Protocol Cascades

Protocol cascades are the result of sequential failures where one protocol's collapse forces liquidations on another, leading to a chain reaction. This is particularly prevalent in composable DeFi environments where protocols are built on top of each other.

A failure in a base layer protocol can invalidate the collateral of protocols built on top, causing a rapid withdrawal of liquidity. Understanding these cascades is essential for assessing the stability of the DeFi ecosystem and the risks associated with protocol interoperability.

It requires a deep dive into the technical dependencies and the automated mechanisms that trigger liquidations across the stack. This knowledge helps in identifying the most vulnerable points in the system.