# Defi Smart Contracts

> DeFi: Automated Market Makers (AMM)

- Skill: `j4flmao/defi-smart-contracts` (Agent Skill)
- Install (CLI): `npx skillmds@latest add j4flmao/defi-smart-contracts`
- Raw SKILL.md: https://api.skillmd.com/api/skills/j4flmao/defi-smart-contracts/raw
- Safety review: pending
- Works with: Claude Code, Claude.ai, OpenAI Codex
- Category: Coding & Dev Tools
- Author: j4flmao (https://skillmd.com/u/j4flmao)
- Updated: 2026-09-21
- Page: https://skillmd.com/skills/j4flmao/defi-smart-contracts

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# DeFi: Automated Market Makers (AMM)

## Core Mechanics

Traditional finance uses Order Books (matching buyers and sellers). DeFi protocols like Uniswap use AMMs: algorithms that pool liquidity and price assets deterministically using math.

### 1. The Constant Product Formula
The core engine of an AMM is `x * y = k`.
- `x` and `y` are the quantities of two tokens in a liquidity pool.
- `k` must remain constant after a trade.
- If a user buys token X, they must add token Y, making X scarcer and thus more expensive. This curve automatically provides continuous liquidity.

### 2. Smart Contract Reentrancy Guard
A classic vector for stealing funds. If a contract calls an external untrusted contract before updating its own internal balances, the malicious contract can recursively call back (re-enter) the original function to drain funds. Always use a `ReentrancyGuard` mutex or follow the Checks-Effects-Interactions pattern.

### AMM Swap Flow Map

```mermaid
%%{init: {"theme": "default", "flowchart": {"useMaxWidth": true}}}%%
flowchart TD
    subgraph User ["Trader"]
        A["Swap 10 Token A for Token B"]
    end
    
    subgraph AMM_Contract ["Liquidity Pool Contract"]
        B["Check reserves (x, y)"]
        C["Calculate Output: (y - k/(x+10))"]
        D["Execute Transfer"]
    end
    
    subgraph Reentrancy_Guard ["Security Layer"]
        E{"Is Locked?"}
        F["Lock Mutex"]
        G["Unlock Mutex"]
    end
    
    A --> E
    E -->|"No"| F
    F --> B
    B --> C
    C --> D
    D --> G
```