Many crypto market participants would agree that Intents have indeed become a trending topic in crypto recently.
But what exactly are intents? This is a little harder to answer.
In a nutshell, Intents allow users to sign a message declaring their ‘intent’ to make a transaction.
By learning of your intent to make a trade before actually signing the transaction, market makers can ideally provide a better price in a more efficient manner than if you simply signed the transaction yourself.
In today’s edition, we’re briefing you on a perps platform leveraging the power of Intents to power its trading…
Stay alert in the markets ⬇
Crypto Market Update:
- Top Gainer (24H) in the top 50 mcap: Uniswap $UNI increased in price by 20.1%.
- Top Loser (24H) in the top 50 mcap: $BNB is down -2.7%.
- The total crypto market cap has seen a increase by 4.9% to stand at $1.39T.
- BTC dominance in the market is currently at 52.5%.
- The median gas price on Ethereum over the past 24 hours has been 39 gwei.
Inflows
- $RLB and $BLUR are attracting significant Smart Money, with inflows of $146,920 and $93,255 respectively, despite $BLUR's ongoing drama about multisig staking and L2 readiness in relation to the Blast L2.
- Other notable inflows are seen in $GALA and $ATOR, with $GALA experiencing a downturn along with the market, and $ATOR attracting smart money at a lower price point.
Outflows
- $UNI and $PRIME are leading the outflows with $196,440 and $191,118 respectively, with $PRIME showing a sideways movement and just below an $800M market cap.
- Other cryptocurrencies like $PEPE and $ARB are also experiencing significant outflows, despite some showing price upticks.
Background on IntentX & The Problem it Solves
IntentX is an intent-based derivatives exchange built on Base.
Existing decentralized perpetual exchanges have limitations compared to centralized exchanges:
Open interest is significantly lower on decentralized exchanges.
Spreads are wider and more volatile.
Overall trading experience is less favorable than on centralized exchanges.
IntentX is working on a solution for bringing liquidity to decentralized exchanges on-chain.
Both virtual AMM and centralized order book models suffer from scalability issues.
Liquidity is limited by the total loss to the liquidity pool or over-collateralization requirements. Incentivizing liquidity becomes challenging when traders are successful.
Limit order books provide better speed than virtual AMMs but face front-running concerns.
Centralized order book models require centralizing forces to address front-running issues.
Local liquidity remains a dependency for both models.
Latency may also be higher compared to centralized exchanges.
No perfect onchain model for deep liquidity exists currently.
Ongoing iterations aim to address liquidity depth and leverage challenges but LPs cannot proactively manage or hedge their risk.
Open interest is capped based on the LP's capacity.
Volatility can lead to high demand for open interest, which may not be available in a single venue.
Multichain DEXs are challenging due to fragmented liquidity.
In addition to these headwinds, regulatory challenges make it difficult to bridge between centralized exchange systems and DEXs.
Trade-offs in infrastructure, validators, collateral requirements, and cash-based systems exist between centralized exchanges and DEXs.
Centralized exchanges offer different benefits compared to DEXs but lack some advantages like security and programmatic assurances.
The goal of IntentX is to achieve a CEX-like experience on-chain, combining security and programmatic assurances of Ethereum with the liquidity and speed of centralized exchanges.
Designing a new system requires addressing questions about product features and user needs.
Considerations in Designing IntentX
Existing intent-based systems like Paraswap or 1inch allow traders to request quotes from professional market makers off-chain.
Just-in-Time (JIT) liquidity helps market makers avoid holding idle liquidity on LPs.
Market makers face holding costs for assets, including spot assets, which affect their ability to provide liquidity.
IntentX aims to incentivize market makers based on their ability to proactively hedge on-chain positions off-chain.
Delta neutrality and appreciable yield are key incentives for market makers.
Incentivizing Market Makers
Squigz, contributor at IntentX, says that current solutions incentivize liquidity through token emissions.
IntentX aims to incentivize market makers based on their ability to proactively hedge on-chain positions offchain.
Intent-Based Trading System
In an intent-based trading system, traders put trades, such as a minimum desired price for $ETH.
Trades are entered into an open system where other participants can see the intent and bid on or fulfill the trade.
Offchain market makers receive quotes from traders who want specific perpetual trades with leverage and collateral.
Market makers solve these intents by providing liquidity to traders.
The execution process in this trading system is different from traditional systems.
Offchain market makers continuously stream quotes to the front end, allowing traders to have immediate access to quotes when placing their trades.
This speeds up the process and ensures delta neutrality for market makers.
Market makers can start hedging at off-chain venues during the lag phase before on-chain trade execution, ensuring delta neutrality from the start.
Delay in Order Execution
Order execution in crypto or DeFi transactions takes a few seconds, causing delays.
Live quotes on centralized exchanges may have already moved by the time on-chain orders are executed.
Stale quotes on-chain can result in significant price differences.
For this reason, institutional traders may often opt to use a centralized exchange for their trading needs.
Executing off-chain orders prior to on-chain orders helps maintain delta neutrality from the start.
Market makers can capture profits by consistently filling stale quotes.
Infrastructure providers have reported over 100% annualized returns in pure profit using this system.
Fees and Fee Reduction
The IntentX trading system charges a four-basis point entry/exit fee.
Market makers benefit from fresh quotes while filling stale ones, potentially making their business highly profitable.
In the open Beta phase, there are zero funding rates.
Market makers are always on the other side of a trade, either paying or being paid by traders.
The goal for the team is to have very low funding rates, which can be achieved by having more market makers participating.
If market makers charge high spreads, they won't capture volume and their business won't be profitable.
Institutional market makers have zero fees on some centralized exchanges, allowing them to offer extremely low spreads.
Trading Experience on IntentX
Squigz says that the platform offers a similar trading experience to other centralized exchanges.
Users can choose from over 180 different pairs available for trading.
Pairs are updated almost instantaneously when listed on centralized exchanges used by solvers.
Exchanges like IntentX, Hyperliquid and Aevo are quick to list trending tokens to trade
There is also a share trade option, encouraging successful traders to share results with their social circles.
Users can view charts, set favorites, and place orders (market or limit). Account health and previous orders can be monitored in the account management tab.
A position is opened by selecting a pair (e.g., Solana) and specifying details like leverage and order type (e.g., long with 15x leverage).
Pending status indicates a lag period where the solver opens the position.
Account health, P&L, and previous orders can be monitored in the account management tab.
The platform plans to add more analytics to help traders maximize their win percentage.
IntentX Trading UI
Preventing Misuse of Funds
Squigz says that market makers deposit collateral for both sides of a trade into an on-chain perpetuals contract.
If market makers don't manage their positions properly, they can get liquidated.
In the worst-case scenario, traders would receive the market maker's collateral plus their own collateral (CVA) if liquidation occurs.
Security Guarantees and Withdrawal Period
Squigz says that during the pending phase, where hedging occurs off-chain, security guarantees are provided by the blockchain.
There is a 12-hour withdrawal period for $USDC due to infrastructure setup as its own layer-3.
The withdrawal period helps prevent reorg attacks but efforts are being made to reduce it and integrate bridging solutions.
Market makers bond $USDC in the contract.
If the market maker fails to fulfill their part of the contract, they will get liquidated.
If a trade gets closed due to the market maker not fulfilling their part of the contract, all funds go to the trader.
Collateral Assurance and Future Products
Squigz says that traders can trust that market makers won't run off with collateral.
He adds that funding rates are planned for the future.
The platform aims to offer various derivatives based on what market makers provide collateral for.
Expansion into Other Products
Currently, only perpetual contracts are available.
Future options include offering futures and fixed-duration options in addition to perpetual contracts.
The platform can offer any derivative that market makers provide collateral for.
Internal Market Maker and Product Development
The team plans to include creating an internal market maker where users can deposit $USDC.
Opportunities exist for product development, including treasury management services for DAOs.
Beta Launch & Future Plans
The beta version of the platform is now live.
Traders can use referral codes to receive a 15% bonus on their trading volume.
A retroactive airdrop will be given to traders based on their trading volume during the beta phase.
Ongoing audits are being conducted on staking contracts.
The full launch of IntentX with TGE is planned for late Q4 or early Q1.
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