Gearbox
Get up to 10x leverage and use it across DeFi protocols. Gearbox Protocol allows anyone to get leverage in a decentralized way and use it across various other protocols in a composable way: margin trading, leverage farming, and more
How it works
- Lenders - liquidity providers who seek additional yield and have a higher risk tolerance. This can be seen similar to providing liquidity to Compound and getting cTokens back. LPs' assets are utilized by others, for which they get APY. Any one can be a liquidity provider on Gearbox.
- Borrowers - traders and farmers who wish to increase their position by borrowing liquidity from the protocol at multiples of their collateral, for which they pay interest rates. The liquidity they borrow is 4x+ or more of what their notional size is. This is the leverage they get.
Core parts of Gearbox Protocol
One of the key aspects which actually makes this DeFi primitive possible are Credit Accounts, which “bind” together lenders and borrowers in this equation. More specifically, a Credit Account is an isolated smart contract that holds user + borrowed funds, has liquidation thresholds, and has a list of allowed tokens and protocols (in order to avoid attack vectors from malicious actors, like borrowing leverage and buying a self-created ERC20 token; or sending an operation to a malicious smart contract).
Credit Account
A Credit Account is an isolated smart contract which contains both the user funds and the borrowed funds. This is where your leverage is. After you open an account, all the operations go through this account and the assets stay on it as well. You can see a Credit Account as your automated DeFi wallet where you not only keep positions, but can also potentially program it the way you want.
Funds on Credit Accounts are used as collateral for debt, and users can operate these funds by sending financial orders to their Credit Accounts. That could be: margin trading on Uniswap or Sushiswap; leverage farming on Yearn; arbitraging pegged assets on Curve, and more!
Protocol Fees
Liquidation fee
- If a Credit Account is liquidated, some percentage goes to a third-party liquidator who liquidated the account - and some percentage goes to Gearbox Protocol.
- Current liquidation fee going to the liquidator: 5%
- Current liquidation fee going to the protocol: 2%
Liquidity Provider Fees
- A withdrawal fee is taken when a liquidity provider withdraws funds from the pool.
- Current withdrawal fee: 1%
What are dTokens like dUSDC and dBTC?
Diesel Tokens are like cTokens of Compound. These tokens automatically earn interest & fees proportional to your share of the pool like cTokens on Compound or Yearn LP tokens. You don’t need to claim interest or perform any other actions, your Diesel Tokens value is supposed to grow.