Decentralized exchange aggregator 1inch has identified a significant liquidity crisis in the DeFi sector, with a report revealing that 83% to 95% of capital in major pools like Uniswap and Curve remains unused. This inefficiency has led to billions of dollars being idle in smart contracts, with Uniswap v2 alone accounting for $1.8 billion in ineffective liquidity. Retail liquidity providers are particularly impacted, with 50% experiencing losses due to impermanent loss, resulting in over $60 million in net deficits. To address these challenges, 1inch has proposed the Aqua protocol, which aims to enable DeFi applications to share liquidity without compromising custody, thereby reducing barriers for developers seeking access to deep liquidity.