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That makes the window small but does nothing for the 8 instances/process threads of steam running in the background taking up huge resources...not to mention that you have to launch the beast to even use that option unless you use the no browser option at launch.
My computer is no slouch ..but i cringe everytime i look at the process tree and see that steam is taking up more ram than my entire linux desktop... and 1/3rd of the ram that windows 11 uses.
Also if you run Win11 you should have rather up to date hardware unless you bypassed those reqs.
Any hardware in the past 5 years should not have an issue with Steam.
For current work around:
Try this add -no-browser to steam target on shortcut, now it cut out basically lot of your web support, and switch to small mode like you wanted, now it lighter.
Draw back is being unable to uninstall, and have to launch Steam normally without the -no-browser, and go full mode to see your library in web interface.
This is why I normally run Steam with the -no-browser launch parameter. It cuts out all the "steamwebhelper" nonsense. Sure, the Library doesn't work, but it's not like the Library UI is any good these days; I can just use Small Mode to launch things and Big Picture Mode to uninstall things and manage game settings.
If the Steam client still had the old Library UI, that stuff could run without needing the browser-based processes. But Valve was silly and threw it out and made everything browser-dependent.
Browsers are infamous for being resource hogs and the Steam client using such to display things is no exception.
Though, if we're gonna be proposing a lite version of Steam, I'd just go all the way and suggest that there ought to be a way to launch games (including DRM checks!) entirely via command line. So there would no longer be a need for any GUI...and furthermore people could then also design any GUI they wanted to use with the command line interface!