DeFi lending is evolving through modular design, which breaks down the lending process into independent modules, such as collateral management, interest rate calculation, risk assessment, and liquidation mechanisms. Modular design enhances flexibility and scalability, allowing users and developers to freely combine functional modules. While it brings flexibility, modularity also increases complexity, necessitating attention to potential systemic risks.

Isolating the market is not the only way to make your lending protocol more modular; true innovation is happening in new protocols that reimagine the necessary components of the lending stack.

Explore the characteristics, design, and potential of the modular lending products Morpho and Euler.