Problems in Defi

DeFi solves a lot of issues, but that doesn’t mean it isn’t without its problems. Currently, there are no options out there for a permissionless, non-custodial, chain-agnostic cross-chain swap solution in which users are free to cross-chain swap or bridge any asset they wish with the same wallet.

Liquidity aggregation is one of the hottest topics in the space as TVL (Total Value Locked) over the last two years increased by over one hundred times. While this is great, the problem is that it’s fragmented with liquidity spread across ten chains and then hundreds of exchanges within those chains. This leads to capital inefficiency and higher costs to users, in both gas and time, with no fast and efficient way to bridge and cross-chain swap their assets.

At the beginning of May 2022, 55% of TVL was on Ethereum, with that 45% remaining being spread mostly between about ten chains, but roughly 60 more have tens of millions in liquidity. This causes quite the fracture between blockchains and exchanges for users to find what they want, quickly, and for a good price. It even becomes an issue within the same chain , liquidity spread across ten or even fifty exchanges, creating a need for users to use bridges, liquidity, and DEX aggregators to find the token and price they want. Bridges are most often not enough of a solution by themselves as after using a bridge, users need a DEX or DEX aggregator to complete the swap as bridges are limited to stablecoins and native currencies, while Eagle protocol is not.

There are too many bridges to be educated on, each with their own unique user interface, limitations, system to learn, and time to bridge. Some apps (DEXs) or liquidity aggregators link to seven or more bridges, each for a different chain, that users would need to learn, navigate, use, and possibly need a new wallet for. These apps allow deposits from a single chain only, forcing users to leave the app to bridge their funds, having to do a lot of hard work, paying a lot of gas fees, all just to be able to use the previous app (DEX). In order to purchase assets on the new chain, users need that chain's native token, ex. ETH, in order to complete any swaps on the destination chain, meaning users have to first purchase and bridge the native token and trade it for the token they want, adding another layer of complexity to the process.

Another major challenge in DeFi is that of Bridge security. By using bridges, users are entrusting their tokens with the security of the bridge, not being able to keep them in their own wallets. This has been the cause of many exploits which have cost users over $1 billion dollars USD in the last year alone. Eagle protocol helps solve this problem by not actually bridging assets or locking users assets in a smart contract to burn or mint tokens.