Composability risk is the risk that a problem in one system can cascade into other connected systems. For example, LP positions in the Y Curve pool take on the composed risks of USDT, Dai, USDC, TUSD, Compound, Aave, and Curve. In the design of a Curve AMM pool, if one of these components were to fail, the value of the whole pool would cascade to zero.
Gyroscope solves this, while maintaining capital efficiency, by stratifying composability risks.
The Gyroscope reserve is separated into lower-level vaults (triangles in the above figure) with carefully contained risks. There are little overlapping risks between the vaults. The failure of an individual vault then has no effect on the remaining vaults. If vaults should fail (if a triangle is removed in the above figure), the Gyroscope system will remain stabilized at $1 through the peg coordination mechanism (described fully here). After a vault failure, the Gyroscope reserve can also recover back to full strength through the yield earned on reserve assets in the remaining vaults.