Definition ∞ Isolated lending vaults are distinct pools of capital within a decentralized lending protocol, each with its own risk parameters. Unlike shared liquidity pools, these vaults segregate assets and their associated risks, meaning that a default or exploit in one vault does not directly compromise assets in others. This design allows for more granular risk management and supports a wider array of collateral types. They enhance security by limiting contagion risk across the protocol.
Context ∞ Isolated lending vaults are a growing trend in DeFi news, frequently highlighted as an advancement in risk management for decentralized lending. Their implementation allows protocols to offer lending markets for more volatile or niche assets while containing potential systemic risks. Discussions often center on their effectiveness in mitigating smart contract vulnerabilities and market manipulation attempts.
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