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Homepage > News > Finance > DeFi liquidity is fragmented—scalable blockchain is the solution When I first heard about decentralized finance (DeFi), I was highly skeptical. However, as the years have rolled on and I’ve learned more, I now believe that, done right, it has revolutionary potential with hugely beneficial implications for financial inclusion, transparent lending and borrowing, and remittances, to name a few things. However, DeFi has a problem. With Total Value Locked recently surpassing $120 billion, liquidity is fragmented across dozens of unscalable blockchains tied together by a tangled web of bridges. Worse yet, these blockchains have different consensus mechanisms, data structures, and smart contracting formats that inhibit interoperability. This is inefficient and costly, ruins the user experience, and introduces security vulnerabilities that need not exist. Let’s take a closer look at these and some other issues before exploring how a single scalable blockchain can solve them. Fragmented liquidity and its discontents Fragmented liquidity is a problem for DeFi in and of itself: just as the United States dominates the world financial system because of its deep capital markets, easy accessibility, and the network effects of the U.S. Dollar, DeFi would benefit from something similar. However, the fragmented state of DeFi and the need to transfer between incompatible blockchains causes several other problems, some of which slow the adoption of the technology. Reduced efficiency – Anyone who has traded on so-called decentralized exchanges knows about and likely loathes the term slippage. Essentially, it’s when a trade is executed at a different price than the one requested. One of the main reasons for slippage is thin liquidity, caused by providers spreading their capital across multiple protocols and blockchains. Increased costs – While blockchains like Solana, Tron, and BNB have respectable Total Value Locked figures in the billions, Ethereum has…