Crypto Assets cross-chain transactions: Intent of the settlement layer

In the current Crypto Assets ecosystem, there are numerous active L1 public chains, and with the development of rollup technology, L2 networks are also experiencing explosive growth. How to achieve efficient and low-cost cross-chain asset transfers has become key to promoting the development of users, applications, and protocols on these networks.

The mainstream cross-chain solutions currently include:

1. Custodial Bridge: Conducted through centralized exchanges, it has fast speed and low cost, but lacks decentralized characteristics.

2. Permissionless Bridges: Such as Hyperlane, Portal, etc., with faster speeds but higher costs.

3. Intent Bridge: No permission required, but slow speed, high cost, and only applicable for large transfers.

Although the intent bridge is expected to solve the above problems, it still faces challenges such as liquidity fragmentation and lack of standardization. In response to these issues, a new solution is emerging - the intent settlement layer.

The Principle of Intent Settlement

Research has found that approximately 80% of the funds in cross-chain transactions will flow back to the original chain within 24 hours. The intention protocol is based on this phenomenon, achieving asset transfer by matching complementary trading demands across different chains, rather than directly bridging between chains.

For example, when one user needs to transfer 100 dollars from Chain A to Chain B, while another user needs to transfer 100 dollars from Chain B to Chain A, the protocol can allow both transactions to be completed on their respective chains, avoiding actual cross-chain operations, thereby significantly reducing costs.

However, this perfect match is not common. To address this, certain protocols have proposed the concept of a "settlement layer" aimed at standardizing cross-chain transaction processes and improving matching efficiency.

Advantages of the Settlement Layer

The settlement layer brings significant advantages to all participants:

• Blockchain network: Simplified the integration process of bridging solutions
• Protocol: Expanded the range of matchable order flow
• Market Makers: Provide a more efficient rebalancing mechanism

Specifically, the settlement layer deploys standardized contracts on each chain, allowing users to generate "invoices" of trading intentions, while market makers can "balance" these intentions with each other. If no one claims the intentions within a certain period, the prices can be gradually lowered through a Dutch auction mechanism to attract market makers to execute.

This standardization mechanism makes cross-chain transactions more efficient while maintaining decentralization features. It can aggregate order flows from different applications, providing market makers with more arbitrage opportunities, and is easy to adopt by new blockchain networks.

Industry Cooperation and Development Prospects

Currently, multiple institutions have collaborated with settlement layer projects, including rebalancers, liquidity staking protocols, and more. This extensive collaboration is expected to further enhance the efficiency of the cross-chain market.

With the development of modular blockchain, the issue of fragmented cross-chain liquidity is becoming increasingly prominent. The settlement layer, as the first solution to coordinate global cross-chain order flow, is expected to play an important role in the future.

Overall, the intention of the settlement layer is to provide a new approach for cross-chain transactions of Crypto Assets. Through a standardized and decentralized mechanism, it is expected to significantly reduce cross-chain costs, enhance user experience, and inject new momentum into the development of the entire crypto ecosystem.