Composability
The ability of DeFi smart contracts and tokens to interact with one another trustlessly, enabling stacked strategies.
Composability is a fundamental property of decentralised finance: smart contracts and the tokens they issue can interact with one another without permission from either party. Any ERC-20 token can theoretically be deposited into any protocol that accepts it — creating "money lego" stacks where capital earns yield at multiple layers simultaneously.
In the context of onchain reinsurance, composability means that capital deposited in a protocol like Ensuro produces an eToken (ERC-20) that can then be used as collateral in a DeFi lending market. The capital provider earns insurance premium from Ensuro and borrowing capacity from the lending market simultaneously.
Traditional reinsurance capital cannot do this: it sits in segregated trust accounts, managed by trustees, accessible only through contractual mechanisms. Onchain capital is programmable money.
Example usage
“Ensuro's eTokens demonstrate DeFi composability: capital providers can use their eToken positions as collateral in lending protocols while still earning insurance premium yield.”
Frequently asked questions
What is Composability?
The ability of DeFi smart contracts and tokens to interact with one another trustlessly, enabling stacked strategies. Composability is a fundamental property of decentralised finance: smart contracts and the tokens they issue can interact with one another without permission from either party. Any ERC-20 token can theoretically be deposited into any protocol that accepts it — creating "money lego" stacks where capital earns yield at multiple layers simultaneously.
How is Composability used in practice?
Ensuro's eTokens demonstrate DeFi composability: capital providers can use their eToken positions as collateral in lending protocols while still earning insurance premium yield.
Related terms
More Onchain / DeFi terms