# Defi Protocols > A Claude skill from brainbytes-dev/everything-claude-trading. - **Type:** Skill - **Install:** `agentstack add skill-brainbytes-dev-everything-claude-trading-defi-protocols` - **Verified:** Yes — security-reviewed for prompt injection and unsafe behavior - **Seller:** [brainbytes-dev](https://agentstack.voostack.com/s/brainbytes-dev) - **Installs:** 0 - **Category:** [Finance & Payments](https://agentstack.voostack.com/c/finance-and-payments) - **Latest version:** 0.1.0 - **License:** MIT - **Upstream author:** [brainbytes-dev](https://github.com/brainbytes-dev) - **Source:** https://github.com/brainbytes-dev/everything-claude-trading/tree/main/skills/crypto/defi-protocols ## Install ```sh agentstack add skill-brainbytes-dev-everything-claude-trading-defi-protocols ``` Requires the [AgentStack CLI](https://agentstack.voostack.com/docs/cli). Works with Claude Code, Cursor, and any MCP-compatible agent. ## About # DeFi Protocol Analysis ## When to Activate - Analyzing DeFi protocol mechanics for trading or yield opportunities - Evaluating AMM designs (Uniswap v3, Curve), lending protocols (Aave, Compound), or staking systems - Assessing liquidity provision strategies, including concentrated liquidity and stableswap invariants - Comparing liquid staking solutions (Lido, Rocket Pool) or evaluating validator economics ## Core Concepts ### Automated Market Makers (AMMs) **Constant Product (Uniswap v2):** - Invariant: x * y = k - Price impact is proportional to trade size relative to pool depth - LPs provide liquidity uniformly across the entire price range (0, infinity) - Simple but capital-inefficient — most liquidity sits unused far from current price **Concentrated Liquidity (Uniswap v3):** - LPs choose a price range [p_lower, p_upper] to deploy capital - Capital efficiency gain: up to 4000x vs v2 for tight ranges - Fee tiers: 0.01% (stablecoins), 0.05% (correlated pairs), 0.30% (standard), 1.00% (exotic) - Position management is active — out-of-range positions earn zero fees - Tick spacing determines granularity: 1 tick = 0.01% price change for 0.01% fee tier - JIT (just-in-time) liquidity: sophisticated LPs add/remove liquidity around large trades in the same block **Curve StableSwap:** - Invariant blends constant-product and constant-sum: A * n^n * sum(x_i) + D = A * D * n^n + D^(n+1) / (n^n * prod(x_i)) - Amplification parameter A controls the flatness of the curve around the peg - Higher A = flatter curve = lower slippage near peg, but higher risk if assets depeg - Curve v2 (CryptoSwap) extends to volatile pairs with internal oracle and dynamic A - Gauge system: veCRV holders vote on emission allocation; "Curve Wars" for gauge control ### Lending Protocols **Aave/Compound Mechanics:** - Utilization rate U = total borrows / total deposits - Interest rate models are kinked: low rate below optimal utilization, steep rate above - Aave: variable rate = base + (U / U_optimal) * slope1 when U = U_optimal - slope2 is typically 10-50x slope1 to discourage full utilization - Collateral factors (LTV): determines max borrowing power per asset (e.g., ETH = 82.5% on Aave v3) - Liquidation threshold > LTV — buffer zone before liquidation triggers - Liquidation penalty: 5-10% bonus incentivizes liquidators - Health factor = (collateral * liquidation_threshold) / debt; liquidation triggers at HF < 1.0 **Aave v3 Features:** - Efficiency mode (e-mode): higher LTV for correlated assets (e.g., ETH/stETH at 93% LTV) - Isolation mode: new assets listed with limited borrowing capacity - Portal: cross-chain liquidity bridging - Flash loans: uncollateralized single-block loans; 0.05% fee (Aave), 0% (some forks) ### Staking and Liquid Staking **Validator Economics (Ethereum PoS):** - 32 ETH minimum stake per validator - Rewards: attestation rewards + block proposal rewards + MEV tips - Current yield approximately 3-5% APR depending on total staked - Slashing risks: double-signing, surround voting — penalty is correlated with concurrent slashing events - Withdrawal queue: variable wait times based on churn limit **Liquid Staking:** - Lido (stETH): rebasing token, daily balance updates, ~90% market share risk - Rocket Pool (rETH): exchange-rate model, accumulates value, more decentralized (permissionless node operators) - Staking derivative pricing: should trade near 1:1 but discounts occur during market stress or withdrawal delays - stETH/ETH peg risk: during 2022, discount reached ~5% due to 3AC forced selling and withdrawal uncertainty ## Methodology ### Protocol Evaluation Framework 1. **Mechanism design** — understand the invariant/interest model mathematically 2. **TVL analysis** — total value locked, TVL trend, TVL concentration by pool/market 3. **Revenue analysis** — protocol revenue vs token holder revenue; fee switch status 4. **Risk assessment** — smart contract risk (audits, bug bounties), oracle risk, governance risk 5. **Competitive positioning** — market share, moat, fork risk, incentive sustainability ### LP Position Management (Uniswap v3) ``` 1. Select pair and fee tier based on expected volatility 2. Analyze historical price distribution to determine range - Tighter range = more fees when in range, more rebalancing when out - Rule of thumb: set range to cover 1-2 standard deviations of expected price movement 3. Calculate expected fee income vs impermanent loss 4. Monitor position: rebalance when price exits range or when IL exceeds fee income 5. Account for gas costs — rebalancing on Ethereum mainnet costs $20-100+ ``` ### Lending Strategy Analysis ``` 1. Compare supply/borrow rates across protocols for the same asset 2. Check utilization rates — high utilization means withdrawal risk 3. Evaluate liquidation risk: model collateral drawdown scenarios 4. Consider recursive leverage: supply ETH, borrow stablecoin, buy more ETH - Effective leverage = 1 / (1 - LTV); at 80% LTV = 5x effective leverage - Risk: liquidation cascade if collateral drops sharply 5. Monitor governance proposals that could change parameters ``` ## Examples ### Example 1: Curve Pool Analysis ``` Pool: 3pool (DAI/USDC/USDT) A parameter: 2000 TVL: $500M Daily volume: $50M Fee: 0.01% Analysis: - Volume/TVL ratio: 10% daily — healthy utilization - With A=2000, slippage on $1M trade: ~0.002% - Base APY from fees: ~3.65% (10% * 0.01% * 365) - CRV emissions add 5-15% depending on gauge weight and boost - Risk: USDT depeg would break the amplification assumption ``` ### Example 2: Aave Recursive Leverage ``` Strategy: Supply ETH, borrow USDC, buy ETH, repeat ETH LTV on Aave v3: 82.5% Liquidation threshold: 86% 3 loops: - Deposit 10 ETH ($20,000) - Borrow $16,500 USDC (82.5% LTV) - Buy 8.25 ETH, deposit - Borrow $13,612 USDC - Buy 6.8 ETH, deposit Effective position: ~25 ETH exposure on 10 ETH collateral (2.5x leverage) Liquidation price: approximately 18% below entry Borrow cost: ~3% APR on total borrowed Net cost of leverage: ~3% * 1.5 (leverage ratio) = 4.5% annual drag Risk: If ETH drops 15%+ rapidly, liquidation cascade. Health factor must be monitored continuously. Consider using Aave's e-mode if available for the pair. ``` ### Example 3: Liquid Staking Arbitrage ``` Observation: - stETH trading at 0.97 ETH on Curve - Lido withdrawals enabled with 3-day queue - Fair value: 1.0 ETH (minus small time value discount) Trade: - Buy stETH at 0.97 on Curve - Submit withdrawal request to Lido - Receive 1.0 ETH after withdrawal period - Profit: 3% minus gas costs and opportunity cost of capital lockup Risk factors: - Withdrawal queue could extend during high demand - Smart contract risk during withdrawal process - stETH discount could widen further before withdrawal completes ``` ## Quality Gate Before deploying capital into DeFi protocols, verify: - [ ] Smart contract has been audited by 2+ reputable firms and has active bug bounty - [ ] Protocol has been live for 6+ months with no critical exploits (or exploits were patched and post-mortemed) - [ ] Interest rate model or AMM invariant is understood mathematically, not just described - [ ] Impermanent loss and fee income are modeled for realistic price scenarios, not just historical - [ ] Liquidation thresholds and health factors are stress-tested against 2-3 sigma price moves - [ ] Oracle dependencies are identified — Chainlink vs TWAP vs custom, and their failure modes - [ ] Gas costs for position management are factored into expected returns - [ ] Governance risk assessed — can parameters change via governance vote with short timelock? - [ ] Concentration risk evaluated — what percentage of TVL is your position? Can you exit without moving the market? - [ ] Regulatory risk considered — protocol jurisdiction, KYC requirements, potential for sanctions ## Source & license This open-source skill is cataloged on AgentStack and links to its original source — we do not rehost the code. - **Author:** [brainbytes-dev](https://github.com/brainbytes-dev) - **Source:** [brainbytes-dev/everything-claude-trading](https://github.com/brainbytes-dev/everything-claude-trading) - **License:** MIT Install and usage instructions live in the source repository linked above. ## Pricing - **Free** — Free ## Security capabilities Automated source analysis of v0.1.0 — what this tool can access: - **Network access:** no - **Filesystem access:** no - **Shell / process execution:** no - **Environment & secrets:** no - **Dynamic code execution:** no *"Yes" means the capability is present in the source — more access means more to trust, not that it is unsafe.* ## Versions - **0.1.0** — security scan: passed — Imported from the upstream source. ## Links - Listing page: https://agentstack.voostack.com/l/skill-brainbytes-dev-everything-claude-trading-defi-protocols - Seller: https://agentstack.voostack.com/s/brainbytes-dev - Browse the marketplace: https://agentstack.voostack.com/browse --- Listed on AgentStack — the marketplace for AI agent skills and MCP servers. Every listing is security-reviewed. Creators keep 70%.