What it means
The way DeFi protocols can plug into each other like building blocks, because they all share one public blockchain.
A vault can lend through Aave, an aggregator can trade through Uniswap, and an app can combine them in one step.
How it works
It's powerful, and it also means a problem in one protocol can spread to others built on it.
Related terms
| Term | What it means |
|---|---|
| DeFi | Decentralised finance: lending, borrowing and exchanging that runs on public smart contracts instead of through a bank. |
| Vault | A smart contract that takes deposits and spreads them across lending markets by a set strategy. |
| Smart contract | A program that lives on a blockchain and runs exactly as written, holding and moving tokens by its own rules. |
This glossary explains terms in general. It isn't investment, tax or legal advice.