DeFi Trading Gets a New Layer: Intent-Based Protocols Gain Momentum

Traditional DeFi trading involves users interacting directly with Automated Market Makers (AMMs), which can leave them vulnerable to sandwich attacks by MEV bots. These bots monitor pending transactions and execute trades that extract value from the spread, resulting in significant losses for retail users.

In response to this issue, intent-based protocols have emerged as an alternative solution. Instead of broadcasting a transaction with every execution detail, users sign an intent, a declarative statement of their desired result. A network of solvers then competes off-chain to fill that intent at the best possible price without exposing the order to the public mempool.

CoW Protocol and UniswapX are two prominent examples of intent-based protocols. CoW Protocol uses batch auctions, where multiple intents are collected over a window and settled in a single transaction. This approach allows for direct matching between users, reducing fees and spreads. UniswapX, on the other hand, introduces Dutch order auctions, which incentivize solvers to fill orders quickly while protecting users from bad prices.

These intent-based protocols offer several benefits over traditional AMM trading, including reduced MEV vulnerability, suboptimal routing, and gas inefficiency. Solvers operate at their own risk, fronting capital and paying gas costs in pursuit of profit. Competition between solvers compresses their margins, pushing more value back to users.