Composability
Last updated 17 October 2026Last verified 17 October 2026
What is composability in DeFi?
The property that lets DeFi protocols be combined like building blocks: a loan in one protocol used as collateral in another, which feeds yield into a third. Creates capital efficiency and systemic contagion risk simultaneously. When one layer in a composable stack fails, cascading liquidations across dependent protocols can follow within the same block.
TradFi equivalentThe interconnectedness of a settlement chain, where each institution's exposure runs through the ones beneath it. The difference is that anyone can assemble a DeFi stack with no counterparty due diligence and no agreed unwind procedure, and the cascade completes inside one block rather than over a settlement cycle.