What Is "Systemic Risk" in the Context of DeFi Contagion? ▴ Learn

What Is “Systemic Risk” in the Context of DeFi Contagion?

Systemic risk in DeFi refers to the risk of the failure of one major protocol or asset causing a cascading failure across the entire ecosystem. This is often due to the interconnectedness of protocols, where one protocol's failure (e.g. a stablecoin de-pegging) can lead to mass liquidations and insolvency in others.

This contagion effect is a major concern for the stability of Decentralized Finance.

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