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Uniswap and Across Protocol propose ERC-7683, a new API standard to combat liquidity fragmentation

Uniswap has partnered with Across Protocol to introduce ERC-7683, a proposed API standard aimed at streamlining cross-chain trading and addressing liquidity fragmentation.

ERC-7683 seeks to mitigate the liquidity fragmentation caused by the growing number of Layer 1 and Layer 2 networks. By establishing a “universal filler network,” it aims to facilitate seamless cross-chain swaps. Uniswap announced this initiative on May 28, although the initial proposal appeared on the Ethereum Wizards forum in April.

How ERC-7683 Works

With ERC-7683, traders can sign cross-chain orders, escrowing their funds into a settlement contract. Liquidity providers, acting as “fillers,” compete to settle trades at the best prices. Once a filler is selected, the trade is executed, and funds are released. This process not only reduces gas fees for traders but also lowers the entry barriers for fillers.

Across Protocol emphasized the benefits of a standardized approach: “When a protocol adopts intent-based execution, they need to build, attract, and retain their own relayer or filler ecosystem. ERC-7683 proposes a shared order structure so that a universal filler network can facilitate transactions.”

Uniswap highlighted the current fragmentation issue: “Today’s intents-based systems are fragmented, each with their own set of fillers and no unified cross-chain standard. By implementing ERC-7683, cross-chain intents systems can interoperate and share infrastructure.”

Addressing Fragmented Liquidity

The rise in the number of blockchains has led to liquidity being spread thinly across various web3 networks. L2beat, an on-chain data provider tracking Layer 2 networks, currently monitors the Total Value Locked (TVL) for 55 active chains and lists 43 upcoming projects—a nearly 50% increase since the start of 2024.

Bobby Ong, co-founder of the web3 data platform CoinGecko, noted the rapid proliferation of networks. CoinGecko expects to track over 1,000 networks in 2024, up from the current 158. Ong remarked, “Everyone is launching a chain. At this rate, all major crypto apps will have their own rollup.”

Conclusion

ERC-7683 represents a significant step toward resolving liquidity fragmentation in the blockchain ecosystem. By providing a standardized framework for cross-chain trading, it promises to enhance efficiency and reduce costs, benefiting both traders and liquidity providers.

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Disclaimer: Not Investment Advice

it’s crucial to understand that the information provided here is not to be construed as investment advice. The crypto market is dynamic and highly speculative, and decisions should be made based on thorough personal research and consideration of individual risk tolerance. Always consult with financial professionals and conduct your own due diligence before making any investment decisions. The intention of this exploration is to present insights and trends, not to provide specific investment recommendations.

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