🏇Dynamic Delegation

Dynamic Delegation through ERC-4337

We discussed the merits of dynamic delegation before, but how does it relate to the BalloonDogs thesis?

Note, for a quick overview of the foundational article ERC-4337 delegation benefits.

Process State Changes

The BalloonDogs DSN generates ERC-4337 calldata that encapsulate state changes.

Imagine a user aiming to leverage assets across blockchains for optimized lending rates. BalloonDogs' decentralized algorithm generates (solves) the ERC-4337 calldata that captures the execution plan:

This sequence illustrates dynamic delegation navigating cross-chain financial maneuvers.

  1. Initial State: User holds assets on Chain A.

  2. Withdrawal: Assets are withdrawn from Chain A, an ERC-20 approval limited to the specific withdrawal transaction.

  3. Bridging: Assets are bridged from Chain A to Chain B, an approval restricted to the bridging operation.

  4. Deposit: Assets are deposited into a lending protocol on Chain B, and approval is granted for the deposit transaction.

  5. End State: The user's assets are now deployed on Chain B, earning interest.

Use Case Examples

  1. Defi: Cross-chain Swaps In a cross-chain swap scenario, the BalloonDogs DSN generates ERC-4337 calldata that include the precise steps for withdrawing assets from an AMM platform on one chain, bridging them to another chain, and depositing them into a liquidity pool on the destination chain. Each step is accompanied by ERC-20 approvals strictly limited to the specific EVM interaction.

  2. NFTs and Gaming: Cross-chain Asset Interaction Dynamic delegation supports the interaction between NFTs and gaming assets across chains. For example, a user might want to acquire an NFT on one chain and use it within a game on another chain. The DSN's execution plan ensures that permissions are granted only for the specific actions required, such as transferring the NFT and interacting with the game contract.

  3. Staking and Liquid Staking: Granular Asset Management Staking and liquid staking involve multiple state changes, each requiring precise authorization. With dynamic delegation, the DSN generates ERC-4337 calldata that permissions each action, such as liquid staking on a primary platform and moving assets for restaking.

  4. DAO Governance: Targeted Voting Permissions Dynamic delegation extends to DAO governance, an unconventional but pragmatic Web3 use case in which users benefit from cross-chain voting without exposing their assets to unnecessary risk. The ERC-4337 calldata generated by the DSN includes permissions limited to the voting process to protect the user's voting rights, which are exercised precisely as intended.

Advantages Over Conventional Delegation Methods Dynamic delegation, as implemented by BalloonDogs using ERC-4337, offers significant advantages over traditional delegation methods:

  1. Decision Making: BalloonDog's decentralized algorithm navigates diverse options as conditions mature to exercise Intent options on behalf of the user.

  2. Granular Permissions: Unlike blanket approvals or pre-signed transactions, dynamic delegation enables users to grant permissions per transaction basis, minimizing the risk of unauthorized access to their assets.

  3. Enhanced Security: By limiting permissions to the specific actions required to execute a user's Intent, dynamic delegation significantly reduces the attack surface and potential for malicious exploitation.

  4. Improved User Experience: Dynamic delegation abstracts the complexities of managing multiple approvals and transactions, providing a seamless user experience.

  5. Flexibility and Composability: The ERC-4337 standard enables the creation of highly flexible and composable delegation systems, allowing for the execution of complex, multi-step Intents across various blockchain ecosystems.

Current Intent Solutions Relying On Coarse Delegation

Case Study: Swap Operation

In a known DEX Intent solution, users must provide the platform's router contract with unrestricted access to lump token balances. This broad permission introduces unnecessary persistent risk beyond a single transaction scope. BalloonDogs, conversely, utilizes dynamic delegation to specify permissions solely for the tokens and amounts involved in the swap.

Swap's Balancer Vault Permissions

Another known solution integrates it with Dex vaults for asset management, necessitating wide-ranging user approvals.

While these approaches may streamline certain operations, they expose users to increased risk by granting broad permissions beyond the specific Intent being executed.

Intent ERC-4337 calldata contains granular permissions, i.e., approving the precise token amount for the Intent.

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