How Does Composability Increase Systemic Risk within the DeFi Ecosystem?

Composability increases systemic risk because a failure or exploit in one underlying protocol can cascade rapidly across the entire ecosystem. Since protocols are stacked like "money legos," a bug in a widely used token standard or a major lending platform can instantly affect all derivative platforms, exchanges, and vaults built on top of it.

This interconnectedness means that a localized failure can quickly become a system-wide crisis, a phenomenon often called "DeFi contagion."