Fragmentation

When blockchains were created, there was one major ecosystem and that was Ethereum. However, soon after the scalability limits of Ethereum were reached and then came the Layer2s that were created to solve the scalability problems of Ethereum.

However, to solve scalability, so many competing Layer2s came out that the entire ecosystem got fragmented - further worsening the UX problems.

Let's discuss the types of fragmentations that were introduced.

Liquidity Fragmentation

In Web3, liquidity fragmentation occurs when assets and trading activities are spread across multiple blockchains, decentralized exchanges (DEXs), and protocols. Since assets are often native to specific chains, liquidity is siloed, limiting the ability to trade seamlessly across platforms.

For instance, users on Ethereum cannot directly trade with assets on Solana without bridging solutions, which can be costly, slow, and risk-laden. This fragmentation dilutes liquidity pools and increases slippage, making it harder to achieve efficient trading volumes and pricing across the ecosystem.

Data Fragmentation

Data fragmentation in Web3 refers to the separation of data across various blockchain networks, protocols, and storage solutions. Each blockchain maintains its own ledger, leading to isolated data silos that hinder interoperability and cross-chain applications. Consequently, data residing on Ethereum may not be directly accessible to applications on another chain, like Polkadot or Binance Smart Chain, without additional bridging mechanisms. This fragmentation complicates data analysis, cross-platform verification, and the creation of unified, user-friendly experiences across the decentralized ecosystem.

User Fragmentation

User fragmentation in Web3 is the challenge of maintaining a consistent user identity and experience across multiple chains and decentralized applications. As users interact with different wallets, chains, and protocols, their identities and activity histories become fragmented across platforms, making it hard to achieve a unified profile or reputation. This limits the ability of users to port their assets, data, and reputations across platforms seamlessly and can lead to redundant steps, such as creating new wallets or profiles on each application, ultimately impacting user experience and slowing ecosystem growth.

Plurality is working to de-fragment liquidity, data, and user fragmentation through its Open Context Layer