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Tarun Chitra
@pinged
Going to give a *sneak peak* about this paper w/ @ksk and others to FC before Twitter! There's been a surge of interest in intent-based systems like @uniswapX or CoW Swap — their claim has been to help improve the acquisition of off-chain price data on-chain But do they work?
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DeFi Cheetah
@deficheetah
Would like to know how solvers incur congestion fees due to the lack of inventory, even before they secure the exclusive rights to the orderflow by winning the auction. Don’t they merely simulate the execution such that congestion fees don’t price in?
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Tarun Chitra
@pinged
In a fully permissionless intent system (so nothing that is live right now) where they are slashed if they don't deliver on the intent within some time period, they have to procure _some_ inventory to avoid getting slashed. The real problem is that if they all do this simultaneously they get worse prices
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Tarun Chitra
@pinged
In theory, if you had some way of not having to slash them to enforce the intents' covenants, then you could grant "fully exclusive" ownership of the order flow and not have congestion elsewhere; but that's virtually impossible (how do I prove to you that I can acquire off-chain inventory at a particular price?)
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DeFi Cheetah
@deficheetah
How about the status quo? If every time solvers have to at least execute and bid simultaneously, that could actually frustrate the purpose of having a competitive auction as the competition is translated into congestion fees lol
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Tarun Chitra
@pinged
Yeah; this is why intents are good for liquid markets (e.g. ETH) but not memecoins/small caps — and in fact, you see most of the volume concentrated in those market [which suggests these congestion effects are real for low liquidity coins]
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DeFi Cheetah
@deficheetah
Same thought! this is really something that I thought about before, because for long-tail assets it’s more risky for solvers to take the trade and thus I guessed there must be some premium on it, but you clarified it - the premium is actually due to the congestion fees
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