In recent years, Web3 has become a hotbed of innovation, bringing forward radical ideas around digital ownership, decentralized economies, and user-controlled data. Yet the ecosystem is still grappling with a critical obstacle: fragmentation. Fragmentation across liquidity, user attention, and user experience is stifling Web3's growth and preventing its many innovations from reaching mainstream adoption. As the landscape matures, these fractures must be addressed to achieve a truly interconnected, thriving Web3 ecosystem.
Fragmented Liquidity: Locked Resources and Systemic Inefficiency
One of the most pressing issues in Web3 is liquidity fragmentation, where digital assets and funds remain locked within isolated chains, significantly limiting the financial flows that could otherwise support a dynamic, interconnected ecosystem. Web3's current structure means that each blockchain operates as its own economic island, with assets such as Ethereum's ETH or Binance's BNB unable to flow easily across borders to other chains. This isolation has real consequences: it limits capital efficiency, leads to price discrepancies, and creates a barrier for users and developers who need liquidity to access the best opportunities across the ecosystem.
For example, in 2023, DeFi's total value locked (TVL) reached approximately $47 billion, yet the majority of these assets remain siloed within individual blockchains, including Ethereum, BNB Chain, and Solana. This isolation not only stifles cross-platform transactions but also hampers innovation. When liquidity is trapped within individual chains, smaller networks struggle to attract sufficient trading volumes or financing, reducing the competitive opportunities that make Web3 so attractive in the first place. A report from Messari notes that this fragmentation leads to inefficiencies across the board—such as price inconsistencies on decentralized exchanges and liquidity shortages in smaller or emerging chains, which ultimately drive up transaction costs and discourage cross-chain engagement.
Further complicating matters, this lack of liquidity mobility reduces the scalability of Web3 projects, which must often reinvent the wheel to build solutions for isolated user bases. Without unified liquidity, price volatility and arbitrage risks are amplified, increasing risks and costs for end-users. For instance, differences in token prices across chains can widen, making it difficult for users to get fair pricing when transacting on multiple platforms. This isolation stifles the user experience and prevents the network effects Web3 needs to expand beyond its early adopters.
Fragmented Attention: A Dispersed User Base
In Web3, user attention is spread thin across countless projects, platforms, and blockchains. Unlike centralized platforms like Facebook or Google, where user engagement is aggregated and easily directed, Web3 ecosystems are splintered into isolated applications, each struggling to capture user interest. Chainalysis research from 2023 highlights that only a fraction of crypto users engage with more than two dApps, and even fewer participate across multiple chains. This splintered attention creates isolated user communities and limits the powerful network effects necessary to sustain and grow a robust ecosystem.
Moreover, discovery within Web3 is challenging. Unlike Web2, where algorithms and personalized recommendations guide users to new content, Web3 lacks a "Netflix-like" discovery mechanism that would enable users to explore new dApps and projects seamlessly. DeFi users, for instance, must often search decentralized exchanges without any easy-to-use discovery tools, making it hard for even experienced users to explore new, relevant opportunities across the space.
Fragmented User Experience: Complexity and Friction
For most users, Web3 still feels complex and inaccessible, with fragmented user experiences standing as a major adoption barrier. Even seemingly simple transactions across chains require navigating multiple wallets, using bridges, and absorbing fees. A recent DappRadar report identified user onboarding as a primary obstacle, noting that most users abandon Web3 applications because of the friction involved in managing assets across wallets and converting tokens across various chains.
Consider the experience of moving assets from Ethereum to Solana. It's rarely a few clicks. Users must navigate complex UIs, switch wallets, interact with bridges, and contend with fees. The Block's 2023 survey found that 70% of respondents felt that blockchain complexity discouraged them from engaging more actively, underscoring the need for dramatic usability improvements. Without reducing these frictions, Web3 cannot scale to mainstream users accustomed to the convenience of Web2.
The Solution: Building a Liquidity Superhighway for Web3
The answer to Web3's fragmentation lies in creating a "liquidity superhighway"—a connective infrastructure that enables fluid movement of assets, users, and engagement across chains, applications, and platforms. This is the critical next step to achieving the scalability and network effects necessary for Web3 to rival Web2.
Imagine a universal liquidity layer that any Web3 project could access, facilitating the flow of assets, users, and engagement across the ecosystem. This "liquidity superhighway" would transform Web3 in several fundamental ways:
- For Users: With universal liquidity, users could explore dApps, engage in activities across chains, and manage assets without concern for specific wallets or fees. This would create a seamless experience similar to Web2 platforms like Netflix or YouTube, offering users a one-stop portal for all their Web3 activities.
- For Developers: Developers would gain access to an aggregated user and liquidity base, drastically reducing the friction involved in reaching new audiences across chains. By building chain-agnostic apps that draw on this universal liquidity layer, developers could focus on innovation without needing to deploy isolated instances for each chain.
- For Investors: A unified liquidity layer would offer investors transparent adoption metrics and real-time usage data, making it easier to evaluate projects based on actual financial flows and engagement. By investing in infrastructure that promotes connectivity across Web3, investors could support projects that align with the future of a truly interoperable Web3.
Web3's fragmented state across liquidity, user attention, and user experience is holding it back from reaching its potential. Establishing a liquidity superhighway—an integrated network where assets, users, and information flow freely between chains and platforms—is essential to overcoming these obstacles and achieving the promise of decentralization, democratization, and digital sovereignty.
About Ezra Strauss and Portal
Ezra Strauss, formerly of Immutable, is the General Manager of Portal, the leading builder of the distribution layer for Web3 and beyond. Portal is an ecosystem that brings together users from every chain and connects them with the best apps in the space, starting with gaming. Via frictionless products, a pioneering liquidity layer, and a world-class network, Portal is aggregating users into a single, vibrant ecosystem. Builders of top-level games and dApps can now focus on creating world-class experiences on any chain—Portal is connecting them to users from around the world. Portal's advisors include Jamie King, Rockstar Games Co-Founder; Russell Hanson, former CSO of Consensys; Matt Dixon, former Head of BD, EA Games; and John Yao, CEO of Team Secret eSports. Portal is proudly represented by WME. For more information, follow Portal on X: https://x.com/Portalcoin.
