The decentralized finance (DeFi) sector faces significant challenges due to liquidity fragmentation, which complicates user interactions and slows down transactions. Dmitry Zhelezov, co-founder and CEO of SQD Network, suggests that blockchain-based “intents” could provide a solution to these issues, provided the industry can address concerns regarding centralization.

Liquidity fragmentation arises when capital is distributed across various blockchains that lack interoperability. This situation leads to slow transaction speeds, high fees, and considerable price slippage, creating hurdles for both users and developers. Zhelezov emphasizes that “liquidity fragmentation is one of the most significant obstacles for developers launching new DeFi applications.”

Intents represent a shift from traditional blockchain architectures that require users to navigate complex transaction processes. Instead, users can simply express their desired outcome, allowing the protocol to manage the intricate details of execution. For instance, if a user wants to purchase a non-fungible token (NFT) in a game on a different blockchain, they can state their intent, and “solvers” will automate the necessary steps to complete the transaction. This approach eliminates the need for users to manually transfer funds between networks.

However, the use of solvers raises concerns about centralization. Critics argue that as independent solvers compete to execute transactions, those with greater resources may dominate the market, potentially undermining decentralization and trust within the network. Zhelezov acknowledges this risk but believes that simplifying user interactions through intents could enhance the overall appeal of DeFi.

Despite these challenges, intents could streamline crosschain transactions and improve liquidity flow within DeFi. If developers can effectively address the issues associated with solvers and centralization, intents may pave the way for more user-friendly applications that attract increased liquidity to various protocols. As Zhelezov notes, “If DeFi wants to grow beyond what it is now, it needs to find a way to streamline crosschain transactions and increase the flow of liquidity without the headaches.”

Editorial Note: This news article has been written with assistance from AI. However, opinions and perspectives are those of Harshajit Sarmah.