DeFi Protocol Development
Decentralized Finance (DeFi) replaces traditional financial services with permissionless smart contracts. AMMs like Uniswap use mathematical formulas instead of order books, enabling trustless token swaps 24/7.
45 min•By Priygop Team•Last updated: Feb 2026
DeFi Concepts
- AMM (Automated Market Maker) — Constant product formula: x * y = k. Price determined algorithmically. No order book needed. Uniswap, Curve
- Liquidity Pool — Users deposit token pairs. Earn fees from swaps. Risk: impermanent loss when price ratio changes
- Yield Farming — Provide liquidity to earn reward tokens. APY can be high but includes protocol risk, smart contract bugs
- Lending protocols — Aave, Compound. Over-collateralized loans. Borrow 75% of collateral value. Liquidation if collateral drops
- Flash loans — Borrow any amount with ZERO collateral if repaid in same transaction. Used for arbitrage, liquidations, collateral swaps
- Oracles — Chainlink provides real-world prices (ETH/USD) to smart contracts. Critical for DeFi; manipulated oracles cause hacks
- MEV (Miner Extractable Value) — Validators reorder transactions for profit. Front-running, sandwiching, arbitrage. Significant in DeFi