At the beginning of 2023, the Kinetex team launched the first version of the protocol, a meta-aggregator that contained an aggregation of bridges and DEXes, connecting the fragmented liquidity between networks. In order to automate processes and avoid the hassle of storing gas on each intermediate network, a decision was made to create a network of relayers that function as keepers. These relayers would sequentially launch smart contracts in each network, thus ensuring that the entire process is automated from the user's end. The team also developed secure smart contracts that eliminated the need for users to trust or transfer funds under Kinetex's management, ensuring a seamless and decentralized approach to swapping.
After some time, statistics showed that user transactions often got stuck between networks due to sudden gas surges or delays on the bridge validators' side, which caused the price slippage to reach maximum values and the swap to freeze, unable to be completed automatically. In such cases, users had to pay gas in intermediate networks, withdraw transactions, and restart them. The team quickly realized the flaws of such a solution and decided to move on.
In the summer of 2023, the Kinetex team, represented by founders Mike Shishko and Tigran Bolshoi, introduced a new approach to cross-chain swaps at the ETHGlobal hackathon in Lisbon, where they modified ZK Light clients from SuccinctLabs. This approach eliminated the need to wait for a response from third-party validators and pay gas and fees on both networks for each transaction. At the same time, the security of cross-chain interactions was ensured on each network's level.
Later that summer, at the ETHGlobal hackathon in Paris, the Kinetex team proposed a new standard based on intents and named it Flash Trade. The main difference between Flash Trade and complex omni-chain solutions is the separation of tasks and their delegation. It leads to ease of execution as there is no need to connect blockchains not initially designed for this. The team believes it is necessary to separate blockchains' operation, developers' requests to write apps on top of the blockchains, and user intents to perform certain actions as independent processes.
The Kinetex team also presented an updated look at moving liquidity between networks using light clients — without wasting time waiting for validators' responses and the mandatory need to pay for proof of each transaction. Instead, resolvers provide collateral in advance to a special smart contract that does not participate in the swap process but is only responsible for the maximum possible order size that each resolver can fill.
Suppose a resolver has 1 million in the collateral contract. It means that it cannot start filling one or several orders exceeding 1 million. To be able to reuse collateral, the resolver needs to update its state after ensuring that all transactions have been successfully completed and there are no debts left. Resolvers can update the state of their collaterals at any time; the main advantage is that there is no need to do so every transaction. For example, if a resolver has 1 million in collateral and has made 1000 transactions, they can update the state of all transactions at once. We call this feature "batch validation".
Thus, the Kinetex team came up with a model of decentralized P2P trading, where two on-chain transactions are created between a user and a resolver, where the resolver technically has the ability to process the transaction instantly in the first block. Moreover, the resolver fully pays all gas costs and takes on all transaction management and risks for the further sale of the user's asset. On the part of the user, all that is required is to sign with consent to the execution of the intent. As a result, we get the most significant optimization of gas costs, minimizing it to 60-80k gas units, which is a very high gas optimization compared to all current solutions on the market. We also avoid the need to use pools with trading pairs that allow MEV attacks and wrapped or virtual tokens, which bridges create in abundance.
Working with user intents is crucial in the existing market, given the current UX and UI problems, which makes it difficult to talk about quick mass adoption. Currently, users need to connect Web3 wallets constantly, own different wallets for different networks, switch to various networks, store gas on each network for any operations, and understand the procedure and consequences of such phenomena as price slippage, price impact, etc. Most users are intimidated by the complexity of the process, especially knowing that hackers often exploit user errors to launch attacks, taking advantage of users' limited understanding of the complex workings of backend systems. As a result, the importance of simplicity cannot be overstated.
The idea of Flash Trade is to delegate tasks to professional players, creating a marketplace of user intents. Let's imagine there is a certain level in the form of a decentralized network where users can send their order requests for free to the marketplace of professional players (resolvers), who will compete to fulfill them. The decentralized level serves as a filter between user requests and resolvers, filtering against spam, malicious intents, or failures from resolvers.
Thus, we get a pool of intents in the form of an auction, where users place their request for order execution. All resolvers are notified of each request and then compete for each request separately. The network appoints a winner for each order and provides the answers back to the users. If the best proposal matches the user's request, the user can sign the intent, permitting the resolver to execute it. In turn, the resolver commits to complete the order by blocking part of the collateral.
The Kinetex team plans to develop the intent-based approach further so that users can send any requests to the auction, including swaps, purchase or sale of NFT collections, direct replenishment to the pool, rebalancing or liquidating orders, etc.
The question of forming queries and a standard for intents remains open; at the moment, the team is looking for a suitable solution for standardizing intent queries.
At the end of December 2023, the Kinetex team uploaded a ZK light client for native Bitcoin called BTCX to the SuccinctX platform. In 2024, the Kinetex team plans to complete the integration of the ZK Light client into the Flash Trade protocol, which will open access to Bitcoin in DeFi, enabling direct swaps of BTC for ETH and other crypto assets. The main difference is that such a solution will not require pools storing BTC since any participant can deposit collateral and start processing orders as a resolver or send a request for a swap to resolvers. Resolvers will be able to connect liquidity between CeFi and DeFi, allowing them to execute routes in one transaction between networks. This way, there is also no need to combine a bridge and a DEX, for example, swapping the native BTC for a stablecoin or any other token in one transaction.