Publish Date

October 21, 2024

Intent Based Smart Contracts: Definition, Types, Examples, and Challenges

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You’ve likely used apps where you set everything once, and the rest happens like magic.

But what if that level of ease could be applied to every move you make in the DeFi world?

In this article, we’ll understand how intent-based smart contracts simplify DeFi tasks like automated trading, cross-chain transfers, yield farming, NFTs, and lending. Plus, we’ll cover the challenges and how MC² Finance has got your back.

What are intent-based smart contracts?

An intent-based smart contract is a type of automated agreement that carries out specific actions based on your stated intentions or goals, without needing manual intervention.

Traditional smart contracts on steroids = Intent-based smart contracts. Source: X

How they differ from traditional smart contracts?

In traditional smart contracts, all the terms and execution logic must be fully defined upfront, and the contract executes automatically once specific conditions are met.

Limitations of traditional smart contracts. Source: X

However, intent-based smart contracts allows you to express high-level goals (or “intents”), with the contract dynamically interpreting and executing the necessary actions across various platforms, often involving complex multi-step or multi-chain operations.

Types of intent-based smart contracts (with examples)

Below are some of the most common types of intent-based smart contracts:

  • Automated trading contracts
  • Cross-chain contracts
  • Yield farming contracts
  • NFT marketplace contracts
  • Lending/borrowing contracts

1. Automated trading contracts

Automated trading contracts let you set up rules for buying or selling tokens based on price targets, so you wouldn’t need to monitor the market constantly.

Example:

pragma solidity ^0.8.4;

// SPDX-License-Identifier: MIT

contract AutomatedTrading {

   address public owner;

   uint256 public targetPrice;

   address public tokenAddress;



   // Initializes contract with the owner and the target price for automated trading

   constructor(uint256 _targetPrice, address _tokenAddress) {

       owner = msg.sender; // Owner of the contract

       targetPrice = _targetPrice; // Price at which trade will execute

       tokenAddress = _tokenAddress; // Token to trade

   }



   // Function to execute trade if the target price is reached

   function executeTrade(uint256 currentPrice) public view {

       require(currentPrice >= targetPrice, "Target price not reached");

       // Execute trade logic here

       // For example: Buy or sell tokens based on predefined strategy

   }

}

In the example above, you set a target price (via the constructor function), and once the market hits that price, the contract automatically makes the trade for you (executeTrade).

2. Cross-chain contracts

Cross-chain contracts allow you to move your tokens across different blockchains (e.g., Ethereum → Binance).

Example:

pragma solidity ^0.8.4;

// SPDX-License-Identifier: MIT

interface ICrossChainBridge {

   function transfer(address to, uint256 amount, address tokenAddress) external;

}



contract CrossChain {

   ICrossChainBridge public bridge;



   // Initializes the cross-chain bridge

   constructor(address _bridge) {

       bridge = ICrossChainBridge(_bridge);

   }



   // Function to send tokens across chains

   function crossChainTransfer(address to, uint256 amount, address tokenAddress) external {

       bridge.transfer(to, amount, tokenAddress); // Transfer tokens to a different chain

   }

}
You don’t need to worry about managing separate wallets or complex transfers—the contract connects to a cross-chain bridge (via constructor) and handles the transaction (crossChainTransfer).

3. Yield farming contracts

Yield farming contracts automatically move your tokens between platforms to maximize your potential growth.

Example:

pragma solidity ^0.8.4;

// SPDX-License-Identifier: MIT

interface IYieldProtocol {

   function stake(uint256 amount) external;

   function withdraw(uint256 amount) external;

}



contract YieldFarming {

   IYieldProtocol public protocol;



   // Initializes the yield farming protocol

   constructor(address _protocol) {

       protocol = IYieldProtocol(_protocol);

   }



   // Function to automatically stake funds

   function autoStake(uint256 amount) external {

       protocol.stake(amount); // Stake the specified amount in the yield protocol

   }



   // Function to withdraw staked funds

   function autoWithdraw(uint256 amount) external {

       protocol.withdraw(amount); // Withdraw the specified amount from the yield protocol

   }

}

Instead of manually searching for the best opportunities, the contract stakes your tokens in the platform offering the most favorable conditions (via autoStake) and withdraws them when necessary (autoWithdraw).

4. NFT marketplace contracts

Similarly, NFT marketplace contracts automate processes like buying, selling, and auctioning NFTs based on your intent.

Example:

// SPDX-License-Identifier: MIT

pragma solidity ^0.8.4;



interface INFTMarketplace {

   function listNFT(uint256 tokenId, uint256 price) external;

   function bidOnNFT(uint256 tokenId, uint256 bidAmount) external;

}



contract NFTMarketplace {

   INFTMarketplace public marketplace;



   // Initializes the NFT marketplace by linking to an existing NFT marketplace contract

   constructor(address _marketplace) {

       marketplace = INFTMarketplace(_marketplace);

   }



   // Function to list NFT for sale, interacting with the external contract

   function listMyNFT(uint256 tokenId, uint256 price) external {

       marketplace.listNFT(tokenId, price); // List the specified NFT for sale at a defined price

   }



   // Function to bid on NFT, interacting with the external contract

   function placeBid(uint256 tokenId, uint256 bidAmount) external {

       marketplace.bidOnNFT(tokenId, bidAmount); // Place a bid on the specified NFT

   }

}

You set the rules, like the price at which you want to sell (via listMyNFT), and the contract lists or sells the NFT or set bids (placeBid).

5. Lending/borrowing contracts

Lending and borrowing contracts allow you to automatically manage loans within DeFi platforms.

Example:

pragma solidity ^0.8.4;

// SPDX-License-Identifier: MIT

interface ILendingProtocol {

   function depositCollateral(uint256 amount) external;

   function borrow(uint256 amount) external;

   function repayLoan(uint256 amount) external;

}



contract LendingBorrowing {

   ILendingProtocol public protocol;



   // Initializes the lending protocol

   constructor(address _protocol) {

       protocol = ILendingProtocol(_protocol);

   }



   // Function to deposit collateral

   function depositCollateral(uint256 amount) external {

       protocol.depositCollateral(amount); // Deposit collateral to secure a loan

   }



   // Function to borrow funds

   function borrowFunds(uint256 amount) external {

       protocol.borrow(amount); // Borrow the specified amount of funds

   }



   // Function to repay a loan

   function repayLoan(uint256 amount) external {

       protocol.repayLoan(amount); // Repay the borrowed amount

   }

}

You can deposit collateral (depositCollateral), borrow funds (borrowFunds), and repay loans (repayLoan) without manually monitoring everything.

Challenges

Let’s explore some common challenges of intent-based smart contracts:

  1. Expensive and complex strategy updates
  2. Delays and high fees in cross-chain transactions
  3. Platform vulnerabilities and high gas costs
  4. Losses from price volatility and gas fee surges
  5. Collateral liquidation risk and costly gas fees

1. Expensive and complex strategy updates

Markets are unpredictable, and rigid automated rules can cause missed opportunities or trigger unwanted trades during volatile swings.

Moreover, updating your strategy once the contract is live can be tricky and expensive.

Is updating a smart contract a philosophical problem? Source: X

💡 With MC² Finance, you can easily modify trading rules and strategies as market conditions change.

2. Delays and high fees in cross-chain transactions

If one chain faces congestion or technical issues, your transaction may be delayed or even lost.

And, moving assets between chains can result in hefty fees and security risks.

Moving assets still complex, expensive, and stressful? Source: X

💡 MC² Finance reduces fees by optimizing cross-chain transactions through batch processing, minimizing the number of steps to one.

3. Platform vulnerabilities and high gas costs

Yield farming can be risky—automatically shifting your assets between DeFi platforms might lead to losses if those platforms are vulnerable.

DYOR still a necessity for yield farming? Source: X

💡 MC² Finance uses trusted DeFi platforms instead, optimizing for gas fees.

4. Losses from price volatility

NFT prices are highly volatile, and automated contracts can make trades at the wrong time, resulting in losses.

Gas fees in NFT marketplaces are also unpredictable, sometimes costing more than the NFT itself.

On-chain NFT activity moving to roll-ups? Source: X

💡 MC² Finance intends to optimize your NFT trading by allowing dynamic rule adjustments, so you always trade at the right time and price.

5. Collateral liquidation risk and costly gas fees

In DeFi lending, collateral can quickly lose value, leading to automatic liquidation and losses.

DeFi’s secret sauce = perfected tokenized collateral? Source: X

💡 MC² Finance protects your assets by monitoring collateral value, helping you avoid unnecessary liquidations and high transaction costs.

Conclusion

So if you want to experience the power of intent-based smart contracts (minus the limitations), head on over to MC² Finance.

Lets see how optimized your wallet truly is to your intentions.

P.S. our Ambassador Program also awaits worthy contenders.