Capital Efficiency
The inefficiency of pool-based lending protocols lies in the inability to fully utilize supplied assets. This results in a significant gap between supply and borrow APY.
For instance, if only 50% of the total supplied assets are lent out with borrowers paying 10% APY, suppliers would only receive 5% APY, assuming no fees. The spread becomes even larger when only 20% of assets are lent out at the same APY, reducing the suppliers' APY to 2%, with 80% of assets lying idle.
By matching supply and borrow demands 1:1 through third-party intermediary, capital efficiency could be maximized up to 100%. Borrowers would pay 7.5% APY, and suppliers would receive 7.5% APY. This is the magic of pool-based P2P lending.
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