#32 GearboxProtocol
#32 GearboxProtocol
hidden gem of defi lending high leverage+Decentralised Undercollateralized lending
#32 @GearboxProtocol
hidden gem of defi lending
high leverage+Decentralised Undercollateralized lending
📍In the 🧵
Gearbox TLDR
What is gearbox
How does it work
$gear token
Opportunity & Challenges
How🐑play the $gear token trade, what catalyst i follow
Summary
📍Gearbox TLDR
Gearbox enables high leverage with undercollateralized loan for DeFi user via using smart contracts to hold “leveraged assets” to avoid the bad debt.
📍What is Gearbox
Gearbox is a dao run protocol leverage protocol, allowing anyone to take DeFi-native leverage across dao approved whitelisted strategies/protocol.
It allow DeFi-native under-collateralized loan via “credit accounts”, essentially a group of smart contracts that can act as a custodial to hold user’s leveraged position as collateral as well. This allow high capital efficiency trustlessly and chances of bad debt.
📍How does it work?
The are two key actors in the protocol
- Passive lenders
- Borrowers (active traders, farmer & protocols)
Passive lenders essentially earns interest via providing capital for Borrowers to leverage.
Borrowers utilise capital from passive lenders to leverage up their position. They can borrow up to 10x of what their notional size is.
📍Core parts of Gearbox
Liquidity providers (passive lenders)
Credit Account (essentially smart contracts that executes & hold the leverage position)
Trader (Borrowers)
Whitelisted Strategies
📍Protocol working flow
Liquidity providers (Passive lenders) deposit tokens into Pool
Trader deposit initial funds into credit account
Trader sends orders to credit managers for their preference in leverage trade/strategy
Credit manager delivers msg to credit account
Credit account uses tokens from Pool to execute leverage position from trader into whitelisted strategy
Credit account manager & Credit account will monitor health level of the leverage position for liquidation if required
📍Whitelisted Strategies on gear
One-Click Strategies
Leveraged stablecoin farming
Leverage vanilla yVaults
Farming long/short or “free leverage position”
Arbitrage of correlated assets
📍Key things to note
Currently is only whitelisted wallets to be a trader
Trader should be ready to borrow US$100K minimum
New Strategy is done via Dao voting
Protocol Fees 1.5% liquidation fee, 50%apy spread fee
📍Gear token
Currently starting off as governance only token for the protocol and possibly taking any new function the dao could envision for it.
📍Opportunity
“First”/ Go-to generate under-collateral DeFi lending protocol (however you can argue its in similar field such as leverage yield farms & strategy vaults)
As a DeFi user, i truly thinks a non custodial under-collateral lending solves a real problem
New Liquid Staking Derivatives DeFi strategies + narrative
Strong team & communities @ivangbi_ lobsterdao @10b57e6da0 One of the most high quality community defi community & tg chats
Active Dao proposals
Early stage of the protocol & the dao is not rushing for growth
Token utilities to be enable
📍Challenges
Current market sentiment & low volatility, less demand for leverage
heavily rely on external DeFi strategy, with lower yield in DeFi right now there are less strategies to build on top of
Traders should be ready to borrow US$100K minimum
Whitelisted and non smooth onboarding for traders
Gear token is pure governance right now
📍How 🐑 play the $gear token trade, what catalyst i follow
Lets look at key catalyst i’d keep eye on
Future Token utilities (currently “preliminary discussion” on proposal-link in below)
LSD enabled yield narrative
Real yield narrative
Current talks of lower 100k minimum for traders
Monitoring new listed & proposal of borrowable asset & strategie
Monitoring new borrowable asset & strategies
📍Looking into some numbers
Start with overview
Overall stats are affected by border DeFi market however active
Developers & code commits are good sign n verification on my thoughts on “strong team & community”
I wouldn't take treasury into account as its a new ish protocol
🔹Active users & fees
Active users in compare to other lending/leverage protocols is quite low, with the 100k minimum dropping, this will be one metric i’d follow along side with fees.
🔹FDV & MCAP
As a new protocol it has a low mcap in comparison to other protocols in a similar field but high fdv. if the catalyst I mentioned comes into play early might be a good short/medium term trade depending on vesting & emission.
I haven’t drilled into the details yet but i like the protocol, need to do another deeper look into what is the best when & how to get $gear. They are currently doing some LP incentives for farming & using, and need to take a deeper look into what is the best way to get gear.
I’d properly start with just farming some $gear on a passive lender and look deeper into risk n reward for other LP strategies for $gear. Buying $gear on secondary will prob have to be based on some metric growth or catalyst I mentioned above.
📍In summary
I might be biassed towards gearbox because i am a fan of @ivangbi_ lobsterdao @10b57e6da0 even tho i got ban from speaking in the lobster TG because i was engagement farming or 2lambro’s tweets ahaha.
I believe they have a strong community with tons of active proposal. I also like the approach of taking the more slow approach towards carefully growing instead of using tokenomics or aggressive strategies for hyper growth.
I’d consider gearbox as a good tool to use and potentially a good bet if the market picks up and it is able to ride on some catalyst I mentioned above. If ftx didnt rekt me too much i prob aggressively farm some for now.
I’d suggest everyone to have a look at their docs, well written alongside with a bit of educational material
links to token utility proposal
https://messari.io/governor/proposal/e6f587bc-287e-4c30-a7fe-3499e965c778?daoSlug=g&daoTab=proposals
Gearbox gitbook
https://docs.gearbox.finance/gear-token/gear-overview
Thank you for reading