External Pool Dependency

Definition ∞ External pool dependency describes a situation where a decentralized finance protocol relies on the liquidity or pricing data from another independent liquidity pool. This interdependence means the protocol’s stability and functionality can be significantly affected by events, vulnerabilities, or changes within the external pool. Such reliance introduces systemic risk across the connected protocols.
Context ∞ External pool dependency is a frequent topic in post-mortem analyses of DeFi exploits, where a weakness in one pool can propagate to others. Developers are actively seeking ways to minimize this risk through diversification, internal liquidity solutions, or robust oracle networks. A critical future development involves standardized risk assessment frameworks for evaluating and managing cross-protocol dependencies within the broader DeFi ecosystem.