On the User Experience of Cross-Chain Bridges

The blockchain space has fragmented into multiple Layer 1s and rollups in terms of applications and liquidity. As the space continues to grow, it is inevitable that we will see an increasingly fragmented environment. This is because developers are more likely to build new products that aim to become the market leader, instead of working under an existing brand, in hopes of better financial rewards, be it in the form of a new token or owning more equity in a new startup. 

The increased fragmentation of blockchain ecosystems is precisely why interoperability and cross-chain bridges have now become an integral part of the multi-chain environment. With sufficiently robust interoperability protocols, it is possible to overcome most of the flaws introduced by fragmented ecosystems. For example, a decentralized exchange on Arbitrum may cater to retail traders who are unwilling to pay high gas fees on Ethereum, but there may be significantly deeper liquidity on Ethereum, which would result in better trade execution. As such, there could be a market for an interoperability protocol that aggregates liquidity across multiple chains to provide the best trade executions. There have been frameworks proposed to address this, such as the  Shared Liquidity AMMs by Delphi Digital and distributed AMMs by StarkWare.