One Layer to Rule Them All: Everything Protocol Tackles DeFi Fragmentation

Everything Protocol has released a new whitepaper outlining its proposed solution to one of DeFi's most pressing issues: fragmented liquidity. The protocol claims that by combining swaps, lending, leverage, and limit orders into a single reserve for each token pair, it can increase capital efficiency and reduce dependencies between protocols.

The traditional DeFi architecture is characterized by separate pools for trading, lending, leveraged trading, and order execution. This fragmentation reduces the potential of liquidity providers to earn swap fees while supporting lending functions, as well as limiting the ability of eligible funds in limit orders to be lent to borrowers.

Everything Protocol's proposed architecture collapses these functions into one balance sheet. A single reserve can price trades, back loans and leveraged positions, and support limit orders. Liquidity providers can earn swap fees while their capital supports lending, and eligible funds in limit orders can be lent to borrowers until those orders execute.