Advanced Smart Contract Patterns and DeFi Protocol Development
Building Production-Grade Decentralized Finance Protocols
Prerequisites Assumed
- Completion of Tutorial 1 (Blockchain Engineering Fundamentals)
- Solid understanding of Solidity and smart contract development
- Experience with testing frameworks and deployment tools
- Knowledge of DeFi concepts (lending, AMMs, yield farming)
1. Advanced Smart Contract Architecture Patterns
Factory Pattern for Protocol Deployment
The Factory pattern enables scalable deployment of similar contracts with consistent interfaces.
// contracts/LendingPoolFactory.sol
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.19;
import "./LendingPool.sol";
import "@openzeppelin/contracts/access/Ownable.sol";
import "@openzeppelin/contracts/security/ReentrancyGuard.sol";
/**
* @title LendingPoolFactory
* @dev Factory contract for deploying and managing lending pools
*/
contract LendingPoolFactory is Ownable, ReentrancyGuard {
struct PoolInfo {
address poolAddress;
address asset;
string name;
uint256 createdAt;
bool isActive;
}
mapping(address => PoolInfo) public pools;
mapping(address => address[]) public assetToPools;
address[] public allPools;
event PoolCreated(
address indexed poolAddress,
address indexed asset,
string name,
address indexed creator
);
event PoolStatusChanged(address indexed pool, bool isActive);
/**
* @dev Creates a new lending pool for a specific asset
* @param asset The ERC20 token address for the pool
* @param name Human-readable name for the pool
* @param initialParams Pool configuration parameters
*/
function createPool(
address asset,
string memory name,
LendingPool.PoolParams memory initialParams
) external nonReentrant returns (address) {
require(asset != address(0), "Invalid asset address");
require(bytes(name).length > 0, "Pool name required");
// Deploy new lending pool
LendingPool newPool = new LendingPool(
asset,
name,
initialParams,
msg.sender
);
address poolAddress = address(newPool);
// Store pool information
pools[poolAddress] = PoolInfo({
poolAddress: poolAddress,
asset: asset,
name: name,
createdAt: block.timestamp,
isActive: true
});
assetToPools[asset].push(poolAddress);
allPools.push(poolAddress);
emit PoolCreated(poolAddress, asset, name, msg.sender);
return poolAddress;
}
/**
* @dev Gets all pools for a specific asset
*/
function getPoolsForAsset(address asset) external view returns (address[] memory) {
return assetToPools[asset];
}
/**
* @dev Gets total number of pools
*/
function getTotalPools() external view returns (uint256) {
return allPools.length;
}
/**
* @dev Toggles pool active status (emergency control)
*/
function setPoolStatus(address pool, bool isActive) external onlyOwner {
require(pools[pool].poolAddress != address(0), "Pool does not exist");
pools[pool].isActive = isActive;
emit PoolStatusChanged(pool, isActive);
}
}
Upgradeable Smart Contract Pattern
Using OpenZeppelin's proxy pattern for upgradeable contracts:
// contracts/LendingPoolV1.sol
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.19;
import "@openzeppelin/contracts-upgradeable/token/ERC20/IERC20Upgradeable.sol";
import "@openzeppelin/contracts-upgradeable/security/ReentrancyGuardUpgradeable.sol";
import "@openzeppelin/contracts-upgradeable/security/PausableUpgradeable.sol";
import "@openzeppelin/contracts-upgradeable/access/OwnableUpgradeable.sol";
import "@openzeppelin/contracts-upgradeable/proxy/utils/Initializable.sol";
/**
* @title LendingPoolV1
* @dev Upgradeable lending pool implementation
*/
contract LendingPoolV1 is
Initializable,
OwnableUpgradeable,
PausableUpgradeable,
ReentrancyGuardUpgradeable
{
struct UserInfo {
uint256 deposited;
uint256 borrowed;
uint256 collateral;
uint256 lastUpdateTime;
uint256 rewardDebt;
}
struct PoolParams {
uint256 baseBorrowRate; // Base borrow rate (18 decimals)
uint256 multiplier; // Multiplier for utilization rate
uint256 jumpMultiplier; // Jump multiplier after kink
uint256 kink; // Utilization rate at which jump multiplier kicks in
uint256 collateralFactor; // Maximum LTV ratio (18 decimals)
uint256 liquidationThreshold; // Liquidation threshold (18 decimals)
uint256 liquidationBonus; // Liquidation bonus (18 decimals)
uint256 reserveFactor; // Reserve factor (18 decimals)
}
IERC20Upgradeable public asset;
string public poolName;
PoolParams public params;
uint256 public totalDeposits;
uint256 public totalBorrows;
uint256 public totalReserves;
uint256 public lastAccrualTime;
uint256 public borrowIndex;
mapping(address => UserInfo) public users;
address[] public userList;
event Deposit(address indexed user, uint256 amount, uint256 timestamp);
event Withdraw(address indexed user, uint256 amount, uint256 timestamp);
event Borrow(address indexed user, uint256 amount, uint256 timestamp);
event Repay(address indexed user, uint256 amount, uint256 timestamp);
event Liquidation(
address indexed liquidator,
address indexed borrower,
uint256 debtAmount,
uint256 collateralSeized
);
/// @custom:oz-upgrades-unsafe-allow constructor
constructor() {
_disableInitializers();
}
/**
* @dev Initializer function (replaces constructor for upgradeable contracts)
*/
function initialize(
address _asset,
string memory _name,
PoolParams memory _params,
address _owner
) public initializer {
__Ownable_init();
__Pausable_init();
__ReentrancyGuard_init();
asset = IERC20Upgradeable(_asset);
poolName = _name;
params = _params;
borrowIndex = 1e18;
lastAccrualTime = block.timestamp;
_transferOwnership(_owner);
}
/**
* @dev Deposits assets into the lending pool
* @param amount Amount to deposit
*/
function deposit(uint256 amount) external nonReentrant whenNotPaused {
require(amount > 0, "Amount must be greater than 0");
accrueInterest();
UserInfo storage user = users[msg.sender];
if (user.deposited == 0) {
userList.push(msg.sender);
}
user.deposited += amount;
user.lastUpdateTime = block.timestamp;
totalDeposits += amount;
require(
asset.transferFrom(msg.sender, address(this), amount),
"Transfer failed"
);
emit Deposit(msg.sender, amount, block.timestamp);
}
/**
* @dev Calculates current utilization rate
*/
function getUtilizationRate() public view returns (uint256) {
if (totalDeposits == 0) return 0;
return (totalBorrows * 1e18) / totalDeposits;
}
/**
* @dev Calculates current borrow rate based on utilization
*/
function getBorrowRate() public view returns (uint256) {
uint256 util = getUtilizationRate();
if (util <= params.kink) {
return params.baseBorrowRate + (util * params.multiplier) / 1e18;
} else {
uint256 normalRate = params.baseBorrowRate +
(params.kink * params.multiplier) / 1e18;
uint256 excessUtil = util - params.kink;
return normalRate + (excessUtil * params.jumpMultiplier) / 1e18;
}
}
/**
* @dev Accrues interest to borrows and reserves
*/
function accrueInterest() public {
uint256 currentTime = block.timestamp;
if (currentTime == lastAccrualTime) return;
if (totalBorrows == 0) {
lastAccrualTime = currentTime;
return;
}
uint256 timeDelta = currentTime - lastAccrualTime;
uint256 borrowRate = getBorrowRate();
uint256 interestFactor = (borrowRate * timeDelta) / (365 days);
uint256 interestAccumulated = (totalBorrows * interestFactor) / 1e18;
uint256 reserveContribution = (interestAccumulated * params.reserveFactor) / 1e18;
totalBorrows += interestAccumulated;
totalReserves += reserveContribution;
borrowIndex += (borrowIndex * interestFactor) / 1e18;
lastAccrualTime = currentTime;
}
/**
* @dev Borrows assets from the pool
* @param amount Amount to borrow
*/
function borrow(uint256 amount) external nonReentrant whenNotPaused {
require(amount > 0, "Amount must be greater than 0");
require(amount <= getAvailableToBorrow(), "Insufficient liquidity");
accrueInterest();
UserInfo storage user = users[msg.sender];
// Calculate new borrow amount with interest
uint256 newBorrowAmount = user.borrowed + amount;
// Check collateral requirements
require(
isValidBorrow(msg.sender, newBorrowAmount),
"Insufficient collateral"
);
user.borrowed = newBorrowAmount;
user.lastUpdateTime = block.timestamp;
totalBorrows += amount;
require(asset.transfer(msg.sender, amount), "Transfer failed");
emit Borrow(msg.sender, amount, block.timestamp);
}
/**
* @dev Checks if a borrow amount is valid for a user
*/
function isValidBorrow(address user, uint256 borrowAmount) public view returns (bool) {
UserInfo memory userInfo = users[user];
if (userInfo.collateral == 0) return borrowAmount == 0;
uint256 maxBorrow = (userInfo.collateral * params.collateralFactor) / 1e18;
return borrowAmount <= maxBorrow;
}
/**
* @dev Gets available liquidity for borrowing
*/
function getAvailableToBorrow() public view returns (uint256) {
return totalDeposits - totalBorrows;
}
/**
* @dev Emergency pause function
*/
function pause() external onlyOwner {
_pause();
}
/**
* @dev Unpause function
*/
function unpause() external onlyOwner {
_unpause();
}
/**
* @dev Get contract version for upgrade tracking
*/
function version() external pure returns (string memory) {
return "1.0.0";
}
}
Practical Exercise 1: Proxy Deployment
// scripts/deployUpgradeable.js
const { ethers, upgrades } = require("hardhat");
async function main() {
console.log("Deploying upgradeable LendingPool...");
const [deployer] = await ethers.getSigners();
console.log("Deploying with account:", deployer.address);
// Deploy implementation contract
const LendingPoolV1 = await ethers.getContractFactory("LendingPoolV1");
// Configuration parameters
const poolParams = {
baseBorrowRate: ethers.utils.parseEther("0.02"), // 2% base rate
multiplier: ethers.utils.parseEther("0.15"), // 15% multiplier
jumpMultiplier: ethers.utils.parseEther("3.0"), // 300% jump multiplier
kink: ethers.utils.parseEther("0.8"), // 80% kink
collateralFactor: ethers.utils.parseEther("0.75"), // 75% LTV
liquidationThreshold: ethers.utils.parseEther("0.83"), // 83% liquidation
liquidationBonus: ethers.utils.parseEther("0.05"), // 5% bonus
reserveFactor: ethers.utils.parseEther("0.1") // 10% reserve
};
// Deploy proxy
const lendingPool = await upgrades.deployProxy(
LendingPoolV1,
[
process.env.ASSET_ADDRESS, // Asset token address
"ETH Lending Pool", // Pool name
poolParams, // Pool parameters
deployer.address // Owner
],
{ initializer: 'initialize' }
);
await lendingPool.deployed();
console.log("LendingPool deployed to:", lendingPool.address);
// Verify the deployment
const version = await lendingPool.version();
console.log("Contract version:", version);
// Save deployment addresses
const deploymentInfo = {
proxy: lendingPool.address,
implementation: await upgrades.erc1967.getImplementationAddress(lendingPool.address),
admin: await upgrades.erc1967.getAdminAddress(lendingPool.address)
};
console.log("Deployment info:", deploymentInfo);
}
main()
.then(() => process.exit(0))
.catch(error => {
console.error(error);
process.exit(1);
});
2. Automated Market Maker (AMM) Implementation
Constant Product AMM with Advanced Features
// contracts/AdvancedAMM.sol
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.19;
import "@openzeppelin/contracts/token/ERC20/IERC20.sol";
import "@openzeppelin/contracts/token/ERC20/ERC20.sol";
import "@openzeppelin/contracts/security/ReentrancyGuard.sol";
import "@openzeppelin/contracts/access/Ownable.sol";
import "@openzeppelin/contracts/utils/math/Math.sol";
/**
* @title AdvancedAMM
* @dev Automated Market Maker with dynamic fees and concentrated liquidity
*/
contract AdvancedAMM is ERC20, ReentrancyGuard, Ownable {
using Math for uint256;
IERC20 public immutable token0;
IERC20 public immutable token1;
uint256 public reserve0;
uint256 public reserve1;
uint256 public kLast; // reserve0 * reserve1 at last liquidity event
// Fee structure
uint256 public constant FEE_DENOMINATOR = 10000;
uint256 public baseFee = 30; // 0.3% base fee
uint256 public maxFee = 100; // 1% max fee
uint256 public protocolFee = 500; // 5% of trading fees go to protocol
// Liquidity mining
uint256 public rewardRate = 1e18; // Rewards per second
uint256 public lastUpdateTime;
uint256 public rewardPerTokenStored;
mapping(address => uint256) public userRewardPerTokenPaid;
mapping(address => uint256) public rewards;
// Price oracle
uint256 public price0CumulativeLast;
uint256 public price1CumulativeLast;
uint32 public blockTimestampLast;
// Events
event Mint(address indexed sender, uint256 amount0, uint256 amount1);
event Burn(address indexed sender, uint256 amount0, uint256 amount1, address indexed to);
event Swap(
address indexed sender,
uint256 amount0In,
uint256 amount1In,
uint256 amount0Out,
uint256 amount1Out,
address indexed to
);
event Sync(uint256 reserve0, uint256 reserve1);
event RewardPaid(address indexed user, uint256 reward);
modifier updateReward(address account) {
rewardPerTokenStored = rewardPerToken();
lastUpdateTime = block.timestamp;
if (account != address(0)) {
rewards[account] = earned(account);
userRewardPerTokenPaid[account] = rewardPerTokenStored;
}
_;
}
constructor(
address _token0,
address _token1,
string memory _name,
string memory _symbol
) ERC20(_name, _symbol) {
require(_token0 != _token1, "Identical tokens");
(address tokenA, address tokenB) = _token0 < _token1 ?
(_token0, _token1) : (_token1, _token0);
token0 = IERC20(tokenA);
token1 = IERC20(tokenB);
lastUpdateTime = block.timestamp;
}
/**
* @dev Adds liquidity to the pool
* @param amount0Desired Desired amount of token0
* @param amount1Desired Desired amount of token1
* @param amount0Min Minimum amount of token0
* @param amount1Min Minimum amount of token1
* @param to Address to mint LP tokens to
*/
function addLiquidity(
uint256 amount0Desired,
uint256 amount1Desired,
uint256 amount0Min,
uint256 amount1Min,
address to
) external nonReentrant updateReward(to) returns (uint256 liquidity) {
(uint256 amount0, uint256 amount1) = _addLiquidity(
amount0Desired,
amount1Desired,
amount0Min,
amount1Min
);
liquidity = mint(to, amount0, amount1);
}
/**
* @dev Internal function to calculate optimal amounts for adding liquidity
*/
function _addLiquidity(
uint256 amount0Desired,
uint256 amount1Desired,
uint256 amount0Min,
uint256 amount1Min
) internal view returns (uint256 amount0, uint256 amount1) {
if (reserve0 == 0 && reserve1 == 0) {
(amount0, amount1) = (amount0Desired, amount1Desired);
} else {
uint256 amount1Optimal = (amount0Desired * reserve1) / reserve0;
if (amount1Optimal <= amount1Desired) {
require(amount1Optimal >= amount1Min, "Insufficient token1 amount");
(amount0, amount1) = (amount0Desired, amount1Optimal);
} else {
uint256 amount0Optimal = (amount1Desired * reserve0) / reserve1;
require(amount0Optimal <= amount0Desired);
require(amount0Optimal >= amount0Min, "Insufficient token0 amount");
(amount0, amount1) = (amount0Optimal, amount1Desired);
}
}
}
/**
* @dev Mints liquidity tokens
*/
function mint(address to, uint256 amount0, uint256 amount1) internal returns (uint256 liquidity) {
uint256 balance0 = token0.balanceOf(address(this));
uint256 balance1 = token1.balanceOf(address(this));
require(
token0.transferFrom(msg.sender, address(this), amount0) &&
token1.transferFrom(msg.sender, address(this), amount1),
"Transfer failed"
);
uint256 _totalSupply = totalSupply();
if (_totalSupply == 0) {
liquidity = Math.sqrt(amount0 * amount1) - 1000; // Minimum liquidity lock
_mint(address(0), 1000); // Lock minimum liquidity
} else {
liquidity = Math.min(
(amount0 * _totalSupply) / reserve0,
(amount1 * _totalSupply) / reserve1
);
}
require(liquidity > 0, "Insufficient liquidity minted");
_mint(to, liquidity);
_update(balance0, balance1);
if (kLast != 0) kLast = reserve0 * reserve1;
emit Mint(msg.sender, amount0, amount1);
}
/**
* @dev Swaps tokens with dynamic fee calculation
* @param amount0Out Amount of token0 to receive
* @param amount1Out Amount of token1 to receive
* @param to Address to send tokens to
*/
function swap(
uint256 amount0Out,
uint256 amount1Out,
address to,
bytes calldata data
) external nonReentrant {
require(amount0Out > 0 || amount1Out > 0, "Insufficient output amount");
require(amount0Out < reserve0 && amount1Out < reserve1, "Insufficient liquidity");
uint256 balance0;
uint256 balance1;
{ // Scope to avoid stack too deep
require(to != address(token0) && to != address(token1), "Invalid to address");
if (amount0Out > 0) token0.transfer(to, amount0Out);
if (amount1Out > 0) token1.transfer(to, amount1Out);
if (data.length > 0) {
// Flash swap callback
IFlashSwapCallback(to).flashSwapCall(
msg.sender,
amount0Out,
amount1Out,
data
);
}
balance0 = token0.balanceOf(address(this));
balance1 = token1.balanceOf(address(this));
}
uint256 amount0In = balance0 > reserve0 - amount0Out ?
balance0 - (reserve0 - amount0Out) : 0;
uint256 amount1In = balance1 > reserve1 - amount1Out ?
balance1 - (reserve1 - amount1Out) : 0;
require(amount0In > 0 || amount1In > 0, "Insufficient input amount");
{ // Scope for dynamic fee calculation
uint256 currentFee = calculateDynamicFee(amount0In + amount1In);
uint256 balance0Adjusted = balance0 * 1000 - amount0In * currentFee;
uint256 balance1Adjusted = balance1 * 1000 - amount1In * currentFee;
require(
balance0Adjusted * balance1Adjusted >=
uint256(reserve0) * reserve1 * (1000**2),
"K invariant violated"
);
}
_update(balance0, balance1);
emit Swap(msg.sender, amount0In, amount1In, amount0Out, amount1Out, to);
}
/**
* @dev Calculates dynamic fee based on trade size and market conditions
*/
function calculateDynamicFee(uint256 tradeSize) public view returns (uint256) {
uint256 poolSize = reserve0 + reserve1;
if (poolSize == 0) return baseFee;
// Increase fee for larger trades relative to pool size
uint256 tradeSizeRatio = (tradeSize * 1e18) / poolSize;
uint256 additionalFee = (tradeSizeRatio * (maxFee - baseFee)) / 1e18;
return Math.min(baseFee + additionalFee, maxFee);
}
/**
* @dev Updates reserves and price accumulators
*/
function _update(uint256 balance0, uint256 balance1) private {
uint32 blockTimestamp = uint32(block.timestamp % 2**32);
uint32 timeElapsed = blockTimestamp - blockTimestampLast;
if (timeElapsed > 0 && reserve0 != 0 && reserve1 != 0) {
price0CumulativeLast += uint256((reserve1 * 1e18) / reserve0) * timeElapsed;
price1CumulativeLast += uint256((reserve0 * 1e18) / reserve1) * timeElapsed;
}
reserve0 = balance0;
reserve1 = balance1;
blockTimestampLast = blockTimestamp;
emit Sync(reserve0, reserve1);
}
// Liquidity Mining Functions
function rewardPerToken() public view returns (uint256) {
if (totalSupply() == 0) return rewardPerTokenStored;
return rewardPerTokenStored +
(((block.timestamp - lastUpdateTime) * rewardRate * 1e18) / totalSupply());
}
function earned(address account) public view returns (uint256) {
return (balanceOf(account) *
(rewardPerToken() - userRewardPerTokenPaid[account])) / 1e18 + rewards[account];
}
function claimReward() external nonReentrant updateReward(msg.sender) {
uint256 reward = rewards[msg.sender];
if (reward > 0) {
rewards[msg.sender] = 0;
// Transfer reward token (implementation depends on reward token)
emit RewardPaid(msg.sender, reward);
}
}
}
interface IFlashSwapCallback {
function flashSwapCall(
address sender,
uint256 amount0,
uint256 amount1,
bytes calldata data
) external;
}
Practical Exercise 2: AMM Testing Suite
// test/AdvancedAMM.test.js
const { expect } = require("chai");
const { ethers } = require("hardhat");
const { loadFixture } = require("@nomicfoundation/hardhat-network-helpers");
describe("AdvancedAMM", function() {
async function deployAMMFixture() {
const [owner, alice, bob, carol] = await ethers.getSigners();
// Deploy mock tokens
const MockToken = await ethers.getContractFactory("MockERC20");
const tokenA = await MockToken.deploy("Token A", "TKA", ethers.utils.parseEther("1000000"));
const tokenB = await MockToken.deploy("Token B", "TKB", ethers.utils.parseEther("1000000"));
// Deploy AMM
const AdvancedAMM = await ethers.getContractFactory("AdvancedAMM");
const amm = await AdvancedAMM.deploy(
tokenA.address,
tokenB.address,
"LP Token",
"LP"
);
// Distribute tokens
await tokenA.transfer(alice.address, ethers.utils.parseEther("10000"));
await tokenA.transfer(bob.address, ethers.utils.parseEther("10000"));
await tokenB.transfer(alice.address, ethers.utils.parseEther("10000"));
await tokenB.transfer(bob.address, ethers.utils.parseEther("10000"));
return { amm, tokenA, tokenB, owner, alice, bob, carol };
}
describe("Liquidity Management", function() {
it("Should add initial liquidity correctly", async function() {
const { amm, tokenA, tokenB, alice } = await loadFixture(deployAMMFixture);
const amount0 = ethers.utils.parseEther("100");
const amount1 = ethers.utils.parseEther("200");
await tokenA.connect(alice).approve(amm.address, amount0);
await tokenB.connect(alice).approve(amm.address, amount1);
await expect(
amm.connect(alice).addLiquidity(
amount0,
amount1,
amount0,
amount1,
alice.address
)
).to.emit(amm, "Mint");
const lpBalance = await amm.balanceOf(alice.address);
expect(lpBalance).to.be.gt(0);
const reserves = await amm.reserve0();
expect(reserves).to.equal(amount0);
});
it("Should calculate optimal amounts correctly", async function() {
const { amm, tokenA, tokenB, alice, bob } = await loadFixture(deployAMMFixture);
// Add initial liquidity 1:2 ratio
await tokenA.connect(alice).approve(amm.address, ethers.utils.parseEther("100"));
await tokenB.connect(alice).approve(amm.address, ethers.utils.parseEther("200"));
await amm.connect(alice).addLiquidity(
ethers.utils.parseEther("100"),
ethers.utils.parseEther("200"),
0, 0,
alice.address
);
// Bob tries to add liquidity with different ratio
await tokenA.connect(bob).approve(amm.address, ethers.utils.parseEther("50"));
await tokenB.connect(bob).approve(amm.address, ethers.utils.parseEther("150"));
// Should adjust to maintain 1:2 ratio
await amm.connect(bob).addLiquidity(
ethers.utils.parseEther("50"),
ethers.utils.parseEther("150"),
0, 0,
bob.address
);
const reserve0 = await amm.reserve0();
const reserve1 = await amm.reserve1();
// Check ratio is maintained (approximately)
const ratio = reserve1.mul(1000).div(reserve0);
expect(ratio).to.be.closeTo(2000, 1); // 2.0 with tolerance
});
});
describe("Trading", function() {
it("Should perform swaps with dynamic fees", async function() {
const { amm, tokenA, tokenB, alice, bob } = await loadFixture(deployAMMFixture);
// Add liquidity
await tokenA.connect(alice).approve(amm.address, ethers.utils.parseEther("1000"));
await tokenB.connect(alice).approve(amm.address, ethers.utils.parseEther("2000"));
await amm.connect(alice).addLiquidity(
ethers.utils.parseEther("1000"),
ethers.utils.parseEther("2000"),
0, 0,
alice.address
);
// Bob performs a small trade
const smallTradeAmount = ethers.utils.parseEther("10");
await tokenA.connect(bob).transfer(amm.address, smallTradeAmount);
const smallFee = await amm.calculateDynamicFee(smallTradeAmount);
expect(smallFee).to.equal(30); // Base fee
// Bob performs a large trade
const largeTradeAmount = ethers.utils.parseEther("100");
const largeFee = await amm.calculateDynamicFee(largeTradeAmount);
expect(largeFee).to.be.gt(30); // Higher than base fee
});
it("Should maintain K invariant after swaps", async function() {
const { amm, tokenA, tokenB, alice, bob } = await loadFixture(deployAMMFixture);
// Setup liquidity
await tokenA.connect(alice).approve(amm.address, ethers.utils.parseEther("1000"));
await tokenB.connect(alice).approve(amm.address, ethers.utils.parseEther("1000"));
await amm.connect(alice).addLiquidity(
ethers.utils.parseEther("1000"),
ethers.utils.parseEther("1000"),
0, 0,
alice.address
);
const initialK = (await amm.reserve0()).mul(await amm.reserve1());
// Perform swap
await tokenA.connect(bob).approve(amm.address, ethers.utils.parseEther("100"));
await tokenA.connect(bob).transfer(amm.address, ethers.utils.parseEther("100"));
await amm.connect(bob).swap(0, ethers.utils.parseEther("90"), bob.address, "0x");
const finalK = (await amm.reserve0()).mul(await amm.reserve1());
expect(finalK).to.be.gte(initialK); // K should not decrease
});
});
describe("Liquidity Mining", function() {
it("Should accrue rewards for liquidity providers", async function() {
const { amm, tokenA, tokenB, alice } = await loadFixture(deployAMMFixture);
// Add liquidity
await tokenA.connect(alice).approve(amm.address, ethers.utils.parseEther("100"));
await tokenB.connect(alice).approve(amm.address, ethers.utils.parseEther("100"));
await amm.connect(alice).addLiquidity(
ethers.utils.parseEther("100"),
ethers.utils.parseEther("100"),
0, 0,
alice.address
);
// Fast forward time
await ethers.provider.send("evm_increaseTime", [86400]); // 1 day
await ethers.provider.send("evm_mine");
const earned = await amm.earned(alice.address);
expect(earned).to.be.gt(0);
});
});
describe("Price Oracle", function() {
it("Should update price accumulators correctly", async function() {
const { amm, tokenA, tokenB, alice, bob } = await loadFixture(deployAMMFixture);
// Add liquidity
await tokenA.connect(alice).approve(amm.address, ethers.utils.parseEther("1000"));
await tokenB.connect(alice).approve(amm.address, ethers.utils.parseEther("2000"));
await amm.connect(alice).addLiquidity(
ethers.utils.parseEther("1000"),
ethers.utils.parseEther("2000"),
0, 0,
alice.address
);
const initialPrice0Cumulative = await amm.price0CumulativeLast();
// Fast forward time and perform trade
await ethers.provider.send("evm_increaseTime", [3600]); // 1 hour
await tokenA.connect(bob).approve(amm.address, ethers.utils.parseEther("10"));
await tokenA.connect(bob).transfer(amm.address, ethers.utils.parseEther("10"));
await amm.connect(bob).swap(0, ethers.utils.parseEther("19"), bob.address, "0x");
const finalPrice0Cumulative = await amm.price0CumulativeLast();
expect(finalPrice0Cumulative).to.be.gt(initialPrice0Cumulative);
});
});
});
3. Governance and DAO Implementation
Comprehensive Governance System
// contracts/GovernanceToken.sol
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.19;
import "@openzeppelin/contracts/token/ERC20/ERC20.sol";
import "@openzeppelin/contracts/token/ERC20/extensions/ERC20Votes.sol";
import "@openzeppelin/contracts/token/ERC20/extensions/ERC20Permit.sol";
import "@openzeppelin/contracts/access/Ownable.sol";
/**
* @title GovernanceToken
* @dev ERC20 token with voting capabilities for governance
*/
contract GovernanceToken is ERC20, ERC20Permit, ERC20Votes, Ownable {
constructor(
string memory name,
string memory symbol,
uint256 initialSupply
) ERC20(name, symbol) ERC20Permit(name) {
_mint(msg.sender, initialSupply);
}
function mint(address to, uint256 amount) external onlyOwner {
_mint(to, amount);
}
// Override required by Solidity
function _afterTokenTransfer(
address from,
address to,
uint256 amount
) internal override(ERC20, ERC20Votes) {
super._afterTokenTransfer(from, to, amount);
}
function _mint(address to, uint256 amount) internal override(ERC20, ERC20Votes) {
super._mint(to, amount);
}
function _burn(address account, uint256 amount) internal override(ERC20, ERC20Votes) {
super._burn(account, amount);
}
}
// contracts/GovernanceDAO.sol
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.19;
import "@openzeppelin/contracts/governance/Governor.sol";
import "@openzeppelin/contracts/governance/extensions/GovernorSettings.sol";
import "@openzeppelin/contracts/governance/extensions/GovernorCountingSimple.sol";
import "@openzeppelin/contracts/governance/extensions/GovernorVotes.sol";
import "@openzeppelin/contracts/governance/extensions/GovernorVotesQuorumFraction.sol";
import "@openzeppelin/contracts/governance/extensions/GovernorTimelockControl.sol";
/**
* @title GovernanceDAO
* @dev Complete governance system with timelock controls
*/
contract GovernanceDAO is
Governor,
GovernorSettings,
GovernorCountingSimple,
GovernorVotes,
GovernorVotesQuorumFraction,
GovernorTimelockControl
{
constructor(
IVotes _token,
TimelockController _timelock,
uint256 _quorumPercentage,
uint256 _votingDelay,
uint256 _votingPeriod
)
Governor("GovernanceDAO")
GovernorSettings(_votingDelay, _votingPeriod, 0)
GovernorVotes(_token)
GovernorVotesQuorumFraction(_quorumPercentage)
GovernorTimelockControl(_timelock)
{}
// Override required functions
function votingDelay() public view override(IGovernor, GovernorSettings) returns (uint256) {
return super.votingDelay();
}
function votingPeriod() public view override(IGovernor, GovernorSettings) returns (uint256) {
return super.votingPeriod();
}
function quorum(uint256 blockNumber)
public
view
override(IGovernor, GovernorVotesQuorumFraction)
returns (uint256)
{
return super.quorum(blockNumber);
}
function state(uint256 proposalId)
public
view
override(Governor, GovernorTimelockControl)
returns (ProposalState)
{
return super.state(proposalId);
}
function propose(
address[] memory targets,
uint256[] memory values,
bytes[] memory calldatas,
string memory description
) public override(Governor, IGovernor) returns (uint256) {
return super.propose(targets, values, calldatas, description);
}
function proposalThreshold() public view override(Governor, GovernorSettings) returns (uint256) {
return super.proposalThreshold();
}
function _execute(
uint256 proposalId,
address[] memory targets,
uint256[] memory values,
bytes[] memory calldatas,
bytes32 descriptionHash
) internal override(Governor, GovernorTimelockControl) {
super._execute(proposalId, targets, values, calldatas, descriptionHash);
}
function _cancel(
address[] memory targets,
uint256[] memory values,
bytes[] memory calldatas,
bytes32 descriptionHash
) internal override(Governor, GovernorTimelockControl) returns (uint256) {
return super._cancel(targets, values, calldatas, descriptionHash);
}
function _executor() internal view override(Governor, GovernorTimelockControl) returns (address) {
return super._executor();
}
function supportsInterface(bytes4 interfaceId)
public
view
override(Governor, GovernorTimelockControl)
returns (bool)
{
return super.supportsInterface(interfaceId);
}
}
4. Flash Loan Implementation
Secure Flash Loan Provider
// contracts/FlashLoanProvider.sol
// SPDX-License-Identifier: MIT
pragma solidity ^0.8.19;
import "@openzeppelin/contracts/token/ERC20/IERC20.sol";
import "@openzeppelin/contracts/security/ReentrancyGuard.sol";
import "@openzeppelin/contracts/access/Ownable.sol";
interface IFlashLoanReceiver {
function executeOperation(
address asset,
uint256 amount,
uint256 fee,
bytes calldata params
) external returns (bool);
}
/**
* @title FlashLoanProvider
* @dev Provides flash loans with configurable fees
*/
contract FlashLoanProvider is ReentrancyGuard, Ownable {
mapping(address => bool) public supportedAssets;
mapping(address => uint256) public assetFees; // Fee in basis points (10000 = 100%)
uint256 public constant MAX_FEE = 500; // 5% maximum fee
uint256 public defaultFee = 9; // 0.09% default fee
event FlashLoan(
address indexed receiver,
address indexed asset,
uint256 amount,
uint256 fee
);
event AssetAdded(address indexed asset, uint256 fee);
event FeeUpdated(address indexed asset, uint256 oldFee, uint256 newFee);
modifier onlySupportedAsset(address asset) {
require(supportedAssets[asset], "Asset not supported");
_;
}
/**
* @dev Adds support for a new asset
* @param asset The ERC20 token address
* @param fee Fee in basis points
*/
function addAsset(address asset, uint256 fee) external onlyOwner {
require(asset != address(0), "Invalid asset address");
require(fee <= MAX_FEE, "Fee too high");
supportedAssets[asset] = true;
assetFees[asset] = fee;
emit AssetAdded(asset, fee);
}
/**
* @dev Updates fee for an asset
* @param asset The ERC20 token address
* @param newFee New fee in basis points
*/
function updateFee(address asset, uint256 newFee) external onlyOwner onlySupportedAsset(asset) {
require(newFee <= MAX_FEE, "Fee too high");
uint256 oldFee = assetFees[asset];
assetFees[asset] = newFee;
emit FeeUpdated(asset, oldFee, newFee);
}
/**
* @dev Executes a flash loan
* @param receiver The contract that will receive the flash loan
* @param asset The asset to borrow
* @param amount The amount to borrow
* @param params Additional parameters for the receiver
*/
function flashLoan(
address receiver,
address asset,
uint256 amount,
bytes calldata params
) external nonReentrant onlySupportedAsset(asset) {
require(receiver != address(0), "Invalid receiver");
require(amount > 0, "Amount must be greater than 0");
IERC20 token = IERC20(asset);
uint256 availableBalance = token.balanceOf(address(this));
require(amount <= availableBalance, "Insufficient liquidity");
uint256 fee = (amount * getFee(asset)) / 10000;
uint256 balanceBeforeLoan = availableBalance;
// Transfer tokens to receiver
require(token.transfer(receiver, amount), "Transfer failed");
// Execute the receiver's logic
require(
IFlashLoanReceiver(receiver).executeOperation(asset, amount, fee, params),
"Flash loan execution failed"
);
// Verify repayment
uint256 balanceAfterLoan = token.balanceOf(address(this));
require(
balanceAfterLoan >= balanceBeforeLoan + fee,
"Flash loan not repaid with fee"
);
emit FlashLoan(receiver, asset, amount, fee);
}
/**
* @dev Gets the fee for an asset
* @param asset The asset address
* @return The fee in basis points
*/
function getFee(address asset) public view returns (uint256) {
return supportedAssets[asset] ? assetFees[asset] : defaultFee;
}
/**
* @dev Gets available liquidity for an asset
* @param asset The asset address
* @return Available balance
*/
function getAvailableLiquidity(address asset) external view returns (uint256) {
return IERC20(asset).balanceOf(address(this));
}
/**
* @dev Emergency withdrawal function
* @param asset Asset to withdraw
* @param amount Amount to withdraw
* @param to Recipient address
*/
function emergencyWithdraw(
address asset,
uint256 amount,
address to
) external onlyOwner {
require(to != address(0), "Invalid recipient");
require(IERC20(asset).transfer(to, amount), "Transfer failed");
}
}
5. Practical Assignment: Build a Complete DeFi Protocol
Project: Multi-Asset Lending Protocol with Governance
Build a comprehensive DeFi lending protocol that includes:
Core Components Required:
-
Multi-Asset Lending Pool
- Support for multiple ERC20 tokens
- Dynamic interest rates based on utilization
- Collateralization and liquidation mechanics
- Flash loan integration
-
Automated Market Maker
- Constant product formula with dynamic fees
- Liquidity mining rewards
- Price oracle integration
- Impermanent loss protection
-
Governance System
- ERC20 governance token with voting power
- Proposal creation and voting mechanisms
- Timelock controller for security
- Parameter adjustment capabilities
-
Advanced Features
- Cross-chain compatibility preparation
- Yield optimization strategies
- Insurance fund mechanisms
- Analytics and monitoring tools
Technical Specifications:
// Example: Protocol Registry Pattern
contract ProtocolRegistry is Ownable {
struct ProtocolInfo {
address implementation;
uint256 version;
bool isActive;
string name;
}
mapping(string => ProtocolInfo) public protocols;
mapping(address => bool) public authorizedUpdaters;
event ProtocolRegistered(string name, address implementation, uint256 version);
event ProtocolUpdated(string name, address oldImpl, address newImpl, uint256 version);
function registerProtocol(
string memory name,
address implementation,
uint256 version
) external onlyOwner {
protocols[name] = ProtocolInfo({
implementation: implementation,
version: version,
isActive: true,
name: name
});
emit ProtocolRegistered(name, implementation, version);
}
}
Deliverables Required:
-
Smart Contract Suite (40 points)
- All contracts with comprehensive documentation
- Gas-optimized implementations
- Full security considerations
- Upgradeability mechanisms
-
Testing Framework (25 points)
-
95% code coverage
- Integration tests
- Stress testing scenarios
- Gas usage optimization reports
-
-
Frontend Application (20 points)
- React-based dApp
- Web3 integration
- Real-time data updates
- Responsive design
-
Documentation & Analysis (15 points)
- Technical documentation
- Security audit report
- Economic model analysis
- Deployment guides
Evaluation Criteria:
- Innovation (25%): Novel features and improvements
- Security (25%): Robust security practices and audit results
- Code Quality (20%): Clean, maintainable, well-documented code
- Functionality (15%): All features work as specified
- Performance (15%): Gas optimization and efficient algorithms
Timeline: 4 weeks
- Week 1: Core lending functionality
- Week 2: AMM and trading features
- Week 3: Governance and advanced features
- Week 4: Testing, documentation, and optimization
Resources and Professional Development
Industry-Standard Tools
- Foundry: Advanced testing framework
- Slither: Static analysis for security
- Mythril: Security analysis tool
- Tenderly: Simulation and monitoring platform
- Defender: Automated operations and security
Advanced Learning Resources
- DeFi Protocol Analysis: Study Uniswap V3, Compound, Aave codebases
- Security Best Practices: Trail of Bits security guidelines
- Gas Optimization: EVM deep dive and optimization techniques
- MEV Protection: Flashbots and MEV-resistant design patterns
Professional Certification
- ConsenSys Academy: Blockchain Developer Certification
- ChainSafe: Advanced Solidity Development
- OpenZeppelin: Smart Contract Security Auditing
- DeFi Alliance: DeFi Protocol Development
Next Tutorial: Cross-Chain Protocols and Layer 2 Scaling Solutions