Isolated collateral
A lending-market design where each collateral asset has its own market and cannot endanger others.
Compound v3 ("Comet") and Morpho Blue both use isolated-collateral designs — losses in one market never propagate to others. Tradeoff: capital efficiency falls because a user can't cross-collateralise. The StableLens risk model rewards isolation with a lower correlated-loss multiplier.
Related terms
- CompoundOne of the original DeFi lending markets — pioneered the cToken model and on-chain governance.
- MorphoA modular lending primitive — Morpho Blue isolates each market, with curators (e.g. MetaMorpho) building risk-managed vaults atop.
- Lending marketA pool-based protocol where suppliers earn interest from borrowers, with rates set algorithmically by utilisation.