Modular finance refers to an architectural approach in financial systems, particularly in decentralized finance (DeFi), where various components or protocols are designed as independent, interchangeable modules. These modules can be combined and recombined to create new financial products or services, promoting flexibility and innovation. This design allows for easier upgrades, specialized functionality, and enhanced system resilience. It stands in contrast to monolithic financial structures.
Context
Modular finance is a central theme in the ongoing development of decentralized finance, enabling greater customization and interoperability among protocols. A key discussion involves the security implications of composing multiple independent modules and the potential for unexpected interactions. News about new DeFi primitives or infrastructure upgrades often highlights the benefits and challenges associated with this architectural style.
The launch of Isolated Liquid Restaking Tokens (iLRTs) structurally de-risks the restaking primitive, transforming it into a capital-efficient, multi-chain money lego.
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