Vault Utilization

Definition ∞ Vault utilization measures the proportion of available capacity within a decentralized finance vault that is actively being used. In lending protocols, this refers to the percentage of deposited collateral that has been borrowed against. For yield farming strategies, it might indicate how much capital is deployed in a particular automated strategy. High utilization can signify strong demand for a specific asset or strategy, potentially leading to higher yields or increased borrowing costs. It provides an indication of a vault’s efficiency and market demand.
Context ∞ Vault utilization is a key metric for assessing the health and demand within decentralized lending and yield optimization protocols. A high utilization rate can indicate efficiency but also potential liquidity constraints if not managed carefully. Future developments aim to optimize vault algorithms for dynamic interest rates and rebalancing strategies to maintain optimal utilization and liquidity.