DeFi Insight: DeFi-native leverage by Gearbox

DeFi-native Leverage

Gearbox’s leverage can be applied to other protocols such as Uniswap, Curve, Convex or Lido. Some use cases include margin trading, leverage farming and more. The protocol has two sides to it: passive liquidity providers who want to earn APY on their deposits and active farmers such as individuals or even other protocols who borrow those assets. Leverage seekers (acting as borrowers) can obtain up to 12x leverage in a fully decentralized manner. The core vision of Gearbox is to become a DeFi leverage middle layer while being 100% permissionless.

Figure 1: Passive pools for liquidity providers (source: gearbox.fi)
Figure 2: Credit Accounts (source: gearbox.fi)
Figure 3: The Health Factor (source: docs.gearbox.finance)
Figure 4: Gearbox TVL (source: dune.com)

Composability

The enormous variety of parts that make up the DeFi ecosystem can be compared to “money legos.” Anyone can use them in various ways to interact with them, taking advantage of a level of capital efficiency that is significantly higher than that of the conventional system. DeFi’s financial Legos come in the form of yield optimization, lending protocols, liquidity protocols and more. DeFi allows users to engage with as many protocols as they wish. Composability is the term used to describe how well-integrated a design system’s components are. Different components can work together in various combinations in a system that is more composable. The following example demonstrates Gearbox’s composability:

Farming Long

  • Open a USDC-denominated Credit Account. For example, 100.000 USDC x 6 leverage = 600.00 USDC.
  • Swap all the USDC from the account to ETH. ETH long is open.
  • Next step would be to put that ETH into some farm which generates APY
Figure 5: Possible leverage strategies (source: gearbox.fi)

Liquidity Mining

Gearbox offers a liquidity mining (LP) program with its own GEAR token. The program is focused on depositors. The GEAR token is part of the DAO governance structure, and it is non-transferable (can be changed by DAO voting). A new batch of GEAR tokens is distributed to lenders every few weeks. The supply of GEAR is capped at 10 billion.

The classification of GEAR according to the ITC:

Figure 6: The GEAR Tokenbase entry (Source: https://itin.itsa.global/Y0YMKD9J5)

The International Token Standardization Association (ITSA) e.V.

The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. In order to increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest register for tokens in our Tokenbase.

  • The International Token Identification Number (ITIN) is a 9-digit alphanumeric technical identifier for both fungible and non-fungible DLT-based tokens. Thanks to its underlying Uniform Token Locator (UTL), ITIN presents a unique and fork-resilient identification of tokens. The ITIN also allows for the connecting and matching of other media and data to the token, such as legal contracts or price data, and increases safety and operational transparency when handling these tokens.
  • The International Token Classification (ITC) is a multi-dimensional, expandable framework for the classification of tokens. Current dimensions include technological, economic, legal, and regulatory dimensions with multiple sub-dimensions. By mid-2021, there will be at least two new dimensions added, including a tax dimension. So far, our classification framework has been applied to 99% of the token market according to the market capitalization of classified tokens.
  • ITSA’s Tokenbase currently holds data on over 4000 tokens. Tokenbase is a holistic database for the analysis of tokens and combines our identification and classification data with market and blockchain data from external providers. Third-party data of several partners is already integrated, and API access is also in development.

Remarks

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International Token Standardization Association

International Token Standardization Association

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The International Token Standardization Association (ITSA) is a not for profit organization working on holistic market standards for the global token economy.