DeFi is Dying
DeFi "dying" can sound a little dramatic, but it's kinda true. Defi has been immensely popular with the features it brought in. Trustless operations, Flash Loans, Yeild Aggregation and much more. Yet, as with any new technology, growing problems are inevitable in DeFi. Among these, liquidity fragmentation stands out as a long-standing problem that the crypto space needs to address. Liquidity fragmentation poses a significant challenge in the industry by hindering the optimal use of liquidity, resulting in volatility and inefficient market-prices.
Basics of Liquidity
Liquidity refers to how easily and seamlessly users can exchange/trade one crypto asset for another. DeFi heavily relies on liquidity; without it, majority defi protocols cannot function. Imagine you're on a DEX, and you want to trade one token for another. The amount of liquidity in that DEX determines how smoothly that trade can happen. If there's not enough liquidity for a particular asset, it can be a real headache. Low liquidity leads to slippage, which happens when the actual price you get for a token is lower than what you expected when you started a trade. In simpler terms, it's like ordering something online at a certain price but getting charged more when you check out. Slippage can work in your favor too, but it's usually not what you want.
DeFi Fragmentation: Divided we fall
DeFi is booming, there's no doubt about it. But there's a big problem: it's not connected. Imagine separate markets, each on its own island, with everyone speaking different languages. That's kind of what's happening right now. Take Ethereum, for instance. It's the big player in DeFi, with over half of all the crypto assets staked on it. Now, picture more than half of Web3's wealth being off-limits to DeFi users on other blockchains like Arbitrum, Avalanche, or Base.
There are two major issues:
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Single-chain fragmentation: This means that on one blockchain, you've got liquidity spread across different protocols. For instance, some Ethereum DApps like Uniswap, SushiSwap, and Balancer have a ton of liquidity, while others hardly get any attention.
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Cross-chain fragmentation: In this case, liquidity is spread out over different blockchains. So, defi protocols on newer chains struggle to tap into the massive liquidity found on Ethereum.
These problems are holding DeFi back. Imagine if all the islands were connected! Money would flow freely, everyone could access the best tools, and DeFi would explode. Sure there are Dex aggregators like 1inch and others, but the hassle to go through multiple bridges and swaps is overwhelming for any user.
This is what Rivendell is all about. We're building bridges between the islands, letting money flow freely, and making DeFi accessible to everyone. Our SDK supercharges your application in < 5 lines of code! Giving your users the superpowers to tap into liquidity and seamlessly execute Swaps, Bridging, Staking etc without any hassle. 🚀✨