One detail in TermMax's design made me rethink what “unused liquidity” actually means in DeFi.
Normally, liquidity providers have to accept that some of their capital may simply sit idle until someone borrows it.
TermMax takes a different approach.
Its documentation says unborrowed capital can be deployed into floating-rate protocols such as Aave, Morpho and Venus while it waits to be matched with borrowers.
I find that interesting because the problem isn't only finding borrowers.
It's what happens to the capital before those borrowers arrive.
If idle liquidity can generate some yield instead of sitting unused, the economics for liquidity providers could become more efficient.
But there is an important trade-off: moving idle capital into other protocols introduces additional smart-contract, liquidity and market risks.
So I wouldn't judge this feature simply by the extra yield it can generate.
The real question is whether better capital utilization can outweigh the additional layers of risk.
That's an aspect of TermMax I'm watching closely.
#termmax @TermMax
Normally, liquidity providers have to accept that some of their capital may simply sit idle until someone borrows it.
TermMax takes a different approach.
Its documentation says unborrowed capital can be deployed into floating-rate protocols such as Aave, Morpho and Venus while it waits to be matched with borrowers.
I find that interesting because the problem isn't only finding borrowers.
It's what happens to the capital before those borrowers arrive.
If idle liquidity can generate some yield instead of sitting unused, the economics for liquidity providers could become more efficient.
But there is an important trade-off: moving idle capital into other protocols introduces additional smart-contract, liquidity and market risks.
So I wouldn't judge this feature simply by the extra yield it can generate.
The real question is whether better capital utilization can outweigh the additional layers of risk.
That's an aspect of TermMax I'm watching closely.
#termmax @TermMax