Cryptovas Liquidity Crisis – TradingView News

Opinion: Jin Kwon, co-founder and chief officer of the Main Strategy in Saga

Cripto has come a long way in increasing the transaction flow. The new layer 1s (L1S) and side networks offer faster, cheaper transactions than ever before. However, the basic challenge came to focus: fragmentation of liquidity – waste capital and users over the growing maze of ccvice.

Vitalic Baterin, in a recent place of blog, pointed out that scaling success led to unforeseen coordination challenges. With so many chains and so much values ​​that developed between them, participants face the daily bridging plot, replacement and transfer of wallet.

Although these issues affect Etherum, they also affect almost every ecosystem. Regardless of how advanced, a new block block risks to become a liquidity of “islands” that struggle to connect each other.

Real fragmentation costs

Liquidity fragmentation means that there is no “pool” property for traders, investors or decentralized funding applications (definitized). Instead, each block or side network hosted its own hair liquidity. For a user who wants to buy a token or approaches to a particular borrowing platform, this rape introduces multiple headaches.

Switching networks, opening specialized wallets and payment of multiple transaction fees are far from seamless, especially for those less technical smart. Liquidity is also diluted in every isolated pool, leading to the inequality of prices and greater slipping on trade.

Many users resort to bridges to cross capital over chains, but they were frequent targets for feat, raising fear and distrust. If it is too bulky or is risky to move liquidity, definitely fails to get the main momentum. Meanwhile, the projects are prevented in order to deploy more in multiple networks or risk to stay behind.

Some observers care that fragmentation could take people to several dominant chains or centralized exchange, undermining decentralized ideals that encouraged Blocchaine to grow.

Famous repairs, with steady gaps

The solutions appeared to deal with this tangle. Bridges and wrapped assets allow basic interoperability, but the user experience remains cumbersome. CrossChain generators can be routed from the chain through the swing chain, but they generally do not connect basic liquidity. They just help users move with him.

Meanwhile, ecosystems such as space and polkadotes bring interoperability within the framework, although separate Krajina is in the wide crypto landscape.

The problem is the fundamental: each chain views only as different. Each new chain or under the network must be “attached” at the country level to truly unite liquidity. Otherwise, it adds another island of liquidity that users must discover and premise and premote. This challenge is complex with chains, bridges and aggregates that sit as competition, leading to intentional and fragmentation even more pronounced.

Integrating liquidity in the basic layer

Integration in the basic layer deals with the fragmentation of liquidity by incorporating bridging and directing functions directly into the basic chain infrastructure. This approach appears in certain layout protocols and specialized frameworks, where interoperability is treated as a fundamental element, not an optional allowance.

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Validator nodes automatically process crosschain connections, so new chains or side networks can be launched with current access to the ecosystem. This reduces reliance on bridges on third parties that often introduce customer safety risks and friction.

Etherum’s own challenges with a heterogeneous layer-2 (L2) solutions underlines why integration is necessary. Different participants – Etherum as a layer of settlement, L2 focuses on execution and various bridging – have their motivations, resulting in fragmented liquidity.

Baterin’s references to this question indicate the need for more cohesive designs. The integrated basic layer model brings these components together on launch, ensuring that capital can freely flow free without coercing the user to move with more banknotes, bridge and rollups.

The integrated routing mechanism also consolidates property transfers, imitating a unique liquidity pool behind the scene. By recording the entire liquidity flow fraction, not charging users for each transaction, such protocols reduce friction and encourage capital mobility across the network. Developers who arrange new blocks receive current access to a common liquidity, and end users avoid juggling more tools or find unexpected fees.

This emphasis on integration helps maintain inappropriate experience, even how multiple networks come online.

Not only Etherum problem

While the Baterin’s blog post focuses on Etherum’s Rollep, the fragmentation is an ecosystem-agnostic. Whether the project is built on an Etherum virtual machine compatible chain, a seat-based platform or something, and the fragmentation trap becomes liquidity of the fence.

As multiple protocols explores base layer solutions – installing automatic interoperability in their chain design – hopes that future networks will not further disseminate capital, but also instead united.

A clear principle arises: bandwidth means a little without connecting.

Users should not think about L1S, L2S or SIDECHAINS. They just want to be an imperceptible approach to decentralized applications (Daps), games and financial services. The adoption will follow if collected to a new chain feels identical to the business on the famous network.

According to a unique and fluent future

The focus of Cripto Community on the transaction flow detected an unexpected paradox: the more chain we create for speed, the more we fragment the strength of our ecosystem, which is in its common liquidity. Each new chain intended to increase capacity creates another isolated capital pool.

Construction of interoperability directly in BlockCain infrastructure offers a clear path through this challenge. When protocols are automatically managed by crosschain connections and effective that developers can be expanded without breaking up their customer base or capital. Success in this model comes from measuring and improving how smoothly moves through the ecosystem.

Technically foundations for this approach exist today. We have to think, with the attention of security and user experience.

Opinion: Jin Kwon, co-founder and officer of the Main Strategy in Saga.

This article is for general information on the need and should not be taken as legal or investment advice. The views, thoughts and opinions are presented here, the author itself is not necessarily reflected or represent the views and opinions of the cointelegraph.