Defi Protocols

DeFi Protocols Skill

Master DeFi protocol development including AMM mechanics, lending systems, yield optimization, and oracle integration.

Quick Start

# Invoke this skill for DeFi development
Skill("defi-protocols", protocol_type="amm", chain="ethereum")

Topics Covered

1. AMM (Automated Market Makers)

Build decentralized exchanges:

• Constant Product: x * y = k (Uniswap V2)
• Concentrated Liquidity: Tick-based (Uniswap V3)
• Stable Swaps: Curve invariant
• TWAP: Time-weighted average price

2. Lending Protocols

Create lending markets:

• Overcollateralized: Aave/Compound model
• Interest Rates: Utilization-based curves
• Liquidation: Health factor, incentives
• Isolated Markets: Risk segmentation

3. Yield Optimization

Maximize returns:

• Auto-compounding: Vault strategies
• Liquidity Mining: Reward distribution
• veTokens: Vote-escrowed governance
• Bribes: Gauge voting incentives

4. Oracle Integration

Secure price feeds:

• Chainlink: Decentralized oracles
• TWAP: Manipulation resistant
• Staleness Checks: Price freshness
• Fallbacks: Multi-oracle setups

Code Examples

AMM Swap Calculation

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.24;

library SwapMath {
    uint256 constant FEE_NUMERATOR = 997;
    uint256 constant FEE_DENOMINATOR = 1000;

    /// @notice Calculate output amount for constant product AMM
    function getAmountOut(
        uint256 amountIn,
        uint256 reserveIn,
        uint256 reserveOut
    ) internal pure returns (uint256) {
        uint256 amountInWithFee = amountIn * FEE_NUMERATOR;
        uint256 numerator = amountInWithFee * reserveOut;
        uint256 denominator = reserveIn * FEE_DENOMINATOR + amountInWithFee;
        return numerator / denominator;
    }

    /// @notice Calculate price impact percentage (basis points)
    function getPriceImpact(
        uint256 amountIn,
        uint256 reserveIn
    ) internal pure returns (uint256) {
        return (amountIn * 10000) / (reserveIn + amountIn);
    }
}

Chainlink Oracle

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.24;

import "@chainlink/contracts/src/v0.8/interfaces/AggregatorV3Interface.sol";

contract PriceOracle {
    AggregatorV3Interface public immutable priceFeed;
    uint256 public constant STALENESS_THRESHOLD = 1 hours;

    error StalePrice();
    error InvalidPrice();

    constructor(address feed) {
        priceFeed = AggregatorV3Interface(feed);
    }

    function getPrice() external view returns (uint256) {
        (, int256 price,, uint256 updatedAt,) = priceFeed.latestRoundData();

        if (block.timestamp - updatedAt > STALENESS_THRESHOLD) {
            revert StalePrice();
        }
        if (price <= 0) revert InvalidPrice();

        return uint256(price);
    }
}

Flash Loan Callback

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.24;

import "@aave/v3-core/contracts/flashloan/base/FlashLoanSimpleReceiverBase.sol";

contract Arbitrage is FlashLoanSimpleReceiverBase {
    function executeOperation(
        address asset,
        uint256 amount,
        uint256 premium,
        address,
        bytes calldata
    ) external override returns (bool) {
        // Execute arbitrage logic here

        // Repay: amount + premium
        IERC20(asset).approve(address(POOL), amount + premium);
        return true;
    }
}

DeFi Math Formulas

Constant Product AMM

Invariant: x * y = k
Output: dy = y - k/(x + dx)
Price: p = y/x
Slippage: dx/(x + dx) * 100%

Interest Rates

Utilization: U = borrows / (deposits + borrows)
Borrow Rate: R = base + slope * U  (when U < optimal)
Supply Rate: R_supply = R_borrow * U * (1 - reserve_factor)

Health Factor

HF = (collateral * liquidation_threshold) / debt
Liquidation when HF < 1

Common Pitfalls

Security Checklist

• Oracle staleness validation
• Slippage protection
• Flash loan attack resistance
• Reentrancy guards
• Access control on admin
• Emergency pause mechanism
• Timelock on parameters

Troubleshooting

"Oracle price deviation"

# Compare oracle vs DEX price
cast call $ORACLE "latestRoundData()" --rpc-url $RPC
cast call $POOL "slot0()" --rpc-url $RPC

"Sandwich attack detected"

Add minimum output enforcement:

require(amountOut >= minAmountOut, "Slippage exceeded");

Protocol Addresses (Mainnet)

Cross-References

• Bonded Agent: 04-defi-specialist
• Related Skills: solidity-development, smart-contract-security

Version History