Uniswap and Across Propose New Ethereum Token Standard to Solve Liquidity Dispersion Problems
Uniswap Labs and cross-chain interoperability provider Across Protocol have proposed a new Ethereum token standard for cross-chain intent to address liquidity fragmentation.
The new standard is part of Ethereum Request for Comment 7683 (ERC-7683) and aims to build a unified framework for specifying cross-chain operations in an intent-based system. An intent is an automated blockchain interaction based on a user’s desired outcome, without the need for specific knowledge.
For example, intents could automate cross-chain token swaps through optimal routes without requiring additional effort from users, 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 flexibility in implementation details. This flow starts with the swapper signing an off-chain message, which then distributes his order to the filler on the origin chain. The order is then filled on the destination chain.
In particular, Uniswap Labs emphasized that it will implement this standard in the cross-chain version of UniswapX, but stated that the ERC-7683 standard is already feasible for implementation in any decentralized application.
The standard also allows for customization of various aspects such as pricing resolution methods, implementation constraints, and payment procedures. The proposal has been submitted to the CAKE working group for discussion and review.
Intent-based systems have emerged as a leading solution for cross-chain interactions between end users, simplifying the complexity and time constraints associated with traditional bridges.
However, these systems struggle to access sufficient liquidity and maintain a vibrant filler network across chains, a problem that may only worsen as the number of individual chains grows.
Liquidity distribution problem
Ethereum’s layer 2 blockchain solves the scalability problem the industry has been struggling with for years. But it also presents a new challenge: decentralizing the flow of funds across different micro-ecosystems.
Also, this According to CoinShares, the problem is technical, as each layer 2 blockchain processes and orders transactions in blocks in a centralized manner. Analyst Max Shannon.
Shannon explained that each blockchain maintains its own ledger and set of smart contracts, resulting in a fragmented global state of transactions, which negatively impacts liquidity efficiency. He added:
“The promise of fragmentation is shared liquidity, gas efficiency, bridgeless bridging, seamless app upgrades, and easier L2 bootstrapping and development.”
