DeFi Composability

Definition ∞ DeFi composability refers to the ability of decentralized finance protocols to interact and build upon one another like digital money legos. This characteristic permits developers to combine existing DeFi applications and services, such as lending platforms, decentralized exchanges, and stablecoins, to create new, more complex financial products. Each protocol acts as a building block, allowing for the stacking of functionalities to produce innovative financial instruments. This interoperability fosters rapid innovation and a highly interconnected financial ecosystem.
Context ∞ Discussions around DeFi composability often highlight its power to accelerate innovation and create sophisticated financial strategies within the digital asset space. However, this interconnectedness also presents systemic risks, as a vulnerability in one underlying protocol can propagate across multiple dependent applications. News frequently covers new protocol integrations, flash loan attacks exploiting composability, and efforts to build more resilient and secure financial primitives.