Capital Efficiency Multiplier

Definition ∞ Capital efficiency multiplier is a metric that indicates the effectiveness with which deployed capital generates returns or supports operational capacity. In financial systems, it quantifies the output achieved relative to the amount of capital committed. A higher multiplier suggests superior utilization of resources to achieve desired outcomes.
Context ∞ In decentralized finance, the capital efficiency multiplier is a critical consideration for liquidity protocols and lending platforms. Protocols often compete on their ability to offer higher multipliers, allowing users to achieve greater returns from their staked or lent assets. News often covers updates to protocol mechanics or new platforms aiming to optimize this metric, impacting user adoption and overall market dynamics.