Each chain is an island: a cryptographic liquidity crisis

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Opinion: Jin Kwon, co -founder and strategy director at the Saga

Crypto has gone through a long way to enhance transaction capacity. The fresh layer 1S (L1S) and side networks offer faster, cheaper transactions than ever before. However, the basic challenge focused: the fragmentation of liquidity-soothing capital and users in the constantly growing maze of blocks.

Vitalik Buterin, on the latest blog postHe emphasized how scaling of successes led to unforeseen coordination challenges. With such a vast number of chains and so high value, among them the participants stand in the daily tangling of bridging, swap and changing portfolios.

Although these problems affect Ethereum, they also affect almost every ecosystem. No matter how advanced, fresh blockchains risk “islands” that have difficulty connecting together.

Real costs of fragmentation

Fragmentation of liquidity means that there is no single “pool” of assets for traders, investors or decentralized financial applications (DEFI). Instead, each blockchain or side network hosts its own fluidity. For a user who wants to buy a token or access a specific loan platform, this silo introduces a lot of headache.

Network switching, opening specialized wallets and paying many transaction fees are far from trouble -free, especially for those less knowing technologies. The liquidity is also thinner in each isolated pool, which leads to price differences and a higher slip in transactions.

Many users resort to the bridges to transfer capital capital, but these were recurrent goals of feats, increasing fear and distrust. If the displacement of liquidity is too burdensome or risky, DEFs do not take on the mainstream of the shoot. Meanwhile, projects are trying to implement in many networks or a risk left.

Some observers are worried that fragmentation can lead people back to several dominant chains or centralized exchanges, undermining decentralized ideals that fueled the growth of blockchain.

Known corrections with strong gaps

There were solutions to deal with this tangle. Bridges and packed resources allow basic interoperability, but the user’s experiences remain embarrassing. Transitional aggregators can lead tokens through the swap chain, but generally do not combine base liquidity. They only support users move in this.

Meanwhile, ecosystems such as Cosmos and Polkadot bring interoperability in their framework, although these are separate kingdoms in a wider cryptographic landscape.

The problem is fundamental: each chain is perceived as separate. Any fresh chain or susceptibility must be “connected” at the ground level to really unite liquidity. Otherwise, it adds another liquidity island, which users must discover and stick. This challenge is found by chains, bridges and aggregators perceived as competition, which leads to a deliberate silo and making fragmentation even more clear.

Integration of liquidity in the basic layer

Integration in the basic layer concerns fluidity fragmentation by embedding the branching and routing function directly into the basic chain infrastructure. This approach appears in some protocols of layers 1 and specialized frames in which interoperability is treated as a fundamental element, not an optional supplement.

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Walidator nodes automatically support transition connections, so fresh chains or side networks can start with immediate access to the liquidity of wider liquidity of the ecosystem. This reduces relying on the bridges of other companies, which often introduce hazards of security and friction of users.

The challenges of Ethereum with heterogeneous solutions of layer 2 (L2) emphasize why integration is necessary. Different participants – Ethereum as a settlement layer, L2S focusing on execution and various bridge services – have their own motivations, which causes crushed liquidity.

Buterin references to this problem emphasize the need for more coherent projects. The integrated model of the base layer combines these components during the premiere, ensuring that capital can flow freely without forcing users to move in many portfolios, bridge solutions or rolls.

The integrated routing mechanism also consolidates asset transfers, imitating the united liquidity pool behind the scenes. By gaining a fraction of the overall liquidity flow, not charging users for each transaction, such protocols reduce friction and encourage capital mobility throughout the network. Developers implementing fresh Blockchains gain immediate access to a common base of liquidity, while end users avoid juggling with many tools or encountering unexpected fees.

The emphasis on integration helps maintain a trouble -free impression, even when more networks appear.

Not only the Ethereum problem

While the Buterina blog post focuses on Ethereum skates, the fragmentation is ecosystem-anti. Regardless of whether the design is based on a virtual machine -compatible Ethereum, a webassembly -based platform, or something else, the fragmentation trap arises if the liquidity is separated.

As more protocols are investigating the solutions of the basic layer-automatic interoperability in their chain design-hopes that future networks will not continue to fall capital, but instead support.

A clear rule appears: the capacity means little without connectivity.

Users should not think about L1S, L2S or Sidechains. They simply want trouble -free access to decentralized applications (DAPP), games and financial services. The acceptance will take place if the entrance to the fresh chain is identical to the operation in a known network.

Towards the united and liquid future

The concentration of the cryptographic community on the capacity of the transaction was revealed by the unexpected paradox: The more chains we create for speed, the more we fragmmia the strength of our ecosystem, which lies in its common fluidity. Each fresh chain aims to enhance capacity creates another isolated pool of capital.

Building interoperability directly in blockchain infrastructure offers a clear path because of this challenge. When the protocols automatically support transition connections and efficiently conduct resources, developers can develop without the breakdown of the user base or capital. Success in this model results from measurement and improvement, how liquid value moves throughout the ecosystem.

The technical foundations of this approach exist today. We need to implement them, paying attention to the user’s safety and experience.

Opinion: Jin Kwon, co -founder and director of the strategy at the Saga.

This article is used for general information purposes and should not be and should not be treated as legal or investment advice. The views, thoughts and opinions expressed here are themselves and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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