The economic system that dominated Europe during the Middle Ages was feudalism. This hierarchical system was characterized by the relationship between lords, vassals, and serfs. Lords owned large estates and granted land to vassals in exchange for military service and protection. Serfs, who worked the land, were bound to the estate and had limited rights. Feudalism influenced social structure, economy, and governance, creating a land-based economy with local self-sufficiency. This system began to decline with the rise of towns, trade, and the emergence of a more market-oriented economy in the late Middle Ages, eventually paving the way for the Renaissance.