The increased energy dissipation caused by the formation of parasitic capillary wavelets on moderately short, steep gravity-capillary waves is studied numerically. This study focuses on understanding the mechanism leading to dissipation enhancement and on exploring the possible correlation between the enhanced dissipation rate and the characteristic parameters of the parasitic capillaries. The interaction between the parasitic capillary wave train and the underlying dominant flow of the carrier wave induces strong vortex shedding and imposes large straining immediately underneath the troughs of the capillary ripples. These localized strains are very effective in dissipating energy of the carrier gravity-capillary wave. The attenuation rate of the carrier wave can increase by more than one order of magnitude in the presence of capillary wavelets. Systematic simulations for various carrier wavelengths and steepnesses reveal that the enhanced dissipation rate can be quantified well by a simple parameter: the average of all the difference between the local maximum and minimum slopes along the entire carrier wave surface, which is equivalent to the mean slope of the parasitic capillary wave train. The enhanced dissipation rate increases approximately linearly with the carrier gravity-capillary wavenumber for a given mean slope of the capillary wave train. The increased energy dissipation caused by the formation of parasitic capillaries is also found to significantly impact on the characteristics of three-dimensional instabilities of finite-amplitude, uniform gravity-capillary waves.