Money Legos

Money Legos or DeFi Legos refers to the idea of composability, the combining of simple protocols that are already doing something very well on their own, into a brand new protocol or service.

Lego blocks, or individual protocols operating on the same blockchain network, can “snap” onto another Lego block, or protocol, creating new and incredible DeFi projects.

The protocols can interoperate, or work together using middleware, that binds the various protocols together.

Great examples of this idea are Automatic Market Maker (AMMs) protocols, liquidity mining, over-collateralized loans, and flash loans.

Examples of DeFi protocols benefiting from DeFi Legos include Maker DAO, Aave, Synthetix, Curve, Yearn, Compound, Sushi, and Polygon.

Many DeFi lego protocols operate on the Ethereum blockchain because it maintains the largest majority of total value locked into DeFi apps.

That’s not to say that other protocols operating outside of Ethereum can’t benefit from the concept of DeFi Legos.

A great example of this is the Hubble Protocol, which runs on Solana, contributing USDH, a crypto-backed and censorship-resistant stablecoin.

Hubble is much like Maker DAO, in that it allows market participants to deposit the digital asset and borrow a stablecoin to use in DeFi. The users still get to keep their long positions on the asset while gaining liquidity that can also be used.

Related Terms

Ethereum (ETH)

Ethereum is a decentralized blockchain platform that makes digital money, global payments, and applications possible using open-source software and smart contract functionality. The big difference between the two is that Ethereum is programmable, meaning you can build and use decentralized apps on the network. That means the Ethereum blockchain can be programmed to do virtually anything.

Cardano (ADA)

Cardano is a decentralized open-source blockchain platform built with proof-of-stake (PoS) consensus, offering smart contract capabilities, and using the native cryptocurrency ADA.

Decentralized Finance (DeFi)

A new way of providing financial services to the masses, minus the middleman in many cases. Think of traditional financial services like money exchange and transfers, savings and lending, but now they’re online and digital, global and easily transferrable. They’re also programmable, allowing them to be interconnected to other services via different protocols, all existing on the blockchain

Token

A Token is a digital asset that operates on a parent blockchain or on another digital asset’s blockchain because it doesn’t have a blockchain of its own. The term “token” also tends to describe almost all other cryptocurrencies other than Bitcoin and Ethereum, the two largest cryptocurrencies in existence today. Tokens have multiple purposes and use cases.

Fork

When developers make changes to a blockchain, such as adding new blockchain functionality, correcting security issues, creating entirely new coins, or even changing the consensus protocol that governs how blocks are created and validated on a blockchain.