Solving major DeFi problems: Soul new primitive to finally solve liquidity fragmentation

DeFi is entering a new phase. Not only are the largest, most battle-tested protocols like Aave, Maker or Lido, continuing to grow and consolidate their dominance. But also a wave of younger, more agile projects is rapidly capturing market share through true design innovation. DeFi is consolidating and growing, showing product market fit over the wider crypto uncertainty.

New entrants such as Fluid, Morpho, Ethena and many others aren’t merely optimizing around the edges. They’re fundamentally rethinking core mechanisms around capital efficiency, collateral and incentives allocation, and protocol architecture. What sets this group apart is their capacity to identify persistent limitations in DeFi and implement practical, technically novel solutions to overcome them. Their rapid traction suggests that the market is hungry for differentiated infrastructure that extends beyond familiar DeFi primitives.

At the same time, DeFi's as a sector seems in extremely good shape, with its mindshare being at its local all-time high. Despite broader macro uncertainty, the sector has continued to attract developer interest, liquidity, and protocol experimentation. More users are interacting with on-chain applications, and DeFi protocols are seeing a constant growth in users and liquidity.

Lending, in particular, continues to be the main DeFi primitive. Lending protocols remain central to the ecosystem’s infrastructure, with Aave recently reaching an all-time high in total value locked. This illustrates not only the maturity and resilience of lending as a sector, but also the ecosystem’s capacity to evolve around robust core services.

With the expansion of the space, the arrival of new protocols, the deployment on different blockchains and rollups and successive upgrades of existing ones (e.g., Aave v1 through v4) have contributed to increasingly fragmented liquidity. As capital is distributed across protocol versions, protocols and different chains, depth is reduced, diminishing execution efficiency. This fragmentation stands in contrast to the sector’s broader trend toward increased capital inflow and utilization, where greater efficiency should be expected. While new protocols often attempt to preserve unified liquidity, not much has been done till now to unify existing, siloed liquidity, especially in the lending vertical.

Solving this issue could be transformative for DeFi, unlocking a new level of capital efficiency.

Growth inefficiencies

Consider a user with $250,000 in ETH deposited in Aave v2 on Ethereum. They spot a short-term opportunity to borrow USDC on Avalanche at an attractive rate. Executing this action, in theory, should take a few clicks. In practice, it’s a cumbersome path involving bridges, collateral migration, re-deployment, and multiple transactions across chains.Also, it comes with the need to remove liquidity from ethereum’s aave to redeploy on another chain.

Each step adds friction: latency, gas fees, bridge and smart contract risk. By the time the user is done modeling out the risk-reward profile, the opportunity window has closed or worse, the user simply gives up.

This isn’t an edge case, cause it applies broadly to users across protocols and chains, limiting what they can do with their liquidity. Users must choose where to supply collateral, are restricted by the liquidity depth of specific protocol deployments, and are effectively confined to a single chain’s environment. It shows deep DeFi inefficiencies.DeFi is evolving to be fast, modular, and efficient, but still lacks native cross-environment composability to unify its liquidity.

The growth of DeFi has been powered by modularity: new chains, new rollups, new versions of existing protocols.

Collateral held in one protocol instance cannot easily be reused elsewhere. Moving assets between environments often involves bridges, tools that are operationally complex, time-consuming, and high-risk. This fragmentation makes liquidity less efficient and limits the scalability of the system as a whole.

Soul’s new cross-protocol infrastructure

Soul is a DeFi protocol that approaches this exact problem, not by creating a new lending market, but by connecting the ones that already exist. It uses LayerZero's cross-chain messaging infrastructure to orchestrate lending positions across chains, allowing users to deposit collateral in one place and borrow in another.

For example, for the first time, a user will be able to supply ETH on Aave-Ethereum and borrow USDC on Euler-Avalanche without bridging the ETH. Soul verifies the collateral, relays a message, and authorizes borrowing from different markets. Abstracting all of this into a single interface, into a unified experience. Users can decide both the best supply market and also borrow markets based on the preferred protocols or rates, without limitations.

Most DeFi protocols compete to attract and lock liquidity. Soul takes a different approach: instead of pulling capital into its own system, it makes other systems work together. Building on top of liquidity instead of competing for it.

Liquidity aggregation requires migration and duplication. Coordination only requires messaging. Leveraging existing liquidity rather than attracting it, may be foundational to the next generation of DeFi protocol design.

New primitives to unlock new economies

The model Soul proposes could unlock a range of new dynamics across the DeFi:

• New cross-chain margin and leverage possibilities

• Lower idle capital across ecosystems

• Reduced reliance on bridges

• Unified interfaces for multi-protocol and multi-chain lending

• New more efficient cross-protocol and cross-chain arbitrage operations

Ultimately, it offers a model for liquidity as a global, rather than local, resource. Something that is simply not possible in today’s fragmented lending environment.

Soul is getting ready: a Public Fair Round

Soul is currently in testnet, with over 265,000 users. It is being built by the team behind Hatom, a lending protocol that previously surpassed $300M in TVL, with now almost $90M TVL, running for more than 2 years with no security incidents. The contracts are undergoing formal verification and audits, and a public token sale is scheduled for May 16.

Soul has been in stealth for over two years, focused on building a protocol to address structural inefficiencies in DeFi. Alongside the protocol itself, it introduces a new approach to token sales.

Traditional promising launches often favor early investors, relying on closed fundraising rounds with fixed, and frequently inflated, valuations. This structure tends to concentrate ownership and restrict fair access.

Soul’s Public Fair Round offers a different model. It removes fixed valuations entirely. Instead, price is determined dynamically during the public sale based on total demand, enabling a form of open price discovery. There is no whitelist, and participation is broadly accessible.

25% of the total token supply is allocated to the community and early investors receive only 8%. The structure is designed to prioritize distribution over exclusivity, and to reward early conviction without pricing out early retail contributors.

By combining this approach with a new extremely promising DeFi primitive, Soul is aiming to set a precedent not just for how lending works across chains, but for how crypto projects can launch with community alignment at the core.

TL;DR

Liquidity fragmentation remains a central blocker in DeFi's growth. While innovation continues across primitives and protocols, capital efficiency at the system level still suffers from siloed liquidity pools.

Soul offers a novel approach: A new DeFi primitive unifying and coordinating existing liquidity, composable across environments through secure messaging. It doesn’t compete with DeFi’s foundational infrastructure, it extends it and makes it interoperable, building on top of the existing 70B lending locked liquidity.

Its public token sale is scheduled for May 16, structured in a new fair model to prioritize community participation.

​​Soul’s design could prove to be the transformative primitive of the next DeFi phase.