How Does the Concept of “Capital Efficiency” Apply to the Choice of Derivatives Collateral?

Capital efficiency refers to maximizing the returns or utility from a given amount of capital. In derivatives, using stablecoin collateral is highly capital-efficient because its fixed value allows traders to post the minimum required margin and maximize their leverage without the constant risk of the collateral's value fluctuating.

By contrast, volatile collateral requires larger margin buffers, tying up more capital for the same position size, making it less capital-efficient.