Gitcoin Grants 24: Submission of Problem Briefs

🌱 Gitcoin Grants
1

1. Problem & Impact

The Problem:
Ethereum’s scaling strategy via Layer-2 (L2) rollups has created a rich ecosystem — but also severe fragmentation. Each L2 functions as an isolated environment with its own liquidity pools, dApps, and user base. Moving assets between L2s is often slow, costly, and inconvenient: the most common route involves bridging to L1, then re-depositing to another L2, taking hours or even days.

This has two major effects:

  • Liquidity fragmentation: Liquidity providers must split funds across chains, leading to shallow pools, higher slippage, and worse user experience.
  • Loss of composability: dApps can’t easily interact across L2s, breaking the “one big Ethereum” user experience.

Evidence & Urgency:

  • Vitalik Buterin warned in 2023: without cheap, seamless L2 transactions, Ethereum risks losing users to centralized, high-throughput chains.
  • Despite record DeFi TVL, rival chains like Solana have surpassed Ethereum in active DEX users (2025 data, Artemis & DefiLlama).
  • Research by L2Beat and LI FI (2024) highlights bridging delays and liquidity isolation as critical obstacles to scaling adoption.
  • DEX liquidity across L2s is highly uneven — small L2 pools often rely on slow, manual bridging from large L2s for rebalancing.

Why This Matters Deeply:
This is not hype-driven — it is core infrastructure. Both users and developers are directly affected:

  • Users face higher costs, long wait times, and missed opportunities (e.g., in DeFi arbitrage).
  • Developers must maintain multiple deployments, fragmenting their user base and liquidity.

Impact of Solving This:

  • Unified liquidity across L2s → deeper pools, better prices, more active DeFi.
  • Faster, cheaper cross-L2 transfers → improved UX and onboarding.
  • Stronger Ethereum network effects → retaining users and developers.

2. Sensemaking Analysis

Tools Used:

  • Ecosystem Mapping: Surveyed L2 rollups, existing bridges, and shared liquidity solutions.
  • Gap Analysis: Compared current cross-chain infrastructure to Ethereum’s composability ideals.
  • On-chain Data Review: Used DefiLlama, L2Beat, and Artemis data to identify liquidity distribution and transaction patterns.

Sources:

  • Vitalik Buterin’s blog posts on scaling & decentralization trade-offs.
  • Reports from L2Beat, LI.FI, and Chainlink on interoperability challenges.
  • Gitcoin Grants history showing strong community support for infra/tooling rounds (GG18–GG23).
  • Discussions from Ethereum Magicians, ETHResearch forums, and recent Devconnect panels.

Aggregation Method:

  • Clustered pain points into liquidity fragmentation, slow/unsafe bridging, and lack of shared standards.
  • Identified potential interventions: fast trust-minimized bridges, shared sequencers, cross-chain messaging protocols, and liquidity aggregation layers.
  • Cross-referenced with past Gitcoin-funded infra successes to validate feasibility.

3. Gitcoin’s Unique Role & Fundraising

Gitcoin’s Advantage:

  • Proven track record funding critical Ethereum infra (ethers.js, WalletConnect, Scaffold-ETH).
  • Community governance ensures solutions remain open-source public goods rather than proprietary products.
  • Quadratic Funding draws diverse stakeholder support, not just single-entity dominance.

Why a Network Beats a Hierarchy:

  • L2 fragmentation affects many actors differently; only a decentralized network of builders can create widely adopted, chain-agnostic standards.
  • Centralized actors (VC-funded infra) may prioritize chain-specific or closed solutions.

Funding Reality:

  • Target: $50K+ matching pool is realistic.
  • Likely Sponsors: Optimism, Arbitrum, Base, Polygon, StarkWare, zkSync, Uniswap, Curve, Aave, Chainlink, Connext.
  • Commitments: Early soft interest from interoperability protocol teams and L2 foundations in supporting public-good bridges and liquidity layers.

4. Success Measurement & Reflection

6-Month Success Outcomes:

  • 2+ open-source fast-bridge or shared liquidity prototypes deployed to mainnet.
  • 5+ major DeFi protocols integrate funded interoperability solutions.
  • 20% average reduction in bridging times between top L2 pairs.

Impact Measurement Beyond Activity:

  • Adoption Metrics: Volume of assets moved using funded tools.
  • Developer Integration: Count of dApps and wallets enabling cross-L2 swaps.
  • User Feedback: Net Impact Score > 7/10 on UX improvement surveys.

Satisfaction Test:
The Ethereum community will celebrate if:

  • Cross-L2 movement becomes near-instant and trust-minimized.
  • Liquidity across L2s feels as unified as a single chain.
  • DeFi, gaming, and NFT projects can scale without fragmenting users.

5. Domain Information

  • Proposing a Domain for GG24: Yes — “Ethereum L2 Interoperability & Liquidity Unification.”
  • Domain Experts: L2Beat researchers, Connext team, LI FI engineers, Chainlink CCIP team, leading DeFi protocol devs.
  • Mechanisms: Quadratic Funding for early-stage infra, Retro Funding for proven adoption, Community Rounds for ecosystem-wide experiments.
  • Possible Sub-Rounds:
    • Fast-Bridge Infrastructure
    • Shared Liquidity Layers
    • Cross-Chain Standards & Messaging
1 Like