Isolated Lending Markets are decentralized finance (DeFi) platforms where individual lending pools operate independently from one another. Each pool manages its own set of assets, collateral requirements, and risk parameters. This design limits the impact of a default or exploit in one market to only the participants within that specific pool. It offers a method for risk containment within the broader DeFi ecosystem.
Context
The structure of isolated lending markets is a central topic in discussions about managing risk within decentralized finance. A key debate involves balancing capital efficiency with the benefits of risk separation. Future developments will focus on optimizing these models to provide sufficient liquidity while minimizing systemic exposure across different digital asset offerings.
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