Idle liquidity creates a simple problem for any lending market capital can be available without actually being borrowed.

Leaving that capital untouched means the lender has supplied liquidity but the money isn't currently doing much.

TermMax's solution is to give that unused capital another destination.

The whitepaper describes deploying unborrowed funds into external lending protocols such as Aave Morpho and Venus allowing the capital to generate floating rate returns while it isn't being used for the fixed rate market.

The engineering tradeoff is pretty clear.

The capital can still serve its original purpose when borrowing demand appears but during periods of low utilization it doesn't have to remain completely inactive.

That creates two different operating states for the same liquidity available for TermMax's fixed rate market when needed and potentially earning elsewhere when demand isn't consuming it.

The extra yield is only one consequence of the design.

The bigger engineering goal is reducing the amount of time supplied capital spends doing nothing.

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What’s the biggest benefit of idle liquidity management?