DeFi Protocols Deep Dive
Comprehensive guide to major DeFi protocols: DEXes, lending platforms, liquid staking, and yield optimization. Compare TVL, yields, and risks across the ecosystem.
DeFi Protocol Landscape
Decentralized Finance (DeFi) has evolved from experimental smart contracts to a $150B+ ecosystem offering every traditional financial service in a permissionless, transparent way. This guide covers the major protocol categories and how to use them.
How DEX (AMM) Works
Smart Contract Checks Pool
Contract finds ETH/USDC liquidity pool with reserves
TVL by Category
Liquid staking has become the largest DeFi category, followed by lending and DEXes.
DeFi TVL by Category
Data as of January 2026. Source: DeFiLlama
Explore DeFi Protocols
Browse and compare protocols by category. Click each protocol to see detailed metrics.
Lending Protocols Explained
How Lending Works
- 1. Supply assets to earn interest
- 2. Borrow against your collateral
- 3. Maintain health factor above liquidation threshold
- 4. Repay loan anytime to unlock collateral
Key Metrics
- LTV (Loan-to-Value): Max borrow % of collateral value
- Liquidation Threshold: LTV where position gets liquidated
- Utilization Rate: % of supplied assets being borrowed
- Health Factor: Position safety ratio (must stay >1)
Liquid Staking
Liquid staking lets you stake ETH or SOL while receiving a liquid derivative token (stETH, jitoSOL) that can be used in DeFi. You earn staking rewards while maintaining capital efficiency.
Yield Optimization
Yield protocols help maximize returns through auto-compounding, boosting, or yield tokenization.
Pendle - Yield Trading
Splits yield-bearing tokens into Principal (PT) and Yield (YT) tokens. Lock in fixed yields or speculate on variable rates.
Yearn - Yield Vaults
Automated strategies that rotate capital across DeFi protocols to maximize yield while auto-compounding returns.
Convex - Curve Boosting
Maximizes Curve LP yields by aggregating veCRV voting power. Earn boosted CRV rewards without locking CRV yourself.
Yield Comparison
Compare yields across protocols and understand the risk/return tradeoffs.
DeFi Yield Comparison
Compare yields across different protocols and risk levels
| Protocol | Asset | APY | Type | Risk |
|---|---|---|---|---|
| Ethena | sUSDe | 15% | Yield Token | High |
| GMX | GLP | 12.5% | Perp LP | High |
| Jito | SOL | 7.5% | Staking | Low |
| Pendle | PT-stETH | 4.8% | Fixed Yield | Medium |
| Aave | USDC | 4.5% | Lending | Low |
| Lido | ETH | 3.2% | Staking | Low |
| Curve | stETH/ETH | 2.1% | LP | Medium |
| Aave | ETH | 1.8% | Lending | Low |
APYs are variable and change frequently. Last updated: January 2026
Understanding DeFi Risks
DeFi offers high yields but comes with significant risks. Understanding these is crucial before deploying capital.
DeFi Risk Assessment
Bugs or vulnerabilities in protocol code can lead to loss of funds. Even audited protocols have been hacked.
Mitigation: Use battle-tested protocols, check audit reports, diversify across protocols
LPs can lose value compared to holding when prices diverge. Worse in volatile pairs.
Mitigation: Use stable pairs, monitor IL, consider concentrated liquidity positions
Attackers can manipulate price feeds to exploit lending and perpetual protocols.
Mitigation: Use protocols with decentralized oracles (Chainlink), avoid protocols with DEX-only price feeds
Token holders can vote to change protocol parameters, potentially harming users.
Mitigation: Monitor governance proposals, understand timelock periods
Low liquidity can cause slippage or prevent withdrawals during market stress.
Mitigation: Check TVL trends, avoid protocols with declining liquidity
Regulations could restrict access to protocols or affect token values.
Mitigation: Understand jurisdiction, use decentralized frontends
Before You Invest
Use this checklist to evaluate any DeFi protocol before depositing funds.