The Fragmentation Problem

Why LST proliferation broke usability, payments, and capital efficiency.

Liquid staking succeeded faster than the ecosystem’s ability to integrate it. The result is fragmentation that compounds across every layer of the stack.

Today, ETH does not exist as a single economic object. It exists as a family of representations: native ETH, wrapped ETH, liquid staking tokens, restaked derivatives, chain-specific mirrors, and yield-enhanced composites. Each representation encodes slightly different assumptions about custody, redemption, slashing exposure, oracle dependence, and upgrade risk. Each integrates differently across protocols. None is canonical.

For developers, this creates integration debt. Supporting “ETH” now means supporting a matrix of tokens, each with bespoke adapters, risk parameters, and failure modes. For users, it creates cognitive overload. A wallet balance that reads “ETH” no longer answers the only question that matters: can I use this to pay right now, without blowing up my position?

Payments are where this fragmentation becomes terminal.

Payment systems require:

• Predictable settlement

• Stable interfaces

• Clear redemption paths

• Minimal asset ambiguity

LSTs violate these assumptions when exposed directly. A merchant cannot accept a dozen staking derivatives and reason about their redemption mechanics. A card network cannot price slashing risk at the point of sale. A compliance team cannot audit a balance sheet that depends on which wrapper is used this week.

As a result, LSTs are treated as collateral-only assets. Users are forced to unwind positions, swap back to canonical ETH or stablecoins, and incur slippage, taxes, and opportunity cost just to spend value. Yield turns off the moment money needs to move.

This is the failure mode of old DeFi. It maximizes optionality at the protocol layer while minimizing usability at the economic layer.

Fragmentation also destroys capital efficiency. The same underlying ETH may be rehypothecated across multiple protocols, but it cannot be mobilized coherently. Borrowing markets price each wrapper independently. Liquidity pools fragment. Risk is duplicated rather than netted. The system grows in complexity without growing in utility.

Retail users respond rationally by opting out. Institutions respond by centralizing. Neither outcome is acceptable if DeFi is meant to become financial infrastructure.

The industry’s default response has been education. Better dashboards. Better explanations. More documentation. This does not work. Complexity does not disappear when explained. It disappears when abstracted.

The key insight is that fragmentation is not a bug to be patched, it is a consequence of success. As more staking and restaking mechanisms emerge, representations will multiply further. Waiting for convergence at the asset level is futile.

The only viable solution is convergence at the interface level.

GigaETH addresses fragmentation by refusing to expose it. Heterogeneous LSTs are linked once, normalized once, and aggregated behind a single endpoint. Risk is handled internally. Yield provenance is preserved internally. What the user and the payment rail see is a unified, spendable representation of productive ETH.

This is not about hiding information. It is about putting information where it belongs: inside the system, not in the user’s head.