AMM Fragmentation

AMM fragmentation occurs when liquidity for the same asset pair is spread across many different decentralized exchanges and pools. This makes it difficult for traders to find the best price and often leads to higher slippage as liquidity is diluted.

Aggregators are typically used to mitigate this issue by routing trades through multiple pools simultaneously. While fragmentation can be a challenge for efficiency, it also fosters innovation as different protocols compete to offer better incentives and lower fees.

Managing this fragmentation is a central challenge in the design of modern decentralized financial infrastructure.