Uniswap Labs and cross-chain interoperability provider Across Protocol have proposed a new Ethereum token standard for cross-chain intents to address liquidity fragmentation challenges.
The new standard is the subject of Ethereum Request for Comments 7683 (ERC-7683) and aims to establish a unified framework for specifying cross-chain actions in intent-based systems. Intents are automated blockchain interactions based on the user’s desired outcome, excluding the need for specific knowledge.
For example, intents can automate a cross-chain token swap via an optimal route without requiring additional effort from the user, such as knowing the most efficient bridges and exchanges.
ERC-7683
The ERC-7683 standard is designed around a common cross-chain intent flow while allowing some flexibility in implementation details. This flow begins with the exchanger signing an off-chain message, followed by broadcasting its order to a filler on the original chain. The order is then executed on the destination chain.
Notably, Uniswap Labs has highlighted that they will implement this standard on the cross-chain version of UniswapX, but the ERC-7683 standard is already available for any decentralized application to implement.
Additionally, the standard allows for customization of various aspects, such as price resolution methods, execution constraints, and settlement procedures. The proposal has been submitted to the CAKE working group for discussion and review.
Intent-based systems have become a leading solution for end-user interaction across channels, simplifying the complexity and time constraints associated with traditional bridges.
However, these systems face challenges in accessing sufficient liquidity and maintaining active backfill networks across chains, problems that may intensify as the number of distinct chains increases.
Liquidity Fragmentation Problem
Ethereum’s layer-2 blockchains solve scalability issues that the industry has faced for years. Yet they present a new challenge: the fragmentation of funds flowing across smaller ecosystems.
Moreover, this The problem lies at the technical level, as each layer 2 blockchain processes and orders transactions into blocks centrally, according to CoinShares. analyst Max Shannon.
Shannon explained that each blockchain maintains its own ledger and set of smart contracts, resulting in a fragmented overall state of transactions that negatively impacts liquidity efficiency. He added:
“Fragmentation management promises shared liquidity, energy efficiency, bridgeless gateways, seamless application upgrades, and easier L2 startup and development.”
