Dynamic Collateral: The Missing Piece in DeFi

Dynamic Collateral

In traditional finance (TradFi), collateral is often treated as static due to the overhead associated with its management. Unlocking collateral usually requires repaying the associated debt, which limits flexibility.

DeFi introduced permissionless composability, enabling innovations like rehypothecation (reusing assets to boost capital efficiency). However, collateral management has remained largely static, locking users into siloed vaults and strategies with limited options for reallocation.

This creates three major challenges:

• Reduced capital efficiency: Assets are underutilized.

• Lack of flexibility: Users cannot adjust strategies dynamically.

• Complex user experiences: Navigating siloed protocols adds unnecessary friction.

Jigsaw solves these problems by introducing dynamic collateral—a mechanism that enables unparalleled flexibility, allowing users to move assets freely across strategies and protocols without unwinding loans.