DeFi aggregator 1inch said the sector’s main bottleneck is no longer the total amount of liquidity on-chain, but how efficiently that capital can actually be used. In its latest note, the company argued that a large share of DeFi liquidity sits idle, remains fragmented across venues, or is locked into single-purpose positions, which limits how flexibly it can be deployed when demand appears. That, in 1inch’s view, makes “usable liquidity” a more meaningful focus than simply pushing total value locked, or TVL, higher.
The article also reviewed the limits of three common liquidity structures: passive liquidity pools, concentrated liquidity, and stablecoin pools. According to 1inch, liquidity providers often have to split funds across multiple protocols, trading pairs, and price ranges, making positions harder to manage and reducing capital efficiency. The firm said future liquidity models should be built around whether capital can be activated in real demand conditions, rather than whether assets are merely sitting locked on-chain.
DeFi aggregator 1inch said the key issue in DeFi is not a lack of total liquidity, but weak capital efficiency. In its view, a large portion of liquidity remains idle, fragmented, or locked in single-purpose positions, leaving it unable to move flexibly in response to actual demand.
Focus shifts from TVL to usable liquidity
1inch said the next stage of DeFi should center on usable liquidity rather than simply chasing growth in total value locked, or TVL. The firm argued that liquidity models should be judged by whether capital can be put to work when demand emerges, not by whether funds remain locked on-chain.
Three liquidity models face limits
The article examined the limits of passive liquidity pools, concentrated liquidity, and stablecoin pools. According to 1inch, liquidity providers often have to spread capital across multiple protocols, trading pairs, and price ranges. That raises management complexity and makes capital harder to run efficiently.
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