Liquidity fragmentation occurs when trading volume, order books, and liquidity are dispersed across multiple platforms or exchanges rather than being concentrated in a single location. This can create inefficiencies, as traders may struggle to find the best prices or execute large orders without significantly affecting the market.The division of liquidity can happen for various reasons, including the emergence of numerous decentralized exchanges, varying trading protocols, or user preferences for specific platforms. As a result, some exchanges may have deep liquidity for certain assets while others lack it.When liquidity is fragmented, it may lead to higher slippage for large trades and increased price volatility. Traders often have to navigate multiple platforms to optimize their transactions. Solutions like liquidity aggregators aim to address these issues by pooling liquidity from different sources, providing traders with a better price and more efficient execution. This can help relieve some challenges brought about by liquidity fragmentation, making the trading process smoother and more effective.