{"id":"money-legos","hidden":false,"ipfs":"QmdQPCwFVDU8RfViNhdRX22APAm8X9fwuhY2oRCTDMF7d2","language":"en","transactionHash":"0xe57d0571728b123a5b4c936c5dc1c5c552544174a9298f366e6d115b94b5b8f9","created":"2023-08-05T18:35:21.978Z","updated":"2023-08-26T20:33:21.721Z","title":"Money Legos","summary":"Money Legos is a concept in decentralized finance (DeFi) that involves composing new applications from existing DeFi protocols on the same blockchain network.","content":"**Money Legos** is a composability concept that describes the ability of different [decentralized finance](https://iq.wiki/wiki/defi) (DeFi) protocols to interact and function together in a variety of ways, using composable building [blocks](https://iq.wiki/wiki/block) such as protocols and tokens that can be combined permissionlessly to create new [decentralized applications](https://iq.wiki/wiki/decentralized-application) (dApps). They allow different DeFi protocols to interact and function together as part of a larger system, so developers can stack existing components instead of building every feature from scratch.[[1]](#cite-id-erndfcnwivv)[[7]](#cite-id-1us0ny1aeg)[[2]](#cite-id-mw2gfw0i3em) \n \n $$widget0 [YOUTUBE@VID](LVXbH8kG8bY)$$ \nMoney Legos make it possible to route assets through multiple protocols in a single workflow, improving capital efficiency and accelerating experimentation with new financial products. The same composability also introduces systemic risk, because a failure in one protocol can spread to others that depend on it through shared tokens, [collateral](https://iq.wiki/wiki/collateral), or integrations.[[7]](#cite-id-1us0ny1aeg)[[2]](#cite-id-mw2gfw0i3em)\n\n## Overview\nThe Money Legos concept describes DeFi platforms and tokens as \"Lego [blocks](https://iq.wiki/wiki/block),\" each providing a specific financial function—such as lending, borrowing, swapping, or issuing [stablecoins](https://iq.wiki/wiki/stablecoin)—that can be permissionlessly combined into new multi-function protocols. Because these components are open-source [smart contracts](https://iq.wiki/wiki/smart-contract), developers can reuse and stack them rather than rebuild core primitives, which improves capital efficiency and speeds up innovation across the ecosystem.[[3]](#cite-id-gbolbm7crz6)[[7]](#cite-id-1us0ny1aeg) \n \nMost Money Lego activity originated on [Ethereum](https://iq.wiki/wiki/ethereum) and has expanded to its [layer 2](https://iq.wiki/wiki/layer-2) networks and alternative smart-contract chains, where similar composable primitives are deployed. The same interconnectedness that makes DeFi flexible also creates systemic risk: if one protocol, [collateral](https://iq.wiki/wiki/collateral) asset, or bridge is compromised, it can trigger cascading failures in other protocols that rely on it.[[2]](#cite-id-mw2gfw0i3em)[[8]](#cite-id-2ozt94t9kk) \n \n $$widget0 [YOUTUBE@VID](3zQu3N8pANA)$$ \n\n### Composability Concept\nIn systems design, composability refers to the property of individual components that can be selected, combined, and reused in different arrangements to build more complex systems without changing the underlying parts. Highly composable systems expose clear interfaces and predictable behaviors, allowing developers to assemble new applications by connecting existing modules rather than redesigning them from scratch.[[8]](#cite-id-2ozt94t9kk) \n\nIn DeFi, composability describes how protocols and tokens function as interoperable building [blocks](https://iq.wiki/wiki/block) that can be stacked permissionlessly, such as combining lending markets, decentralized exchanges, and [stablecoins](https://iq.wiki/wiki/stablecoin) into a single strategy or application.[[7]](#cite-id-1us0ny1aeg)[[8]](#cite-id-2ozt94t9kk) A related idea is atomic composability, where multiple [smart contract](https://iq.wiki/wiki/smart-contract) calls are bundled into a single [blockchain](https://iq.wiki/wiki/blockchain) transaction that either fully succeeds or fully reverts. This atomic behavior enables patterns such as [flash loans](https://iq.wiki/wiki/flash-loan) and multi-step strategies, in which users or protocols can borrow, trade, and repay, or move [collateral](https://iq.wiki/wiki/collateral) across platforms, within one transaction without leaving partially executed states.[[7]](#cite-id-1us0ny1aeg)\n\n## Money Legos in DeFi\nSome examples of well-known money legos in DeFi are [MakerDAO](https://iq.wiki/wiki/makerdao), [Curve](https://iq.wiki/wiki/curve-finance), [Compound](https://iq.wiki/wiki/compound), [Synthetix](https://iq.wiki/wiki/synthetix), [Yearn](https://iq.wiki/wiki/yearn), [Sushi](https://iq.wiki/wiki/sushiswap), and other protocols that can be stacked together in different combinations. Newer building [blocks](https://iq.wiki/wiki/block) include [liquid staking](https://iq.wiki/wiki/liquid-staking) tokens such as stETH and cross-chain bridges or messaging layers, which let Money Legos interact across multiple [blockchains](https://iq.wiki/wiki/blockchain) rather than only on a single network.[[8]](#cite-id-2ozt94t9kk)\n\n### MakerDAO\n[MakerDAO](https://iq.wiki/wiki/makerdao) is an [Ethereum](https://iq.wiki/wiki/ethereum)-based DeFi platform that allows anyone to create a vault and receive [DAI](https://iq.wiki/wiki/dai), a highly composable [stablecoin](https://iq.wiki/wiki/stablecoin), as debt against digital asset [collateral](https://iq.wiki/wiki/collateral). Over time, [MakerDAO](https://iq.wiki/wiki/makerdao) has expanded beyond early [collateral](https://iq.wiki/wiki/collateral) types such as [ETH](https://iq.wiki/wiki/ether-eth), [BAT](https://iq.wiki/wiki/basic-attention-token), and [USDC](https://iq.wiki/wiki/usdc) to support a diversified set of on-chain assets, subject to governance-defined risk parameters. [DAI](https://iq.wiki/wiki/dai), which is minted on the [MakerDAO](https://iq.wiki/wiki/makerdao) platform, is integrated into a wide range of decentralized applications (dApps), including [Curve](https://iq.wiki/wiki/curve-finance) and [Uniswap](https://iq.wiki/wiki/uniswap), where it can be used for trading, lending, liquidity provision, and other DeFi strategies.[[3]](#cite-id-gbolbm7crz6)[[5]](#cite-id-t4oh45cwysp)\n\n### Curve\n[Curve](https://iq.wiki/wiki/curve-finance), an [automated market maker](https://iq.wiki/wiki/automated-market-maker) (AMM), focuses on low-slippage [liquidity pools](https://iq.wiki/wiki/liquidity-pool) of closely correlated assets, such as different wrapped versions of the same token or groups of [stablecoins](https://iq.wiki/wiki/stablecoin). Its design makes it a key Money Lego for efficient [stablecoin](https://iq.wiki/wiki/stablecoin) and wrapped-asset swaps, and it incorporates protocols like [Synthetix](https://iq.wiki/wiki/synthetix) and [Yearn](https://iq.wiki/wiki/yearn) into its ecosystem to maximize incentives for [liquidity providers](https://iq.wiki/wiki/liquidity-providers). Some Curve pool assets include [wBTC](https://iq.wiki/wiki/wrapped-bitcoin-wbtc), tBTC, and various [stablecoins](https://iq.wiki/wiki/stablecoin), which can then be used as [collateral](https://iq.wiki/wiki/collateral), yield-bearing positions, or building [blocks](https://iq.wiki/wiki/block) in other DeFi protocols.[[5]](#cite-id-t4oh45cwysp)\n\n### Compound\n[Compound](https://iq.wiki/wiki/compound) is a DeFi money market protocol that lets users supply assets to earn interest and borrow against their deposits, making it a reusable lending and borrowing Lego. The platform is designed so that both borrowers and lenders can earn a yield from their holdings, with interest rates set algorithmically by supply and demand for each supported [cryptocurrency](https://iq.wiki/wiki/cryptocurrency). Developers can integrate [Compound](https://iq.wiki/wiki/compound)’s markets into other protocols, where users may take out collateralized loans in any asset offered by [Compound](https://iq.wiki/wiki/compound) or supply liquidity and receive interest-bearing tokens that can themselves be used in additional DeFi strategies.[[3]](#cite-id-gbolbm7crz6)[[6]](#cite-id-o8a5k4m4a7)\n\n### Aave\n[Aave](https://iq.wiki/wiki/aave) is a DeFi lending protocol that allows users to lend and borrow [ETH](https://iq.wiki/wiki/ethereum) and [ERC-20](https://iq.wiki/wiki/erc-20) tokens permissionlessly, with newer [Aave](https://iq.wiki/wiki/aave) markets such as v3 deployed on multiple chains and [layer 2](https://iq.wiki/wiki/layer-2) networks in addition to [Ethereum](https://iq.wiki/wiki/ethereum). [Aave](https://iq.wiki/wiki/aave) integrates with many DeFi protocols and issues [flash loans](https://iq.wiki/wiki/flash-loan) that rely on atomic composability, allowing users or integrated applications to borrow and repay within a single transaction. [Flash loans](https://iq.wiki/wiki/flash-loan) are used for profit-maximizing strategies such as [collateral](https://iq.wiki/wiki/collateral) swapping, [arbitrage](https://iq.wiki/wiki/arbitrage), and complex refinancing, as well as for managing risk in other protocols. [Stablecoins](https://iq.wiki/wiki/stablecoin) like [DAI](https://iq.wiki/wiki/dai) on the [Aave](https://iq.wiki/wiki/aave) platform can be exchanged for aDAI, a token that accumulates interest while deposited and can sometimes be reused as [collateral](https://iq.wiki/wiki/collateral) or liquidity elsewhere in DeFi.[[4]](#cite-id-o5m7ec8kcu)[[5]](#cite-id-t4oh45cwysp)\n\n### Synthetix\n[Synthetix](https://iq.wiki/wiki/synthetix) is a liquidity protocol that creates synthetic assets, known as \"synths.\" Its native token, SNX, can be used to mint synths of assets, including the following: [[5]](#cite-id-t4oh45cwysp) \n \n* Digital assets such as BTC, ETH, etc \n* Fiats such as USD, AUD, etc \n* Precious metals such as gold \n* Stocks such as TSLA \n \n[Synthetix](https://iq.wiki/wiki/synthetix) employs [Chainlink](https://iq.wiki/wiki/chainlink) oracles to obtain accurate price feeds and [leverages](https://iq.wiki/wiki/leverage) the composable nature of DeFi protocols. This allows for synths to be swapped with zero [slippage](https://iq.wiki/wiki/slippage), even for large quantities of BTC or ETH, using Curve, and for synth positions to be integrated into other DeFi strategies such as lending, liquidity provision, or structured products.[[4]](#cite-id-o5m7ec8kcu) \n \n[Across](https://iq.wiki/wiki/across) these and other Money Legos, composability introduces several risks and limitations. [Smart contract](https://iq.wiki/wiki/smart-contract) vulnerabilities, oracle failures, and bridge exploits can affect not only a single protocol but also any stacked strategies that depend on it, increasing systemic risk as more layers are added.[[2]](#cite-id-mw2gfw0i3em)[[8]](#cite-id-2ozt94t9kk) To mitigate these risks, developers and communities use measures such as independent audits, bug bounties, conservative [collateral](https://iq.wiki/wiki/collateral) and risk parameters, and gradual integration of new assets or cross-chain connections before they become core building [blocks](https://iq.wiki/wiki/block) in wider DeFi stacks.[[8]](#cite-id-2ozt94t9kk)","recentActivity":null,"operator":{"id":"0x1E23b34d3106F0C1c74D17f2Cd0F65cdb039b138"},"categories":[{"id":"glossary","title":"glossary"}],"tags":[],"images":[{"id":"QmXwA18SdBzEUAohDhVDLCPGP8wqw9oRp42zu7ye31r9qG","type":"image/jpeg, image/png"}],"media":[{"name":"LVXbH8kG8bY","id":"https://www.youtube.com/watch?v=LVXbH8kG8bY","size":"0","type":null,"source":"YOUTUBE"},{"name":"3zQu3N8pANA","id":"https://www.youtube.com/watch?v=3zQu3N8pANA","size":"0","type":null,"source":"YOUTUBE"}],"linkedWikis":null,"events":[{"title":"Term \"Money Legos\" gains traction in DeFi community","date":"2020-03-01","type":"DEFAULT","description":"The phrase \"Money Legos\" is widely used in early DeFi coverage to describe Ethereum-based composability.","link":"https://our.status.im/whats-with-defi-and-money-legos/","country":"Global","continent":"Global","multiDateStart":null,"multiDateEnd":null,"id":"39bc9355-de9e-40d0-9370-3e3eb540dd57"},{"title":"Media coverage highlights Money Legos as a defining DeFi meme","date":"2020-04-01","type":"DEFAULT","description":"Camila Russo at The Defiant describes \"Money Legos\" as one of DeFi's most popular memes explaining protocol composability.","link":"https://thedefiant.substack.com/p/money-legos-arent-fitting-right-but-ac9","country":"Global","continent":"Global","multiDateStart":null,"multiDateEnd":null,"id":"da6eaeb0-d7b9-4667-93ba-d3683434b46c"}],"founderWikis":[],"blockchainWikis":[],"metadata":[{"id":"blocks-changed","value":"tags, events"},{"id":"wiki-score","value":"71"},{"id":"references","value":"[{\"id\":\"erndfcnwivv\",\"url\":\"https://learn.radixdlt.com/article/what-is-money-lego#\",\"description\":\"Radix Dlt\",\"timestamp\":1691256490833},{\"id\":\"mw2gfw0i3em\",\"url\":\"https://boxmining.com/defi-money-legos/\",\"description\":\"Box Mining\",\"timestamp\":1691257005425},{\"id\":\"gbolbm7crz6\",\"url\":\"https://phemex.com/academy/defi-composability-money-lego\",\"description\":\"Phemex\",\"timestamp\":1691257696534},{\"id\":\"o5m7ec8kcu\",\"url\":\"https://medium.com/monolith/understanding-defi-composability-explained-70f93d9c0f01\",\"description\":\"The Medium handle of Monolith\",\"timestamp\":1691259116838},{\"id\":\"t4oh45cwysp\",\"url\":\"https://www.moonpay.com/learn/defi/what-is-composability\",\"description\":\"Moon Pay\",\"timestamp\":1691259238044},{\"id\":\"o8a5k4m4a7\",\"url\":\"https://beincrypto.com/learn/compound-finance/\",\"description\":\"Be In Crypto\",\"timestamp\":1691260119375},{\"id\":\"1us0ny1aeg\",\"url\":\"https://chain.link/education-hub/permissionless-composability\",\"description\":\"Chainlink\",\"timestamp\":1787953797657},{\"id\":\"2ozt94t9kk\",\"url\":\"https://moonpay.com/learn/defi/what-is-composability\",\"description\":\"Moon Pay\",\"timestamp\":1787953797657}]"},{"id":"previous_cid","value":"QmdQPCwFVDU8RfViNhdRX22APAm8X9fwuhY2oRCTDMF7d2"},{"id":"commit-message","value":"Expand Money Legos summary (+348w); update timeline and tags"},{"id":"previous_cid","value":"QmdQPCwFVDU8RfViNhdRX22APAm8X9fwuhY2oRCTDMF7d2"}],"user":{"id":"0x8af7a19a26d8fbc48defb35aefb15ec8c407f889"},"author":{"id":"0x1E23b34d3106F0C1c74D17f2Cd0F65cdb039b138"},"views":4784}