Eliminate the cost of on-chain trading

tldr;

• You don’t get market price on your trades, because DEX fees, gas costs and price impact harm your price.
• But you can remove all these costs and get close to market price, even on very big and very small swaps.
• Patient intents make this possible: If you can wait, you can trade P2P without price-impact, let others pay for your gas, and even pay lower fees on DEXs. 

You always pay more than market price

When you trade on-chain, you rarely get the market price. Usually, your price is worse.

Your normal price is 0.1–20% above market price. This is why:

• DEX fees: DEX pools charge fees, usually 0.3%. On a 1m trade routed through two pools, that's 6k – a significant cost.
• Price-impact: The bigger your trade, the more you move the DEX price. Take a 100k trade on a token with 5m liquidity: you’ll easily pay 10% above market price.
• Gas: On small trades < 10k, gas costs can inflate your price just as badly. When gas is high, a swap can cost 50 USD – this is 5%(!) on a 1k trade.
• Market lag: DEX prices randomly fluctuate 1% above and below market price. So if you’re unlucky, you’ll pay another 1%.

In total, you usually pay ~ 0.3–20% above market price.

But you can remove these costs. You can get clost to the market price, and in some cases even beat it.

Intents that get you market price

Intents, some patience, and having a solver on your side can get you market price:

• Pay less DEX fees: Prove you’re not a bot and DEXs will reduce the fees you pay.
• Zero price-impact: Maximise how much you settle P2P at market price.
• Get gas for free: Let others, who have less patience, pay for your gas.
• Pick the right moment: Wait for DEX prices to align with the market.

Let’s look at each of these in turn. First, how can you get lower DEX fees by proving you’re not a bot?

Remove trading fees by proving you’re not a bot

DEXs charge high trading fees. This isn’t because their cost of capital is so high – it’s mainly because DEXs need to cover the losses they make to arbitrageurs.

The Uniswap v2 WETH/USDC pools alone have lost USD 244m to arbitrageurs (Dune query).

The problem is that DEXs can’t yet tell the difference between you and an arbitrage trader. So to compensate for the inevitable loss to arbitrageurs, DEXs charge high fees to everyone.

But things are starting to change. If you can prove to a DEX that you’re not a bot, some will already charge you lower fees!

Prove you’re not a bot with a “patient intent”

How can you prove you’re not a bot, in a way that can’t be gamed?

One thing arbitrage bots can’t tolerate is a slow settlement. They need to settle quickly to make a profit and not be overtaken by other bots.

Speed is such a strict requirement for bots, that if you simply prove that you’re not in a hurry you also prove that you’re not a bot.

You can prove you are not in a hurry by signing an intent that does explicitly not guarantee you instant settlement (a “patient intent”). Any DEX can then specify that patient intents pay a lower fee.

Some DEXs already do exactly this: For example, you pay 80% less fees if you trade on Balancer with a patient intent (Balancer introduced this rule on May 2023).

In the future, more DEXs will reduce fees for traders and make it harder for bots to take advantage of the DEX.

Remove price-impact with P2P trades

But in theory, only two reasons make it unreasonable to offer you market price:

1. Your trade is signal: Your trade changes the market’s opinion of the value of the token. For example, if you’re a well known fund and buy a large bag of a small-cap token.
2. You’re an insider: You could know information that the market does not. For example, you’re an arbitrage bot, or a team-member of the protocol.

But if your trade is not signal for the market, and if you’re not an insider, you should be able to buy at market price – at almost any size.

The reason you still pay price-impact is because the DEX doesn’t know whether or not you are signal or could have inside information. It has to give everyone the same treatment.

To avoid paying price-impact, you can either:

1. Prove to the DEX that you’re not an insider;
2. Avoid going through a DEX altogether.

With some DEXs, for example Integral, you can take the first route. If you trade with Integral, you commit to settling at the TWAP in 30 mins, something a short-term signal trader or bot would never do. In return, you can settle at zero price-impact on high mcap tokens like WBTC and WETH.

Avoiding DEXs is the second route, by trading directly (P2P) with other traders. P2P, you can agree to settle at market price, and neither of you suffer price-impact.

But, it’s rare to find someone who wants to trade the same amount, at the same time. To settle – especially large trades in illiquid tokens – you must do more than simply asking an OTC desk.

How intents get you more P2P trades

You can increase your chances of settling your trade P2P with ring trades and by aggregating counter-parties over time.

Ring trades are P2P trades between N parties instead of just two. If you express your trade as an intent, a solver can wait and find ring trade opportunities.

A solver can collect all P2P opportunities over a period of time until they total the amount you want to trade, or wait for a large-enough single counter-trade. Here again, you can use ring trades to increase the number of opportunities that suit your trade. 

We’ve seen how intents and solvers can remove the main costs of big trades. But what about small trades?

Let someone else pay for your gas

Gas is expensive, especially when you want to trade smaller amounts. But you can avoid paying for gas if you use intents smartly.

Let your P2P counter-party pay for your gas: If someone else wants to sell a token quickly, they can either settle on a DEX, and pay the DEX fee and gas, or they can settle with you, and just pay the gas for the P2P transfers. Even if they pay your share of the gas on the P2P trade, it’s usually cheaper for them – and so they will take that option if you offer it.

Ride-share with other traders: Another way to reduce your gas is to share the DEX gas costs with other traders using the same pool. If you only make up a small part of the trade volume (say 10%), you also only need to pay 10% of the gas costs.

Again, patient intents can remove most of your gas costs.

This leaves only one cost: Being unlucky with the DEX price.

Wait for the DEXs to align

We mentioned that DEX prices randomly fluctuate +-1% around the true market price.

The solution here is simple: Wait until the moment when DEXs are on the upward swing. With an intent and a solver that closely monitors the market, you can capture just that moment. And this way you sometimes can even settle at better than the market price.

Summary

The costs of DeFi trades seem set in stone: Price impact, gas costs, DEX fees and market inefficiencies.

But if you use intents and have a solver on your side, you can truly settle at market price by letting others pay for your gas, proving you’re not a bot, and finding smart P2P matches. 

This isn’t just theory; we’re building solvers that support patient intents.

Call for alpha partners: If you’re as excited as us to reduce >90% of the cost of defi trades, write us for early access to patient intents:

• DEXs & LPs: If you want to loose less to bots and attract more retail swaps.
• Traders & Dapps: If you spend a lot on gas (small trades) or price-impact (large trades) and look for ways to execute your trades closer to market price.