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What Is ‘Capital Efficiency’ in the Context of DeFi?

It measures how effectively locked capital generates returns or facilitates transactions; a long lock-up period is capital inefficient.
Greeks.Live05.11.25

What Is ‘Capital Efficiency’ in the Context of DeFi?

Capital efficiency refers to how effectively a protocol or system utilizes the capital locked within it to generate returns or facilitate transactions. In DeFi, a highly capital-efficient protocol requires less collateral or less locked liquidity to support a given volume of lending, trading, or other financial activities.

The long withdrawal period of Optimistic Rollups is considered capital inefficient because it locks up user funds without generating utility for a period.

How Does the Duration of a Lock-up Period in Staking Affect Its Perceived Value?
How Does a Long Lock-up Period Increase the Risk Profile of a Staked Asset?
How Does the Capital Efficiency of PoS Compare to the Energy Efficiency of PoW?
What Are the Typical Reasons for Implementing a Token Lock-up Period?

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