Money Legos or DeFi Legos refers to the idea of composability, the combining of simple protocols that are already doing something very well on their own, into a brand new protocol or service.
Lego blocks, or individual protocols operating on the same blockchain network, can “snap” onto another Lego block, or protocol, creating new and incredible DeFi projects.
The protocols can interoperate, or work together using middleware, that binds the various protocols together.
Great examples of this idea are Automatic Market Maker (AMMs) protocols, liquidity mining, over-collateralized loans, and flash loans.
Examples of DeFi protocols benefiting from DeFi Legos include Maker DAO, Aave, Synthetix, Curve, Yearn, Compound, Sushi, and Polygon.
Many DeFi lego protocols operate on the Ethereum blockchain because it maintains the largest majority of total value locked into DeFi apps.
That’s not to say that other protocols operating outside of Ethereum can’t benefit from the concept of DeFi Legos.
A great example of this is the Hubble Protocol, which runs on Solana, contributing USDH, a crypto-backed and censorship-resistant stablecoin.
Hubble is much like Maker DAO, in that it allows market participants to deposit the digital asset and borrow a stablecoin to use in DeFi. The users still get to keep their long positions on the asset while gaining liquidity that can also be used.