Definition ∞ DeFi composability risk refers to the potential for unexpected and adverse outcomes arising from the interoperability and stacking of multiple decentralized finance protocols. Because DeFi applications often build upon each other, a flaw or exploit in one protocol can propagate and affect dependent protocols. This interconnectedness creates a complex risk surface where the failure of a single component can trigger systemic instability across the ecosystem. It highlights the challenges of managing interdependent smart contracts.
Context ∞ DeFi composability risk is a frequently discussed subject in crypto news, especially following incidents where exploits in one protocol impact others. Analysts emphasize the need for comprehensive risk assessments that account for these interconnected dependencies. The ongoing debate centers on developing robust security standards, improving cross-protocol auditing, and implementing circuit breakers to contain potential failures within the broader DeFi landscape.
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