Is Liquidity Fragmentation Really That Bad?


Previously viewed negatively, having pools on multiple DEXes is now advantageous due to advancements in aggregators’ routing and AMM design. Bluechip token communities are encouraged to embrace this change for diversified liquidity sources.

In DAO discussions, “liquidity fragmentation” often comes up, usually in opposition to new DEX pools. But it’s not inherently negative. Think of fragmentation as diversification, especially relevant in a token’s life cycle: first as a farming vehicle, then as a store of value*.

Initially, a token’s liquidity and transactions are mostly community-based. A standalone DEX swap widget is the best facilitator here. It’s more straightforward, offers deeper liquidity, and avoids the confusion of multiple DEX options.

When the token evolves into a store of value, it attracts outside traders, often using aggregators like 1inch, focusing on trading costs and slippage.

Aggregators collect quotes from various DEXs, so having liquidity pools on different DEXs enhances overall liquidity. The same dollar can have different effects across DEXs due to their unique high capital efficiency designs, providing competitively priced liquidity even with smaller pools. This highlights the strategic importance of diversifying liquidity, not only in quantity but also in efficiency and pricing.

Consider Lido’s LoL team’s strategy: they observed most w/stETH order flows through aggregators and hence targeted overall on-chain liquidity, incentivizing at least 7 DEXs by September 2023.

For token-centric products, like LSTs, managing slippage is key. High slippage, like in ETH to stETH swaps, can deter users.

Diversifying liquidity sources also mitigates risk. Recent concerns about platforms like Curve emphasize this.

For growth-stage projects, strategic liquidity planning is crucial, but managing multiple pools is challenging. Rocket Pool’s IMC mentions the increased effort required from management and LPs.

Here, Integral offers a solution. In 2023, the DEX cleared about $1.2 billion in volume. The Ethereum pools, like the ETH-USDC pool with only $800k liquidity, processed daily volumes five times their size, while its Arbitrum counterpart offers ~40% swapping fee APR. This makes Integral a prime choice for token projects exploring liquidity options.

Integral aims to simplify concentrated liquidity management in 2024, becoming a key player in farming.

Traditionally, managing concentrated liquidity was complex. Token projects had to adjust incentivized ranges, and LPs needed to actively manage positions. Integral transforms this, streamlining the process. Projects just create a pool, add rewards, and benefit from efficient liquidity placement, competitive quotes, and reduced slippage.

If you’re part of a token project and interested in using Integral for your on-chain liquidity, drop us a DM on twitter.

Remember, on Integral, every bit of liquidity is CONCENTRATED.

* some might categorize it as a unit of account.

None of the information contained here constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy.


Integral Insights


June 13th, 2024

Integral Insights May ‘24


June 6th, 2024

How to Participate in the Arbitrum Rewards Campaign

125,000 $ARB will be dedicated to a 3-month liquidity mining program focusing on store-of-value (SoV) token pairs such as WETH-USDC, WETH-USDT, WETH-wstETH, and WETH-ARB.


June 6th, 2024

Unlock High Yields with Integral's $225K ARB Grant from Arbitrum Foundation – Join Our Liquidity Mining Program Today

Integral has been awarded a significant grant of 225,000 $ARB from the Arbitrum Foundation under the Long-Term Incentive Pilot Program (LTIPP). This funding will drive the growth and adoption of Integral on Arbitrum, benefiting the entire ecosystem. With 125,000 $ARB dedicated to a 3-month liquidity mining program focused on key token pairs like WETH-USDC and WETH-ARB, liquidity providers can enjoy high yields and reduced trading costs. Additionally, 100,000 $ARB will be allocated to incentivize integrations with aggregators, solvers, and vaults, fostering a more interconnected DeFi environment. Join us and be part of this exciting journey to enhance liquidity and trading on Arbitrum!


May 9th, 2024

Integral Insights April ‘24

The combined average daily volume across Ethereum and Arbitrum is now at 8.8 million USD, a remarkable 22% increase compared to last month.


April 25th, 2024

Introducing New Pool Analytics: Elevate Your Liquidity Provision Experience

A standout feature in our latest update is the "LP vs Hold" tab, which provides a comparative analysis of various holding strategies against Integral's LP positions.


April 1st, 2024

Integral Insights March ‘24

We achieved several important milestones, including a new all-time-high daily volume for Arbitrum and the addition of four new pools on the Ethereum mainnet.


March 4th, 2024

Integral Insights February ‘24

Another milestone was reached on February 21st when Integral processed over $2 billion in cumulative volume.


February 1st, 2024

Integral Insights: January ‘24

Our initial launch with the ETH-RPL pool was a success, quickly elevating us to the second most utilized liquidity pool for this pair’s trading.


January 17th, 2024

Is Liquidity Fragmentation Really That Bad?

When the token evolves into a store of value, it attracts outside traders, focusing on trading costs and slippage. This is when concentrated liquidity truly shines.


January 2nd, 2024

2023 Review

At Integral, our focus remains on developing a sustainable product for on-chain trading, serving both traders and liquidity providers.


December 12th, 2023

Integral Now Rewards Liquidity Providers with Trading Fees on Ethereum Mainnet

This enhancement enables liquidity providers (LPs) to directly receive a portion or all trading fees from Integral pools.


December 6th, 2023

Integral Insights: November ‘23

During November, Integral processed an average of approximately 6 million in volume with around 1.5 million in TVL. The system’s overall capital utilization sits at around 350%. It is the 10th most used DEX on Ethereum.


November 28th, 2023

Integral Now Rewards Liquidity Providers with Trading Fees

This enhancement enables liquidity providers (LPs) to directly receive a portion or all trading fees from Integral pools.


November 15th, 2023

How Do University Blockchain Societies Gain So Many Votes?

Explore how university blockchain societies like FranklinDAO and Michigan Blockchain have grown into influential players in DAO governance, utilizing delegated votes and strategic partnerships to shape the future of DeFi protocols like Uniswap, Compound, and Aave.


November 6th, 2023

Integral Insight: October ‘23

We give an update for our work in October and highlight a profitable LP position from a long-term user.


October 26th, 2023

Understanding the Stakes in Lido’s Growing Share of Staked ETH

The community is arguing whether a protocol may have too much control over the Ethereum network. Lido controls a large percentage of staked ETH, which could have consequences for the network’s future security and neutrality.


October 14th, 2023

Changes to Staking and Farming

Looking back at our progress so far and to the future with new updates to staking and farming.


October 11th, 2023

Integral Insight: September ‘23

We give an update for our work in September with utilization going up on higher volume for our new pools.


October 11th, 2023

The Hottest Narratives of the Summer

What were the hottest narratives of the summer? Our DeFi research team delves into the growth of trading bots, RFV traders and more in this overview.


October 2nd, 2023

Uniswap Governance: A Deep Dive

Governance is considered a critical component for the decentralization and community-driven development of DeFi protocols. We take a look at one of the largest goverance ecostystems in DeFi, Uniswap. In this blog post, we'll discuss the landscape of Uniswap's governance, pulling data from empirical research to dissect the system's delegates and proposals, revealing some interesting findings.