A property of the Ethereum platform is composability, meaning that applications built on the network are mutually compatible by design and can seamlessly interact with each other. Composability is a defining feature of Ethereum, allowing developers to build on top of existing protocols and smart contracts, and allowing users to easily call upon them for transactions. Rather than payment infrastructure being a siloed component that depends on internet services companies, Ethereum applications are natively interoperable across the same settlement network.
This means that applications and smart contracts can integrate with one another without requiring explicit permission or coordination. For example, a lending protocol can be integrated with an exchange to programmatically swap collateral with ease, or gaming applications can use token standards from other projects to create interoperable in-game assets. These types of interactions are possible because all apps operate on the same shared infrastructure, follow standardised protocols, and abide by Ethereum’s software rules.
Composability is a unique aspect of Ethereum and part of why investors view it as having increasing potential as a platform for online services and digital assets. Developers can make use of existing building blocks to create new applications without starting from scratch, resulting in more complex and interconnected systems. Over time, this environment has encouraged collaborative development amongst Ethereum’s development community, as each new application contributes to the overall ecosystem.
It’s worth noting that it is Ethereum’s base platform that is composable, and that layers-2s, which only settle transactions to the Ethereum blockchain, are not as seamlessly integrated. Many businesses and technologies use Ethereum to make transactions, and if they choose to not host their infrastructure on the Ethereum platform itself, they no longer receive this benefit.