Fragmented liquidity is a tax on capital efficiency and user experience. Every chain with its own isolated pools forces protocols to bootstrap from zero, creating systemic waste that protocols like Uniswap and Aave must repeatedly pay.
future-of-dexs-amms-orderbooks-and-aggregators
Blog
Why Shared Liquidity Pools Across Chains Are an Inevitable Evolution
The current model of isolated liquidity per chain is a dead end. This analysis argues that AMMs must evolve into cross-chain liquidity networks using shared sequencers and state proofs, or be replaced by intent-based systems that already abstract the problem away.
introduction
THE INEVITABILITY
Introduction
Fragmented liquidity is a structural defect in the multi-chain ecosystem that shared liquidity pools will correct.
Shared liquidity is a network effect that flips the economic model. Instead of competing for slices of chain-specific TVL, protocols aggregate capital across chains, creating a defensible moat similar to Ethereum's L1 dominance.
The infrastructure is now viable. Cross-chain messaging layers like LayerZero and CCIP, combined with intent-based solvers from UniswapX and CowSwap, provide the settlement rails for atomic, trust-minimized liquidity movement.
Evidence: Arbitrum and Optimism collectively hold over $3B in DEX liquidity, yet a user cannot natively access it from the other chain without paying bridge fees and slippage—a clear market failure.
key-trends
THE LIQUIDITY FRAGMENTATION TRAP
Executive Summary
The multi-chain future is here, but capital is trapped in isolated pools, creating massive inefficiency and user friction. Shared liquidity is the only logical endpoint.
01
The Problem: The $100B+ Capital Sink
Every new chain fragments TVL, locking assets in silos. This creates:\n- Inefficient capital utilization with billions sitting idle.\n- Poor user experience requiring manual bridging and multiple wallets.\n- Weaker security for smaller chains with shallow liquidity pools.
$100B+
Fragmented TVL
10+
Major Silos
02
The Solution: Universal Liquidity Layers
Protocols like Stargate, LayerZero, and Circle's CCTP are building the plumbing. The endgame is a unified liquidity network where:\n- One deposit serves all chains via canonical bridging.\n- Yield is aggregated across the entire ecosystem.\n- Composability is restored, enabling native cross-chain DeFi.
~2s
Finality
1-Click
UX
03
The Catalyst: Intent-Based Architectures
The shift from transaction-based to intent-based systems (UniswapX, CowSwap, Across) makes shared liquidity inevitable. Solvers compete to source the best liquidity across any chain, abstracting complexity from the user. This turns liquidity into a commodity.
-90%
Slippage
10x
Solver Efficiency
04
The Inevitability: Economic Gravity
Capital flows to the highest risk-adjusted yield. Shared pools offer:\n- Superior returns via aggregated fee capture.\n- Reduced impermanent loss from deeper, more stable reserves.\n- Protocol dominance for the first network to achieve critical mass, creating a winner-take-most dynamic.
50%+
APY Boost
Winner-Take-Most
Outcome
thesis-statement
THE INEVITABLE EVOLUTION
The Core Thesis: Isolated Liquidity is a Scaling Dead End
Fragmented liquidity across L2s and app-chains creates systemic inefficiency, forcing a shift to shared liquidity networks.
Isolated liquidity fragments capital efficiency. Each new rollup or app-chain creates its own siloed pools, duplicating assets and reducing yields for LPs. This is the direct cost of the multi-chain thesis.
Shared liquidity is a network effect. Protocols like Across and Stargate demonstrate that aggregated liquidity across chains reduces slippage and improves UX. This model will extend to generalized asset pools.
The end-state is liquidity-as-a-service. Future L2s will not bootstrap native liquidity; they will plug into shared liquidity layers like Chainlink CCIP or native Ethereum settlement pools. This is the scaling path.
market-context
THE LIQUIDITY TRAP
The State of Play: Fragmentation is Winning
The proliferation of L2s and app-chains has fragmented liquidity, making native cross-chain asset movement a primary user pain point.
Fragmentation is the dominant state. Over $50B in TVL is now distributed across dozens of L2s and app-chains like Arbitrum and Base. This creates isolated liquidity pools, increasing slippage and capital inefficiency for users and protocols.
Native bridging is a broken primitive. Moving assets via canonical bridges like Arbitrum's takes 7 days for withdrawals and requires manual liquidity provisioning. This forces users into a complex, multi-step process that fails the seamless UX standard.
Shared liquidity pools are inevitable. Protocols like Stargate and Across abstract this complexity by pooling liquidity across chains. They treat liquidity as a network-level resource, not a chain-specific one, which is the logical architectural evolution.
Evidence: The TVL in cross-chain bridges like LayerZero and Axelar exceeds $7B, proving demand for this abstraction. Intent-based architectures from UniswapX and CowSwap further validate the shift from chain-centric to user-centric execution.
LIQUIDITY FRAGMENTATION
The Fragmentation Tax: TVL & Volume Across Top L2s
Compares the capital efficiency tax of isolated liquidity pools across major L2s, highlighting the case for shared liquidity solutions like UniswapX, CowSwap, and Across.
| Metric / Chain | Arbitrum One | Optimism | Base | zkSync Era | Starknet |
|---|---|---|---|---|---|
TVL (USD) | $18.2B | $7.1B | $6.8B | $1.2B | $1.3B |
30D DEX Volume (USD) | $25.4B | $8.7B | $12.1B | $2.1B | $0.9B |
Volume/TVL Ratio (30D) | 1.4 | 1.2 | 1.8 | 1.75 | 0.69 |
Avg. Bridge Time (L1->L2) | ~10 min | ~3 min | ~3 min | ~15 min | ~1-2 hours |
Native DEX Liquidity Depth (>1% Slippage) | $12M | $5M | $8M | $1.5M | $0.8M |
Supports Intents (UniswapX, etc.) | |||||
Dominant Bridge for Liquidity Inflows | Arbitrum Bridge | Optimism Bridge | Base Bridge | zkSync Era Bridge | StarkGate |
deep-dive
THE INEVITABLE ARCHITECTURE
The Technical Paths to Shared Liquidity
Shared liquidity is the logical endpoint of multi-chain design, forced by user demand and enabled by new primitives.
Atomic composability is the goal. Users demand a single pool of capital accessible from any chain, eliminating the need to fragment assets. This requires intent-based routing and verifiable state proofs to coordinate actions across sovereign environments.
Bridges become settlement layers. Simple asset bridges like Stargate and Across are precursors. The end-state is a network where liquidity pools themselves are chain-agnostic, with protocols like UniswapX and CowSwap abstracting the settlement layer.
The winner is shared security. Truly unified liquidity requires a shared security model, not just messaging. This is why EigenLayer and Babylon are critical; they provide the cryptographic bedrock for cross-chain state verification that pure messaging layers like LayerZero cannot.
Evidence: The capital follows. Over $7B is locked in cross-chain bridges, a clear market signal. Protocols like dYdX moving to an app-chain yet needing deep liquidity prove the demand for a unified layer.
protocol-spotlight
SHARED LIQUIDITY
Who's Building the Future?
Fragmented liquidity is crypto's trillion-dollar inefficiency. These projects are stitching it back together.
01
The Problem: The $100B+ Cross-Chain Liquidity Sink
Every chain is an isolated pool. Bridging assets locks up capital in siloed, low-utilization vaults, creating systemic risk and massive opportunity cost.
- Capital Inefficiency: Billions sit idle in bridge contracts, earning zero yield.
- Fragmented Markets: DEX liquidity is diluted, increasing slippage by 10-30% on large trades.
- Security Debt: Each new bridge is a new attack surface; over $2B stolen in bridge hacks.
$100B+
Locked in Bridges
-30%
Slippage Penalty
02
The Solution: Universal Liquidity Layers (e.g., Chainlink CCIP, LayerZero)
Abstract liquidity from individual chains into a programmable network layer. Think of it as a global liquidity mesh where assets are fungible and composable across any chain.
- Programmable Liquidity: Smart contracts can pull liquidity from any connected chain, enabling native cross-chain DeFi.
- Risk Consolidation: Reduces the attack surface from N bridges to 1 verified network.
- Capital Efficiency: Unlocks 10-50x better utilization of locked capital via shared security models.
1 Network
vs. N Bridges
50x
Utilization Gain
03
The Execution: Intent-Based Routing & Solver Networks
The user declares what they want (e.g., "swap 100 ETH for the best-priced BTC on any chain"), not how to do it. Solvers compete to find the optimal route across the liquidity mesh.
- Best Execution: Aggregates fragmented DEXs (Uniswap, Curve) and bridges (Across) in a single atomic transaction.
- User Abstraction: Removes the need to manually bridge and swap; pioneered by UniswapX and CowSwap.
- Economic Flywheel: More liquidity attracts more solvers, which improves pricing, attracting more users.
~500ms
Route Discovery
20%+
Better Price
04
The Endgame: Sovereign Chains as Liquidity Consumers
In the future, new L1s and L2s won't need to bootstrap their own liquidity. They will simply plug into the shared liquidity network as a service.
- Instant Bootstrapping: New chains launch with access to $10B+ of global liquidity from day one.
- Modular Design: Separates execution (chain) from liquidity/settlement (shared layer).
- Protocol Dominance: The winning liquidity network will capture fees from every major chain, becoming the most valuable financial primitive in crypto.
Day 1
Liquidity Access
$10B+
Network TVL
counter-argument
THE FRICTION
The Bear Case: Why It Might Not Happen
The technical and economic friction preventing universal liquidity pools is a solvable engineering problem.
Sovereignty is a feature, not a bug. Chains like Solana and Arbitrum optimize for specific trade-offs in throughput and cost. Their native liquidity is a competitive moat. A shared pool risks homogenization and reduces the incentive for protocol-level innovation.
Cross-chain messaging remains a bottleneck. While protocols like LayerZero and Wormhole improve, atomic composability across chains is impossible. A swap on UniswapX that routes through a shared pool on Base and settles on Avalanche introduces latency and settlement risk that native liquidity avoids.
The economic model is unproven. Liquidity providers face fragmented yield and amplified impermanent loss across volatile, correlated assets. Protocols like Maverick and Gamma need to prove that cross-chain concentrated liquidity generates superior risk-adjusted returns versus single-chain strategies.
Evidence: The rapid adoption of intents via UniswapX and CowSwap demonstrates demand for aggregated liquidity, but these systems use solvers, not a unified pool. The success of Across, which uses a single liquidity pool for bridging, proves the model works for simple asset transfers but not for complex, stateful DeFi operations.
takeaways
THE END OF FRAGMENTATION
TL;DR: Implications for Builders and Investors
Shared liquidity is not a feature; it's a fundamental architectural shift that redefines capital efficiency and user experience across chains.
01
The Problem: The $100B+ Liquidity Silos
Capital is trapped in isolated pools across Ethereum, Arbitrum, Solana, and others, creating massive arbitrage inefficiencies and poor UX.\n- TVL Opportunity Cost: Billions in idle capital that could be earning yield or providing deeper markets.\n- Builder Friction: Launching a new chain or dApp requires bootstrapping liquidity from scratch, a $50M+ venture capital problem.
$100B+
Fragmented TVL
30-50%
Arb Spreads
02
The Solution: Intent-Based Aggregation (UniswapX, CowSwap)
Abstract the chain. Let users express desired outcomes (intents) and let a network of solvers compete to source liquidity from anywhere.\n- Capital Efficiency: Solvers tap into the best price across all pools, reducing slippage by ~20-60%.\n- Chain-Agnostic UX: Users get one-click cross-chain swaps without managing bridges or wrapped assets.
20-60%
Slippage Reduction
1-Click
Cross-Chain UX
03
The Infrastructure Play: Universal Liquidity Layers (LayerZero, Chainlink CCIP)
Messaging and oracle protocols are evolving into programmable liquidity routers. They don't just move data; they orchestrate value flow.\n- Composability: A single liquidity position on Ethereum can back stablecoin minting on Avalanche and perps on Base.\n- Security Primitive: Shared security for liquidity (via AVS models) becomes a more critical moat than pure TPS.
10x
Utilization Boost
AVS
Security Model
04
The Investor Thesis: Bet on Aggregation, Not Isolation
The value accrual shifts from individual L1/L2 sequencers to protocols that unify liquidity. The "liquidity black hole" wins.\n- Metrics to Track: Cross-chain volume share, solver network revenue, and aggregate TVL under management.\n- Pitfall: Chains that resist interoperability will see their TVL and developer activity slowly siphoned away.
Aggregation
Value Accrual
Volume Share
Key Metric
05
The Builder Mandate: Design for Omnichain from Day One
New applications must assume a multi-chain user base. Your tech stack must be chain-abstracted.\n- Architecture: Use account abstraction (ERC-4337) for gas-agnostic UX and universal liquidity layers for backend settlement.\n- Go-To-Market: Launch simultaneously on multiple chains; your liquidity is already there.
ERC-4337
UX Standard
Omnichain
Default State
06
The Endgame: Native Yield Becomes a Protocol Service
Liquidity is a utility. The winning networks will be those that offer the highest risk-adjusted yield sourced from the broadest possible capital base.\n- Protocol Revenue: Fees shift from L1 gas to liquidity routing and solver auctions.\n- New Primitive: Cross-chain rebalancing and yield aggregation become automated, baseline services.
Utility
Liquidity as
Routing Fees
New Revenue
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