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"A monolith that can handle component level failures" - being able to handle component level failures I think is more related to business logic design rather than being a monolith/microservice implementation. If your business process depends on some login microservice and that one is down it does not matter that the other parts are functional.

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So just to play to your hypothetical. If there were two login methods, and they were separate microservices, if only one failed and the other remained up, that would be the graceful failure scenario.

I'm not telling you that you must to do this. Others may have requirements that go beyond yours.

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