Lending's evolution: from shared cauldrons to isolated markets

Classic lending (the first versions of Aave/Compound) is a shared cauldron: all collateral backs a common pool, and an exotic token on the collateral list is every depositor's risk. The new wave of protocols rebuilt the architecture.

Isolated markets

The idea: every "collateral/borrow asset" pair is a separate market with its own parameters, oracle, and risk. A hole in one market does not touch its neighbors. On top of the isolated primitives sit curated vaults: you deposit stables into a vault, and a curator distributes them across markets under their risk policy - with the allocations public.

What it changes for the user

• Risk became addressable: you choose not "a protocol" but specific markets/a curator. The yield is higher where the risk policy is more aggressive - now that is visible rather than hidden in a shared cauldron.
• Responsibility moved: "safe because it is a big protocol" no longer works - read where the curator actually put your money.
• Tail risks are smaller but more numerous: instead of one systemic cauldron - hundreds of small markets, where exotic oracles and thin collateral both turn up.

The direction is healthy: DeFi is moving from "trust the brand" to "verify the parameters". The verification tools are public - use them. Protocol breakdowns - in the lending section.