Swivel's interest rate swap protocol, operating on-chain, faces liquidity fragmentation challenges. Unlike traditional over-the-counter markets, decentralized platforms split liquidity across multiple pools, reducing efficiency. Swivel's design, leveraging automated market makers, struggles with concentrated liquidity for specific swap terms, leading to higher slippage and less favorable rates. Fragmented pools also deter large institutional participation, as they require deeper liquidity for sizable trades. To address this, Swivel could integrate cross-chain bridges or incentivize liquidity providers with dynamic rewards to consolidate pools. Enhancing interoperability with other DeFi protocols may further mitigate fragmentation, ensuring competitive pricing and robust market depth for interest rate swaps.