Composability

Composability is the property that DeFi protocols can plug into one another like building blocks, letting developers combine existing contracts into new products without asking permission. Because smart contracts on the same chain are open and callable by anyone, one protocol's output — a token, a pool position, a loan — can become another protocol's input. The idea is often summarized as 'money legos'.

A concrete example: a user deposits ETH into Lido and receives stETH, a liquid staking token. They deposit that stETH into Aave as collateral and borrow USDC against it, then supply the USDC to a Curve pool and stake the resulting LP token in a yield farm. Four independent protocols, none of which coordinated with each other, have been composed into a single layered strategy — and a developer could wrap that entire sequence into one contract others can use.

Composability is a genuine engine of innovation: flash loans, yield aggregators, and structured products all exist because contracts can call each other freely. But it also chains risks together — a failure in one underlying protocol propagates to everything built on top, a dynamic sometimes called DeFi's contagion problem. A common misconception is that composability is unlimited; it works seamlessly only within a single chain, and composing across chains requires bridges, which add trust assumptions and have historically been a major source of hacks.