isolated lending markets 8 min read
The Architecture of Isolated Lending Markets
TL;DR Isolated lending markets contain risk by separating collateral types into independent, risk-isolated pools. When one market experiences stress (oracle failure, liquidity crisis, smart contract exploit), other markets continue to operate normally. This architecture trades some capital efficiency for dramatically better risk containment. For institutional allocators and protocols building on top of lending infrastructure, isolation is a prerequisite.
