Intent-based trading: A fad or the future of DeFi?

2024-11-05 08:30:25 Primitive Reading

From cointelegraph by Chritoph Richter

Let’s be honest — DeFi is still pretty confusing for the masses.

Navigating multiple platforms, understanding complex protocols, and managing assets across blockchains can be overwhelming. This raises an important question: Is there a way to simplify the decentralized finance (DeFi) experience without sacrificing its core advantages?

Well, there is a way for users to set their money-making goals and let one platform handle every trade afterward. This is intent-based trading, a concept that could redefine how we interact with the DeFi ecosystem.

The main goal of this piece is to explore whether it is just another passing trend or signals the next major leap in financial technology.

What is intent-based trading?

Intent-based trading involves formulating investment goals—such as focusing on eco-friendly tokens or aiming for high returns—and then allowing an automated system to handle the execution.

Traditionally, investors needed to manually manage different wallets, switch between platforms, and keep track of multiple tokens and strategies. With this new approach, the system automatically executes the investment plan across different blockchains, growing assets on autopilot.

Profitability in trading depends on intentionality. Source: X

Intent-based trading timeline

The evolution of intent-based trading can be traced through several key stages:

Rule-based trading systems (2016-2018):

Initially, intent-based trading was rudimentary, relying on simple rules such as “buy Token A if its price drops by 10%” or “sell Token B if it reaches a 20% profit.” Traders utilized custom scripts or basic trading bots to automate these actions. For example, a bot could execute trades based on specific price movements.

However, these bots operated on single blockchains like Ethereum and were unable to adapt to changing market conditions. As the market expanded and became more complex, there was a growing need for greater flexibility and better risk management across different blockchains.

Signal-based trading (2017-2019):

Building upon rule-based systems, signal-based trading introduced the use of market signals such as algorithm-driven alerts and social media trends. This approach was akin to receiving expert tips or using applications that indicated when a token might spike or drop.

Disclaimer: This specification is preliminary and is subject to change at any time without notice. Amazon Finance assumes no responsibility for any errors contained herein.