What Is Gearbox Protocol?
Gearbox is a protocol designed to enhance capital efficiency in DeFi. It offers a generalized leverage mechanism that can be used across various DeFi protocols and platforms. The protocol has two primary users: passive liquidity providers earning higher APY by providing liquidity and active traders or farmers borrowing those assets to trade or farm with x4+ leverage.
Background
Mikhail Lazarev founded Gearbox in 2022. Gearbox protocol was a finalist in the Marketmake ETHGlobal hackathon.
How Does It Work
Gearbox aims to introduce Credit Accounts as a new primitive for leveraged interactions with other DeFi protocols. These Credit Accounts are isolated smart contracts with specific whitelisted actions and assets. This architecture ensures higher safety for user and borrowed funds per account by liquidating a user’s Credit Account portfolio under a particular health factor threshold.
Gearbox doesn’t silo the assets within its platform. Instead, all trades and operations happen on third-party protocols. Users can engage in margin trading on Uniswap, leverage farming on Yearn, arbitraging pegged assets on Curve, and use their DAO treasury to optimize the holdings, among other operations. The core vision of Gearbox is to become a backend leverage provider that users don’t even need to interact directly with.
Key Takeaways
- Gearbox is a DeFi protocol designed to enhance capital efficiency, offering a generalized leverage mechanism applicable across various DeFi platforms.
- The protocol caters to two primary users: passive liquidity providers who earn higher APY and active traders or farmers who can borrow assets for leveraged trading or farming.
- Gearbox was founded by Mikhail Lazarev in 2022 and was a finalist in the Marketmake ETHGlobal hackathon.
- Gearbox introduces Credit Accounts as a new primitive for leveraged interactions, with an architecture that ensures high safety for users and borrowed funds.
- Gearbox doesn’t confine assets within its platform. All operations take place on third-party protocols, with its core vision being a backend leverage provider that users don’t need to interact directly with.
