Building Blocks (DeFi Legos)
What You Probably Got Wrong
DeFi TVL: Ethereum DeFi TVL is $50B+ (Feb 2026). If you're quoting numbers from 2023-2024, they're stale.
Uniswap V4: V4 introduced a hooks system — custom logic attached to pools (dynamic fees, TWAMM, limit orders, custom oracles). This is a major composability upgrade.
<!-- VERIFICATION NEEDED: V4 deployment status and mainnet addresses -->Costs changed everything: A flash loan arbitrage on mainnet costs ~$0.05-0.50 in gas now (was $5-50). This opens composability patterns that were previously uneconomical.
Key Protocol Addresses (Verified Feb 2026)
| Protocol | Contract | Mainnet Address |
|---|---|---|
| Uniswap V2 Router | Router | 0x7a250d5630B4cF539739dF2C5dAcb4c659F2488D |
| Uniswap V2 Factory | Factory | 0x5C69bEe701ef814a2B6a3EDD4B1652CB9cc5aA6f |
| Uniswap V3 Factory | Factory | 0x1F98431c8aD98523631AE4a59f267346ea31F984 |
| Uniswap V3 SwapRouter02 | Router | 0x68b3465833fb72A70ecDF485E0e4C7bD8665Fc45 |
| Uniswap Universal Router | Router | 0x3fC91A3afd70395Cd496C647d5a6CC9D4B2b7FAD |
| Aave V3 Pool | Pool | 0x87870Bca3F3fD6335C3F4ce8392D69350B4fA4E2 |
See addresses/SKILL.md for complete multi-chain address list.
Uniswap V4 Hooks (New)
Hooks let you add custom logic that runs before/after swaps, liquidity changes, and donations. This is the biggest composability upgrade since flash loans.
Hook Interface (Solidity)
import {BaseHook} from "v4-periphery/src/utils/BaseHook.sol";
import {IPoolManager} from "v4-core/interfaces/IPoolManager.sol";
import {PoolKey} from "v4-core/types/PoolKey.sol";
import {BeforeSwapDelta, BeforeSwapDeltaLibrary} from "v4-core/types/BeforeSwapDelta.sol";
contract DynamicFeeHook is BaseHook {
constructor(IPoolManager _manager) BaseHook(_manager) {}
function getHookPermissions() public pure override returns (Hooks.Permissions memory) {
return Hooks.Permissions({
beforeInitialize: false,
afterInitialize: false,
beforeAddLiquidity: false,
afterAddLiquidity: false,
beforeRemoveLiquidity: false,
afterRemoveLiquidity: false,
beforeSwap: true, // ← We hook here
afterSwap: false,
beforeDonate: false,
afterDonate: false,
beforeSwapReturnDelta: false,
afterSwapReturnDelta: false,
afterAddLiquidityReturnDelta: false,
afterRemoveLiquidityReturnDelta: false
});
}
// Dynamic fee: higher fee during high-volume periods
function beforeSwap(
address,
PoolKey calldata key,
IPoolManager.SwapParams calldata params,
bytes calldata
) external override returns (bytes4, BeforeSwapDelta, uint24) {
// Return dynamic fee override (e.g., 0.05% normally, 0.30% during volatility)
uint24 fee = _isHighVolatility() ? 3000 : 500;
return (this.beforeSwap.selector, BeforeSwapDeltaLibrary.ZERO_DELTA, fee | 0x800000);
}
}
Hook use cases with real code patterns:
- •Dynamic fees — adjust based on volatility, time-of-day, or oracle data
- •TWAMM — split large orders over time to reduce price impact
- •Limit orders — execute when price crosses a threshold
- •MEV protection — auction swap ordering rights to searchers
- •Custom oracles — TWAP updated on every swap
Composability Patterns (Updated for 2026 Gas)
These patterns are now economically viable even for small amounts due to sub-dollar gas:
Flash Loan Arbitrage
Borrow from Aave → swap on Uniswap for profit → repay Aave. All in one transaction. If unprofitable, reverts (lose only gas: ~$0.05-0.50).
Leveraged Yield Farming
Deposit ETH on Aave → borrow stablecoin → swap for more ETH → deposit again → repeat. Gas cost per loop: ~$0.02 on mainnet, negligible on L2.
Meta-Aggregation
Route swaps across multiple DEXs for best execution. 1inch and Paraswap check Uniswap, Curve, Sushi simultaneously.
ERC-4626 Yield Vaults
Standard vault interface — the "ERC-20 of yield." Every vault exposes the same functions regardless of strategy.
import {ERC4626} from "@openzeppelin/contracts/token/ERC20/extensions/ERC4626.sol";
import {ERC20, IERC20} from "@openzeppelin/contracts/token/ERC20/ERC20.sol";
contract SimpleYieldVault is ERC4626 {
constructor(IERC20 asset_)
ERC4626(asset_)
ERC20("Vault Shares", "vSHARE")
{}
// totalAssets() drives the share price
// As yield accrues, totalAssets grows → shares worth more
function totalAssets() public view override returns (uint256) {
return IERC20(asset()).balanceOf(address(this)) + _getAccruedYield();
}
}
// Usage: deposit/withdraw are standardized
// vault.deposit(1000e6, msg.sender); // deposit 1000 USDC, get shares
// vault.redeem(shares, msg.sender, msg.sender); // burn shares, get USDC back
// vault.convertToAssets(shares); // how much USDC are my shares worth?
Why ERC-4626 matters: Composability. Any protocol can integrate any vault without custom adapters. Yearn V3, Aave's wrapped tokens, Morpho vaults, Pendle yield tokens — all ERC-4626.
Flash Loan (Aave V3 — Complete Pattern)
import {FlashLoanSimpleReceiverBase} from
"@aave/v3-core/contracts/flashloan-v3/base/FlashLoanSimpleReceiverBase.sol";
import {IPoolAddressesProvider} from
"@aave/v3-core/contracts/interfaces/IPoolAddressesProvider.sol";
contract FlashLoanArb is FlashLoanSimpleReceiverBase {
constructor(IPoolAddressesProvider provider)
FlashLoanSimpleReceiverBase(provider) {}
function executeArb(address token, uint256 amount) external {
// Borrow `amount` of `token` — must repay + 0.05% fee in same tx
POOL.flashLoanSimple(address(this), token, amount, "", 0);
}
function executeOperation(
address asset,
uint256 amount,
uint256 premium, // 0.05% fee
address,
bytes calldata
) external override returns (bool) {
// --- Your arbitrage logic here ---
// Buy cheap on DEX A, sell expensive on DEX B
// Must end with at least `amount + premium` of `asset`
uint256 owed = amount + premium;
IERC20(asset).approve(address(POOL), owed);
return true; // If unprofitable, revert here — lose only gas (~$0.05-0.50)
}
}
Aave V3 Pool (mainnet): 0x87870Bca3F3fD6335C3F4ce8392D69350B4fA4E2
Flash loan fee: 0.05% (5 basis points). Free if you repay to an Aave debt position.
Building on Arbitrum (Highest DeFi Liquidity L2)
Key protocols on Arbitrum:
- •GMX — perps DEX, $500M+ TVL
- •Uniswap, Curve, Balancer — DEXs
- •Radiant, Aave — lending
- •Pendle — yield trading
Discovery Resources
- •DeFi Llama: https://defillama.com — TVL rankings, yield rankings, all chains
- •Dune Analytics: https://dune.com — query on-chain data
- •ethereum.org/en/dapps/ — curated list
Guardrails for Composability
- •Every protocol you compose with is a dependency. If Aave gets hacked, your vault depending on Aave is affected.
- •Oracle manipulation = exploits. Verify oracle sources.
- •Impermanent loss is real for AMM LPs. Quantify it before providing liquidity.
- •The interaction between two safe contracts can create unsafe behavior. Audit compositions.
- •Start with small amounts. Test with minimal value before scaling.
- •Flash loan attacks can manipulate prices within a single transaction. Design for this.