Liquidity Fragmentation Poses Significant Threat to DeFi Ecosystem
The DeFi ecosystem faces a paradox: while the technology is mature, securing sustainable liquidity has become increasingly difficult. Key points include:
- Liquidity is fragmented across protocols and chains, making it challenging for new projects to attract users.
- Traditional "cost of capital" has shifted to "cost of liquidity," complicating capital acquisition without standardized pricing frameworks.
- Venture capital-backed projects experience tension between needing liquidity and the dilution of token holdings caused by aggressive incentive programs.
- Lack of transparency leads to information asymmetry, with established players controlling capital flow and new protocols lacking market visibility.
- A proposed solution is a neutral liquidity layer that enhances connectivity between capital and protocols, offering:
- Visibility into liquidity costs
- Risk-adjusted benchmarks
- Sustainable incentive models
- Transparent risk metrics for capital providers
- Standardizing liquidity coordination is essential for efficient capital flow and sustainable growth in the DeFi space.
The demand for liquidity is infinite, while supply remains limited, highlighting an urgent need for improved infrastructure and pricing mechanisms.