Time is Money: The Role of Reallocation Speed Under Capital Constraints

Capital-constrained businesses often decide between supporting additional blockchains or maintaining higher liquidity for their protocols across existing blockchains. This paper develops a general model to quantify how the speed and cost of cross-chain capital allocation affect capital efficiency gains. We introduce a conservative estimate for per-period gains that can be constructed with two inputs: the cost differential between reallocation options and the incremental revenue unlocked by faster allocation at potentially less capital. Under this model, businesses obtain capital efficiency gains when the value of newly accessible opportunities from faster cross-chain speeds outweighs the additional costs of reallocation.