of one protocol and find it difficult to achieve economies of scale. For cross-chain protocols, Solver's liquidity fragmentation also hinders its ability to flexibly access various new chains in a modular world. Everyone found that the business of Didi on this chain is not as easy to do as imagined.
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 the rebalancing of liquidity. In today's currency circle, the answer to this problem seems obvious.
For most retail investors and institutional participants in the crypto market, the best, fastest and safest cross-chain center today is undoubtedly the mainstream CEX platform such as Binance. They have the deepest liquidity, the most connected chain ecology, and provide 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 of 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 and gave an answer.
In the latest blog post introducing Evercleararticle, founder Arjun mentioned an interesting discovery: from the perspective of 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 each chain. 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 operation of cross-chain asset configuration separately.
This concept has been 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 of funds by various banks.
Based on this basic concept, the Connext team designed an on-chain fund settlement layer (Clearing Layer) - Everclear. Unlike 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 to minimize fund wear and solver operation thresholds.
Sketch of Everclear net settlement mechanism, source: Everclear
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 calculations to reduce their own operation and maintenance costs, and greatly improve the fund flow efficiency of the entire on-chain ecosystem.
Everclear has three main message types: intent messages (Intent), order messages (Fill), and settlement messages (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). Solver uses this message to obtain fund repayment in its designated settlement domain.
The system also consists of two parts: on-chain and off-chain. The on-chain part is mainly the contracts deployed on Rollup: users and solvers establish accounts on Everclear through Spoke contracts 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 periodically process the order queue based on 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 broadcast in the network. These routers can be integrated into intent applications that do not have their own Solvers.
When a user creates a NewIntent cross-chain intent, the protocol will deposit their funds in the Spoke contract through the Deposit contract. The balance of funds 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 have the right to claim the corresponding liquidity in the Spoke contract and can complete the fund recovery at any time through the ProcessSettlementQueue contract. Solvers can settle on any settlement domain they configure, so they are not limited to the settlement domain involved in a single transaction to complete liquidity rebalancing.
Everclear operating mechanism diagram, source: Everclear
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 different intent protocols, Alice prefers to settle in Arbitrum, while Bob prefers to settle in Optimism.
2. Now, Alice is ready to complete an intent transaction worth 10 ETH from Optimism to Arbitrum, and Bob is ready to complete a transaction worth 20 ETH from Arbitrum to Optimism. Both are ready to deposit their ETH into Everclear to complete the transaction.
3. Everclear immediately uses 50% of Bob's 20 ETH deposit in 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. At this time, the system begins to auction Bob's certificate, 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 voucher 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 gives 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 want to settle to. Everclear aggregates settlement for solvers based on various chain ecosystems and CEX platforms. 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 the demand of end users to "not care about the underlying blockchain, but only care about the final result" becomes stronger and stronger, the concept of "chain abstraction" has received more and more attention. Through net settlement transactions, Everclear not only greatly reduces the settlement cost and complexity, but also provides new chains with permissionless liquidity access through supported programmable settlement, making itself stand at the center of the development of chain abstraction narrative.
The modular development direction 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 tickets to attract liquidity. However, due to the bottlenecks of security and cost, the speed of integrating new chains in cross-chain bridges can never catch up with the speed of new chain birth. 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 industry Matthew effect 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 capital flow 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 head public chain have been improved. For capital, the market demand for Solver 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 well. 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", while users pay a small fee to the protocol in exchange for convenience.
The emergence of Everclear has greatly solved the problem of Solver's high operating threshold, bringing 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 letting your money run Didi to earn extra money is not a bad thing.
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