What is Intent-based Trading?

Intent-based trading refers to abstracting the user’s intention and integrating the underlying operational logic and processes into a single step, significantly simplifying complexity and making it more intuitive to use. For example, suppose a user wants to convert token A on the Base chain into token B on the Solana chain. In that case, the user typically needs to perform several steps: first converting token A (a native asset on the Base chain) into USDC, then using a cross-chain bridge to transfer USDC to Solana, and finally exchanging it for token B. This seemingly simple asset conversion requires interacting with at least three different protocols (Base’s DEX, the cross-chain bridge, and Solana’s DEX), as well as ensuring enough ETH and SOL are available to cover Gas Fees on both the Base and Solana chains. The process is cumbersome. However, in an intent-based scenario, users only need to input the token they wish to convert and the target chain, and they can achieve one-click conversion without having to engage in complicated operations across multiple protocols, greatly reducing entry barriers and optimizing the transaction experience.

Intent-based design brings several groundbreaking advantages:

• Optimized Path:
  Users only need to input their requirements, and intent-based DEXs will automatically find the optimized path for implementation. Users can even customize their requirements, such as requesting the DEX to find the fastest or cheapest path.

• Enhanced Interoperability:
  Since the DEX will automatically find suitable cross-chain protocols, the concept of cross-chain becomes more abstract to users, aggregating liquidity from different chains and enhancing interoperability.

• Strengthened Security:
  By automating all operations, the DEX can reduce the risk of user asset loss due to errors such as entering incorrect addresses, clicking phishing sites, or authorizing malicious contracts. According to CoW Swap, losses due to user errors have decreased by 90%.

• Simplified Operation Steps:
  The process is very intuitive, and users don’t even need to understand the differences between chains or how cross-chain bridges work. They only need to sign an authorization to complete the desired operation, significantly lowering the entry barriers and attracting more Web2 users, paving the way for widespread adoption.

Impact of Intent-based Trading on DEXs

Problems Faced by DEXs

In the current market, centralized exchanges (CEXs) like Binance and Coinbase dominate. Compared to DEXs, CEXs offer more stable liquidity, allowing them to handle large orders and reduce the losses caused by slippage. Additionally, CEXs provide a wide range of trading tools, including spot trading, contracts, options, lending, and over-the-counter (OTC) trading, enabling users to flexibly apply these tools based on their strategies and enjoy near-zero latency in transactions. Therefore, with a smooth user experience and diverse financial products, CEXs are the preferred choice for many users.

On the other hand, DEXs require waiting for block confirmations, cannot provide real-time transaction speeds, and suffer from insufficient liquidity depth, which leads to significant slippage for large orders. Even after the introduction of automated market makers (AMMs), liquidity issues have been somewhat alleviated, but slippage still exists beyond specific price ranges, and capital efficiency remains low. This makes DEXs less competitive than CEXs. However, intent-based design has the potential to help DEXs break through this current situation.

Benefits of Intent-based Trading

Aside from the product diversity and user interface, the main reason for the insufficient competitiveness of DEX lies in the subpar trading experience and the high threshold of on-chain operations. Therefore, improving transaction confirmation speed, injecting more liquidity, and simplifying the operation process have become the key problems to solve. The intent-based design can perfectly meet these needs.

First, as mentioned earlier, in the intent-based framework, users only need to express their needs straightforwardly, such as “convert asset B on chain A to asset D on chain C,” and set an acceptable slippage range and a fee limit. The system will automatically find the optimized implementation path, including choosing the appropriate cross-chain bridge, exchanging tokens in the liquidity pool with minimum slippage, optimizing the transaction steps, and so on. Users do not need to understand the complex technical details and operation processes behind the scenes; they simply need to sign authorization to complete the various operations on-chain. For new users who are not familiar with blockchain technology and financial tools, this undoubtedly greatly reduces their learning costs, allowing them to focus more on the trade itself without being troubled by the underlying technology, thus promoting the popularization of Web3 finance. For veteran users who are already familiar with the Web3 industry, intent-based design can reduce their operational steps, seamlessly execute cross-chain asset transfers and conversions, and effectively improve trading efficiency to carry out more complex arbitrage strategies.

In addition to simplifying the operation, the intent-based design also brings more ample liquidity. In the traditional AMM model, DEXs often need to first attract users to lock in a certain amount of assets as liquidity to support large-scale exchange demand and minimize the impact of trading slippage. However, this approach has two main issues.

1. Cold Start
   No matter how excellent the trading experience and financial products are, a DEX must find ways to increase its TVL (Total Value Locked) to survive in the highly competitive DeFi market. A high TVL means good liquidity, providing deeper trading depth, which can reduce the loss caused by slippage and attract more users. Liquidity providers will be rewarded with higher transaction fee dividends, encouraging more liquidity provision and forming a positive cycle. Therefore, a newly launched DEX must first invest a lot of resources to increase TVL, which limits its focus on the product itself. \

2. Liquidity Fragmentation
   In Web3, DEXs play a role similar to that of traditional banks, where users can deposit, exchange tokens, and use other financial products and tools. However, unlike Web2 banks, which are not ubiquitous, there are more than 1500 DEXs according to DefiLlama’s statistics. Usually, people only use a handful of banks, but there are countless DEXs on-chain, making it difficult for users to choose. The most serious problem is that on-chain funds are always limited, and DEXs are competing for liquidity, leading to severe fragmentation of liquidity and inefficient use of capital.

In the intent-based design, when users submit a transaction request, the DEX will find the best path for implementation, and the person responsible for this search is called the “Solver.” Solvers will look for any possible liquidity pools, including CEXs, DEXs, and OTC markets, matching the liquidity required for the user’s transaction and providing the optimized quote. Unlike in the AMM model, where the pool’s calculation formula determines the price of a trade, Solvers will solve liquidity issues by searching for the most efficient pools across different chains. This will aggregate liquidity across chains.

Not only do Solvers solve liquidity problems, but through competition between different Solvers, they will try to find the cheapest and fastest trading paths for users to gain block construction rights and engage in arbitrage while also offering users a better experience.

Introduction to Intent-Based DEX

Next, we will briefly introduce some of the more popular intent-based DEXs in the market, summarizing their technical features, use cases, team backgrounds, and funding statuses, and then compare their differences.

UniswapX

Founded in 2018, Uniswap was the first DEX to use the AMM model to solve on-chain liquidity problems. It successfully navigated through several bull and bear markets and gradually expanded from the Ethereum mainnet to the entire EVM ecosystem, growing into the largest DEX in the DeFi space. As of the latest update (12/5), Uniswap’s TVL is $6.62 billion, and its trading volume over the past three years accounted for 50-70% of the total trading volume across all DEXs. It was only recently surpassed by Raydium, driven by the meme coin craze, with its market share dropping below 40% for the first time. However, it remains the leader in decentralized finance.

DEX Trading Volume Share (Source: Artemis)

Team and Funding Background

Uniswap was founded by Hayden Adams, an active early Ethereum developer. The project received strong support from Vitalik Buterin and the Ethereum Foundation during its early stages and later raised $177M in funding from investors such as a16z, Paradigm, Polychain, and Coinbase Ventures, among others.

Technical Features

A large part of Uniswap’s success in the market can be attributed to its willingness to embrace new industry technologies, continuously iterating and upgrading its products. Since launching V1 in 2018, Uniswap has introduced versions V2 to V4, gradually adding features such as concentrated liquidity, Flash Swaps, and custom pools, optimizing its services to meet market demand and strengthen its competitiveness.

In July 2023, Uniswap launched UniswapX, a permissionless, fully open-source auction-based routing protocol aimed at opening up trading paths and allowing users to connect to more external AMMs and liquidity pools for token swaps, enhancing the trading experience. The key improvements include:

• Aggregating on-chain liquidity to obtain optimized trading prices
• No gas fees
• Protection against MEV attacks
• No fees for failed transactions
• Cross-chain transactions with no gas fees (yet to be implemented)

UniswapX V2 Workflow (Source: X)

In the latest UniswapX V2 system, users submit a special off-chain order, which is then filled by multiple third-party fillers who search for viable liquidity sources, both on-chain and off-chain. These fillers bid to fulfill the user’s order and provide a quote. If the user accepts the quote, they sign the transaction. In this architecture, the actual token swap is executed by the fillers, who absorb the gas fees. However, fillers can reduce transaction costs by executing multiple transactions simultaneously and earning arbitrage opportunities. UniswapX incentivizes fillers to compete with each other to provide the best price for users while avoiding MEV attacks.

With UniswapX, users automatically receive the best prices when trading on Uniswap, and once the cross-chain version is released, token swaps and cross-chain transfers will be seamlessly integrated into a single operation, enabling asset conversion across chains in just a few seconds, further improving the user experience.

1inch

Founded in 2019, 1inch is a DeFi aggregator within the EVM ecosystem, widely supporting Layer 1 and Layer 2 solutions such as Polygon, Arbitrum, BNB Chain, and Avalanche. It connects liquidity pools across multiple DEXs on different chains and automatically calculates the best trading paths and conditions to help users reduce trading costs and time. It also simplifies cross-chain operations, making it easier to move funds between different chains.

Team and Funding Background

1inch was founded by two experienced software engineers, Sergej Kunz and Anton Bukov, at the ETH New York Hackathon. Kunz had worked at prominent German companies like Bulktrade, Porsche, and mimacom, while Bukov was originally an iOS/macOS developer but later transitioned to the crypto space. Before founding 1inch, Bukov was a senior smart contract engineer at Near Protocol, responsible for developing cross-chain communication between Near and Ethereum. Their expertise in software engineering and blockchain technology provided solid technical support for 1inch, which successfully raised a total of $193 million in three funding rounds between 2020 and 2021, with investors such as Binance Labs, Pantera Capital, Amber Group, and Dragonfly.

Technical Features

1inch uses its proprietary Pathfinder algorithm to find the best trading paths between multiple DEXs and liquidity sources. Specifically, the algorithm splits a user’s single transaction request into several parts and allocates them to different liquidity pools. It then calculates the optimal route in less than a second, considering price, liquidity, and gas fees, to obtain the best token exchange rate and slippage, reducing trading costs and improving capital efficiency. Additionally, when 1inch executes trades for users, it automatically reviews the security of the token contracts and liquidity sources involved in the transaction and uses its built-in Rabbithole Protection to process transactions in bulk. This encryption ensures that transaction details are kept private until the transaction is confirmed on the blockchain, preventing MEV attacks and safeguarding users’ funds.

In 2022, 1inch introduced the Fusion mode, allowing users to set price ranges, trading deadlines, and slippage based on their needs. The system then submits the trade orders to multiple liquidity providers (Resolvers), who search for feasible trading paths and select the best trading solution through a bidding process. In this mode, users can avoid the Gas Fees required for transactions, as they are covered by the Resolvers executing the trades. Users benefit from the competition among Resolvers by obtaining a better trading experience.

CoW Swap

CoW Swap was established in 2021 as a trading aggregator based on the “Coincidence of Wants” (CoW) mechanism for handling orders. “Coincidence of Wants” refers to a situation where the trading demands of multiple users complement each other. For example, User A wants to exchange 1 ETH for 4000 USDT, while User B is willing to exchange 4000 USDT for 1 ETH. In this case, the orders of A and B can be directly matched for a P2P token exchange, without needing a third-party liquidity pool. In the “Coincidence of Wants” matching mechanism, all user trade intentions within a given time frame can potentially be liquidity sources for each other. Complementary orders will be satisfied simultaneously, with only a small portion of orders that lack corresponding matches needing to seek other liquidity sources. As a result, CoW Swap reduces reliance on liquidity pools, saves on Gas fees, and provides better MEV protection, offering users more favorable trading prices.

Team and Funding Background

The CoW Protocol was founded by Anna George, the former business development manager at decentralized infrastructure protocol Gnosis. Its predecessor was an incubated project within Gnosis DAO. The goal was to optimize on-chain trading efficiency and provide robust MEV protection to minimize unnecessary losses for traders. In 2022, CoW Protocol officially separated from Gnosis DAO through a community vote and raised $23 million in total funding. This amount included $15 million from institutional investors such as Blockchain Capital, Cherry Ventures, and Ethereal Ventures, and an additional $8 million in crypto funding from 5,000 community members, consisting of ETH, GNO, and xDAI.

Technical Features

Unlike traditional DEXs, when users trade on CoW Swap, they do not directly sign the execution of the trade on-chain. Instead, they sign their “trade intention,” which includes the tokens and amounts they wish to exchange. Once signed, the system aggregates all user trade intentions within the same time frame and passes them to Solvers for matching. Solvers are third-party entities that use optimized algorithms to match complementary trade requests at the most cost-effective price and lowest fees. Unmatched trades will then search for other liquidity sources and, finally, execute the trade via a batch auction process.

This approach allows most user orders to be matched P2P, bypassing liquidity pools, reducing trading costs, and potentially allowing orders to be executed at better-than-market prices. Additionally, since the actual transaction is executed by the Solvers, users are not exposed to MEV attacks, as the risk is assumed by the Solvers. To encourage Solvers to continue providing optimal trading solutions for users, the successful bidder in the auction receives CoW as an incentive, promoting healthy competition among Solvers.

In addition to standard market and limit orders, CoW Swap offers three special order types: Time-Weighted Average Price (TWAP), programmatic orders, Milkman orders, and CoW Hooks, to provide users with more diverse and flexible trading options. Below is a brief introduction to these four special trading modes:

• TWAP
  TWAP aims to break large orders into several smaller orders and execute them in batches over a set period, reducing the impact on the market and lowering the effect of slippage to optimize the execution price. Users can fine-tune their trades by setting parameters like the transaction volume for each batch, the time interval for executions, acceptable price range, total execution time, and trade path optimization, enhancing execution efficiency. This feature is especially suitable for institutions and large traders with high-volume trade requirements..

• Programmatic Orders:
  CoW Swap developed programmatic orders by integrating ERC-1271, allowing users to pre-set trading conditions and rules so that the system can automatically carry out complex trades based on specific logic or strategies. The Solvers executing the trades will look for the best execution plan according to the order conditions, ensuring users’ interests are maximized. Programmatic orders enable more complex use cases, such as projects or DAOs using multi-signature wallets to automatically distribute salaries, allocate protocol income to specified wallets, and adjust asset proportions in wallets. TWAP is built on top of programmatic orders. For individual investors, programmatic orders can be used to automatically adjust portfolio proportions, hedge in the market under specific conditions, or participate in mining rewards, allowing the execution of various complex quantitative trading strategies. \

• Milkman Orders

Workflow of Milkman Orders (Source: CoW DAO Documentation) \

• CoW Protocol and Yearn Finance jointly developed Milkman orders, which work differently from typical orders where users manually set fixed price ranges. Milkman uses on-chain oracles such as Chainlink and Tellor to provide real-time market prices, ensuring the reasonableness of the execution price and avoiding failed transactions due to asset price fluctuations. Milkman orders are suitable for situations where a trade cannot be executed immediately or where price fluctuations caused by insufficient liquidity are severe. For example, if a project wants to sell ETH from its treasury and convert it into USDC, but needs to wait for a DAO vote to proceed, during which ETH may experience significant price fluctuations beyond the set price range, Milkman orders can allow the Oracle to provide real-time market prices, facilitating trade execution.

• CoW Hooks
  CoW Hooks allows users to link their CoW Swap trades with other smart contracts on Ethereum, meaning that users can trigger specific trading actions by calling external smart contracts through their orders. For example, before a trade (known as Pre-Hooks), users can stake their tokens in a protocol contract and use Pre-Hooks to automatically unlock the tokens before executing the trade. After the trade (Post-Hooks), users can use Post-Hooks to deposit funds into other protocols or transfer them to other chains. All external smart contract calls involved in this process are attached to the CoW Swap order, and Solvers will automatically execute them based on the conditions, bundling them into a single transaction and submitting it to the blockchain.

With CoW Hooks, users can set trigger conditions for different smart contracts and automatically execute multiple on-chain transactions in one go, simplifying the complexity of operations. Unlike programmatic orders, which only fine-tune the trading itself and interact with CoW Protocol’s smart contracts, CoW Hooks are connected to external smart contracts, creating a fundamental difference in nature, but when combined, they offer users greater flexibility and adaptability in trading.

Comparison of UniswapX, 1inch, and CoW Swap

From the descriptions of the three protocols above, it’s clear that their primary goal is to simplify the trading process for users, allowing them to declare their trade intentions, and then have the system automatically execute the best trading strategy to maximize their benefits. In this intention-driven trading model, users don’t need to care about where or how the trade is executed—they only care about whether the final result meets their needs and expectations. Therefore, we will compare UniswapX, 1inch, and CoW Swap from four perspectives: execution mechanism, MEV protection measures, protocol fees, and market positioning to understand better how different design mechanisms affect user experience.

Core Mechanisms

Although there are differences in the details, the operational mechanisms of UniswapX, 1inch, and CoW Swap are generally the same. The process is as follows:

User signs the transaction intent → The system looks for the best liquidity source → Transaction matching → Execute the transaction → Return the execution result

From finding liquidity to executing the transaction, all three encourage third-party entities to provide the best quotes through a reward mechanism, but they use different terms. UniswapX calls it a “Filler,” 1inch uses “Resolver,” and CoW Swap refers to it as “Solver.” Apart from the different names, the operational logic of the three also differs.

First, regarding liquidity sources, UniswapX and 1inch both rely primarily on on-chain liquidity pools. Uniswap is a massive liquidity source, while 1inch primarily connects to external liquidity. Both allow private liquidity provision, with large market makers typically providing liquidity on 1inch. CoW Swap, on the other hand, aggregates all users’ trading intentions as its primary liquidity source and only seeks external liquidity if no matching order is found for a user’s trade. Thus, Uniswap and 1inch are still based on AMM pools and market makers as counterparties but help users find the best exchange rate options. In contrast, CoW Swap tries to achieve more peer-to-peer (P2P) exchanges, reducing reliance on liquidity pools.

Therefore, from the above, it can be observed that Uniswap and 1inch match single trades as the smallest unit, while CoW Swap batches all orders occurring at the same time and processes them together.

MEV Protection Measures

Regarding MEV protection, CoW Swap avoids transaction slippage and potential MEV attacks through its off-chain P2P pairing mechanism. The Solvers will match all of the user’s trades and bundle them into a single transaction before submitting them on-chain, providing the most comprehensive MEV protection among the three. According to a report by blockchain data analytics firm EighPhi, transactions matched through CoW Swap in 2022 significantly reduced the probability of users experiencing MEV attacks.

The Reduction in MEV Attacks on CoW Swap (Source: Sandwich MEV’s Impact on CoW Swap: One Magnitude Lower Than on Any Other DEX)

UniswapX and 1inch, however, shift the risk of MEV to the actual transaction executors (Fillers and Resolvers). Although they provide some level of protection, it is not as comprehensive as CoW Swap’s dual protection (P2P pairing and batch processing), and their official documentation lacks detailed explanations.

Protocol Fees

Since the transaction executors for UniswapX, 1inch, and CoW Swap are all third parties, the user only signs the transaction intent. Therefore, third parties pay the Gas Fees on behalf of the user, allowing for zero Gas Fee transactions. Users do not bear the cost of failed transactions and do not need to prepare native tokens for the network before each transaction, significantly reducing the required transaction costs.

However, even though the Gas Fee is passed on to third parties, if the transaction is successful, they will include the fees paid during the process as a Protocol Fee in the user’s order. Since third parties can find arbitrage opportunities from these transactions to offset the costs, users can still execute trades within the price range they set. CoW Swap promises to return excess arbitrage profits to users after deducting costs, while UniswapX and 1inch keep the arbitrage profits and only minimally satisfy the user’s trade orders.

Thus, 1inch and CoW Swap do not charge platform transaction fees, but UniswapX claims in its whitepaper that it has the right to charge up to 0.05% as a protocol fee.

UniswapX’s Fee (Source: UniswapX Whitepaper)

Market Positioning

In summary, we can synthesize the market positioning and advantages/disadvantages of the three platforms and further compare them based on on-chain data.

UniswapX

Uniswap, with over $4.6 billion in total value locked (TVL), is currently the DEX with the most liquidity in Web3, holding a large market share and boasting excellent trading depth. Over the years, it has built a solid user base and transaction volume. Although UniswapX, which introduces intent-based trading, was launched later than both 1inch and CoW Swap and has been accused of copying the two, UniswapX can be seen as a derivative service of its AMM model. By integrating with Uniswap’s existing ecosystem, it aims to enhance the trading efficiency and usability for its original users, further solidifying its market position. However, due to its relatively short development history and the fact that it is not the primary focus of Uniswap’s business, UniswapX still largely mirrors the mechanisms of the other two. Additionally, it charges higher fees than 1inch and CoW Swap, with its standout feature being its plan to pioneer cross-chain trading, a feature not yet available on 1inch or CoW Swap.

1inch

As one of the earliest transaction aggregators in the Ethereum ecosystem, 1inch initially used the Pathfinder algorithm to find diverse liquidity sources and combine different trading paths to find the best prices for users. However, this is only linked to external liquidity pools without optimizing trade prices, and users could still fall victim to MEV attacks. To address this, 1inch introduced 1inch Fusion, allowing users to set price ranges and trade validity periods, as well as reducing Gas Fees, to provide the best cross-platform trading experience. However, compared to UniswapX’s massive liquidity pool and CoW Swap’s superior MEV protection, 1inch is somewhat in an awkward market position.

CoW Swap

CoW Swap is the first DEX among the three to focus on intent-based trading, using the innovative Coincidence of Wants mechanism to match orders between users, reducing reliance on traditional AMM pools, offering the highest level of MEV protection, and providing better execution prices than Uniswap and 1inch. CoW Swap has also developed diverse order models based on this concept to meet various user trading needs, gradually building its technological moat. It stands out the most among the three, with the most mature development.

DEX Aggregator Transaction Volume and Market Share (Source: Dune)

From the data, 1inch, having been launched earlier, had the advantage of being a pioneer and has long held over 40% of the market’s monthly transaction volume. However, with the continuous development of CoW Protocol, the market shares of both have nearly equalized, with CoW Swap at 29.1% and 1inch at 27.9%, with transaction volumes of 6.7 billion and 6.4 billion, respectively, far ahead of other protocols. Uniswap, on the other hand, only holds a 7% market share.

Number of Orders in the Past 30 Days (Source: Dune)

As of 12/24, CoW Swap had over 145k orders in the past 30 days, far outpacing 1inch’s 45k and Uniswap’s 89k. This shows that both 1inch’s transaction volume and order numbers are gradually being overtaken by CoW Swap and Uniswap, with CoW Swap having a strong potential to surpass them.

Conclusion

In the current DeFi ecosystem, user experience has become more important than underlying technological competition, serving as the key to attracting new users and retaining existing ones. Intent-based design not only provides a user-friendly experience for beginners but also allows advanced traders to implement more complex strategies, solving core pain points in traditional DeFi. In the future, intent-based designs may extend beyond asset trading to more application scenarios, such as asset management and financial derivatives, accelerating the adoption of decentralized finance and achieving larger-scale adoption.