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  1. Home
  2. /Glossary
  3. /Capital Efficiency
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defi

Capital Efficiency

How effectively a protocol or strategy uses deposited capital to generate returns.

Definition

How effectively a protocol or strategy uses deposited capital to generate returns. Concentrated liquidity on Uniswap V3 is more capital efficient than V2 because the same amount of capital can support more trading volume. In DeFi, capital efficiency is a key metric for comparing protocols.

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Related Terms

Concentrated Liquidity

A DeFi innovation where liquidity providers choose a specific price range to deploy their capital instead of spreading it across all prices.

TVL (Total Value Locked)

The total value of assets deposited in a DeFi protocol.

DeFi (Decentralized Finance)

Financial services built on blockchain without traditional intermediaries.

1inch

A DEX aggregator that splits trades across multiple decentralized exchanges to find the best overall price.

Aave

One of the biggest lending and borrowing protocols in DeFi.

Across Protocol

A cross-chain bridge that uses an optimistic verification system and a network of relayers to move tokens between chains quickly.

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