DeFi Protocol Design

DeFi Protocol Design is the creation of decentralized financial systems running on blockchains. Core protocols: AMMs (Uniswap), lending (AAVE, Compound), derivatives (dYdX), yield aggregators (Yearn). Engineers design smart contracts enforcing financial rules (collateral requirements, interest calculation, liquidation mechanics), tokenomics (how rewards work), and governance (how protocol changes happen). Example: Uniswap: users deposit ETH/USDC → pool formula (x * y = k) executes trades → traders pay 0.3% fee → liquidity providers share fees.