On Ethereum it is possible to combine coins (tokens) as if they were Lego bricks, to create new coins (or new tokens) with new features. It is the so-called "Ethereum Money Lego".

The fact is that smart contracts are used to create a token on Ethereum, which in turn can be made by exploiting others that already exist. In this way it is possible to use the tokens as if they were just the Lego bricks and build new smart contracts on them that generate new tokens.

In reality, from a strictly financial point of view, it is not something completely new, given that derivatives have existed in finance for a long time: in fact, financial derivatives are in some ways very similar to tokens built on other tokens, but there is a difference: tokens can be decentralized and built on other decentralized tokens.

Ethereum and Lego 

For this reason, the Ethereum blockchain is becoming a sort of sandbox to experiment with new ways of using smart contracts, for example to connect different dApps with each other.

This activity was precisely called "Ethereum Money Lego" and one of its examples is the so-called collateral swap, presented a few days ago by David Truong on Twitter. 

This swap is based on 3 existing DeFi platforms: Maker, Aave and Uniswap. It consists of a single transaction that allows you to swap the collateral of a Maker Vault / CDP with another asset using a flash loan from Aave and Uniswap to convert the collateral itself.

In this way, for example, you can replace ETH with BAT or vice versa within a Maker Vault with a single transaction, and without the need to proceed with the repayment of the loan or the loss of positions in DAI.

This is a solution still in the experimental phase, but since a similar operation previously provided that the borrowers would have to pay the debt in DAI entirely, close the deposit, exchange the underlying tokens and then open a new deposit with the collateral, it is clear what potential it might have.

Therefore, thanks to Ethereum Money Lego not only is it possible to create new tokens of a new type, but it is also possible to create new simplified operations by combining operations that are currently only possible on different platforms.