Ecosystem

What Problem Does Everclear Solve?

Learn more about the central problem of modular fragmentation

Modular Fragmentation

Fragmentation as the Central Problem 

The present blockchain landscape consists of fragmented ecosystems that are characterized by their lack of liquidity. Let’s have a closer look at the problem Everclear seeks to solve…

Understanding Modular Fragmentation

Introduction

In our introduction to Everclear, we’ve learned that a multitude of new blockchain ecosystems have started to emerge over the course of the last years. Along with these new ecosystems came a variety of new use cases for distributed ledger technologies, such as decentralized finance (DeFi) and Non-Fungible-Tokens (NFTs).

The exponential growth of blockchains and L2s is creating widespread liquidity fragmentation and UX problems. Crosschain bridges cannot fix fragmentation problems on their own. This is because bridges are bottle-necked by liquidity, chain support, and the cost of security.

How the Inefficiencies of Fragmentation Manifest

  1. Capital and labor requirements: The smart contracts, liquidity, and growth strategies of a dApp or blockchain need to be applied to every new chain in order to target users from that ecosystem.
  2. Attracting liquidity: New chains are required to gain the attention of the broader market to draw enough liquidity and to be considered worthwhile by bridges and LPs. This only happens for a small minority (the top 5-10% of chains).
  3. Intent-based bridges can only support a small number of chains: The solvers of intent-based bridges are highly centralized and only able to support a small number of chains. For this reason, solvers often use CEXs to rebalance. If this is not possible, rebalancing is expensive and complex.
  4. CEX limitations: The large liquidity requirements for supporting new chains make it not economically feasible to support any but the biggest blockchains.

Capital Requirements

Labor and capital-intense process for dApps wishing to add support for new blockchains

Liquidity Challenges

Liquidity is a key criteria for establishing crosschain functions between chains.

Limitations

Limitations such as limited support for a large number of blockchains create fragmented ecosystems

The central problem responsible for the highly fragmented ecosystem we are confronted with is that solvers, market makers, and CEXs are managing their liquidity in an isolated, noncooperative manner across blockchains. There is no mutual system used for coordinating capital flows and organizing settlement between chains.

When looking at providing liquidity in the present and in the future, we can see the big impact Everclear can have on a variety of use cases, ranging from simple asset transfers to powering complex DeFi contracts with no transaction fees.

Ecosystem