How Blockchain Fragmentation Can Limit the Compatibility and Scalability of Decentralised Technology

The rising number of Layer-2 networks has made fragmentation more common in blockchains.

Written by Radhika Parashar, Edited by David Delima | Updated: 8 January 2025 20:01 IST

How Blockchain Fragmentation Can Limit the Compatibility and Scalability of Decentralised Technology

Photo Credit: Unsplash/ Alina Grubnyak

Blockchains are the underlying technology used by cryptocurrencies

Highlights

Blockchain fragmentation poses a challenge to developers
Fragmentation reduces the scalability element of any blockchain
Developers are advised to build solutions to bridge multiple blockchains

As blockchains receive continuous fine-tuning and improvements, developers are identifying crucial issues that are restricting the advances in interoperability and scalability of the technology. One such issue is called ‘blockchain fragmentation'. As the term suggests, it refers to a situation where the ecosystem of a blockchain is divided into multiple smaller on-chain networks, each facilitating a different task efficiently. The phenomenon of fragmentation is known to complicate blockchain adoption. It often leads developers to choose between multiple blockchain solutions that do not functionally align with each other.

Gadgets 360 spoke to Rohas Nagpal, chief blockchain architect at Hybrid Finance Blockchain (HYFI), a layer-1 blockchain, to understand the process of blockchain fragmentation and how it impacts the ecosystem.

“Blockchain fragmentation happens when different blockchains cannot interact smoothly. Each chain works like an island, with its own rules, tokens, and systems. This lack of connection limits the potential of blockchain technology,” Nagpal said.

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When a blockchain fragments, it essentially obstructs the network from supporting a unified system for value exchange to its full potential.

The continuously increasing number of Layer-2 blockchain networks has made fragmentation a more common issue with blockchain networks in recent years, Charles Wayn had written in a published opinion back in October 2024. Wayn is the co-founder of a Web3 onchain distribution platform named Galxe.

According to Nagpal, solving the problem of blockchain fragmentation will make it more efficient to support multiple usecases while also improving the exchange of data and value between different blockchain ecosystems.

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There are measures that blockchain developers can take to start reducing the risks of fragmenting blockchains, Nagpal said, adding that developers should “build tools like blockchain bridges to connect different blockchains.”

He also recommends that developers set up common rules for APIs and blockchain-native tokens to work well together in synchronisation. Creators of crypto wallets can also bring out storage solutions to manage assets from multiple blockchains on one platform.

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Further reading: Cryptocurrency, Blockchain, Blockchain Fragmentation, Web3

Radhika Parashar

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Radhika Parashar is a senior correspondent for Gadgets 360. She has been reporting on tech and telecom for the last three years now and will be focussing on writing about all things crypto. Besides this, she is a major sitcom nerd and often replies in Chandler Bing and Michael Scott references. For tips or queries you could reach out to her at RadhikaP@ndtv.com. More