Fragmented liquidity is DeFi’s central scalability risk.

Opinion by: Hart Lambur, co-founder of Risk Labs.

Decentralized finance, or DeFi, is built on composability, but composability is breaking. As new chains proliferate, liquidity fragments and incentives weaken.

What was once a single shared environment has splintered into dozens of siloed markets. DeFi isn’t dead, but without the infrastructure that connects these environments, it may lose what made it powerful.

Fractured liquidity is becoming DeFi’s central scalability risk. While expanding to multiple chains was a natural response to Ethereum’s scalability limits, it has created a new class of problems.

Infrastructure, not ideology, will determine whether the multichain future strengthens or weakens the category.

Fragmented liquidity is DeFi’s core failure mode

DeFi protocols rely on deep, composable liquidity: a shared pool of assets that can be borrowed, swapped and layered into strategies.

In a multichain world, however, that assumption no longer holds. Liquidity is now spread across dozens of L1s, rollups and appchains. Aave is deployed on 17 chains; Pendle on 11.

These deployments are powerful on their own, but the liquidity they capture is chain-specific and often inaccessible outside the environment where it’s deposited.

This fragmentation creates fundamental inefficiencies: thinner markets, higher slippage and weaker user and protocol incentives. Even the best-designed economic models begin to break down when the liquidity they depend on is no longer dense. Protocols that worked seamlessly on Ethereum mainnet now struggle to deliver the same outcomes elsewhere — not because their models are flawed, but because the context they operate in has changed.

The shift to multichain has been necessary for scaling. But without a way to emulate composability across chains, it risks undermining the very foundations of DeFi’s success.

Multichain UX friction isn’t the root problem

Much of the attention in multichain DeFi has been focused on UX friction: switching wallets, acquiring gas tokens and jumping through bridge UIs (user interfaces). These are surface-level symptoms of a deeper problem: the lack of a unified execution layer. 

Users who try to execute even basic crosschain actions often encounter inconsistent interfaces, fragmented pricing and uncertain outcomes. In recent months, some progress has been made with swap-and-bridge solutions, but liquidity fragmentation and routing inefficiencies persist. 

Most of these systems rely on isolated…