Disclaimer: The article below should not be treated as investment advice or any sort of solicitation for trading or investing in the particular token mentioned. Bitrue will not be responsible for any of the gains or losses that result from participating in crypto trading or investments. The article below represents the views of our research analyst but does not represent the exchange’s opinions.
Key takeaways:
- $GEAR token has been trending over the past week ever since it’s TGE.
- $GEAR is a utility and governance token for the Gearbox Protocol, a decentralized leveraged borrowing and lending platform.
- Gearbox protocol provides users with flawless transaction experience, and a one-click reinvestment strategy for protocol borrowers.
- Gearbox protocol is governed by the Gearbox DAO and is community-run.
- Gearbox emphasizes protocol security, and the platform has been audited by six different auditors.
Project Introduction
Gearbox protocol has been all the hype lately. Within a few days of the token generation event, there have been several exchanges (Bitrue being one of the first) that have listed the token $GEAR.
So what is all the fuss about this project? Gearbox protocol is a decentralized borrowing and lending protocol built on Ethereum chain, but it is far from being your average dApp. The protocol provides users with seamless DeFi transaction experience comparable to centralized lenders. Furthermore, they provide borrowers with leverage via a one-click re-investment feature.
Still can’t picture what makes this project one to watch for? Worry not, Bitrue is going to take you for a closer look at Gearbox protocol.
Gearbox’s user experience
When a user enters the Gearbox app, they will be met with two features, an “Earn” feature and a “Credit Accounts” feature.
The first feature, the “Earn” page will lead you to what they call as “Passive Pools”, in which you could earn up to 12% APY for being a lender to their liquidity pools. It works like a normal bank, lending your money to earn yield in return, except everything is done on-chain, permissionless, and no KYC procedures are required.
The second feature, the “Credit Accounts” page, is for borrowers. Users can borrow stablecoins and wrapped Ether from the liquidity pools funded by the lenders. However, to be eligible for borrowing, users will need to be a “Leverage Ninja” member, by signing up for a simple KYC process by posting their wallet address to the governance forum, and there is a minimum borrow of US$100,000. After depositing the collateral into a credit account, users will receive 1–10x worth of stablecoins or wrapped ether. This is where the interesting part comes in, borrowers can immediately reinvest their borrowed assets with just one click. Gearbox is currently integrated with some of the best DeFi yield apps out there, including Uniswap, Curve, Convex, and Lido Finance. This integration allows users to reinvest their assets without having to leave the platform and transfer their funds elsewhere. To put it simply, it is fast, efficient, and hassle-free.
In the event of a liquidation, Gearbox protocol uses a third-party liquidator. When a Credit Account is liquidated, some percentage goes to the liquidator, and some percentage goes to Gearbox Protocol. The current fees for liquidation are 4% to the liquidator and 1.5% to the Gearbox protocol.
As you can see from the graphics above, Gearbox’s UI/UX is smooth and intuitive, with direct use cases that are very helpful in onboarding the general public into DeFi.
Gearbox’s core technology
As per the Gearbox protocol’s documentation, the graph above represents the mechanism of the whole protocol and the parties involved. To avoid malicious users or smart contracts that could cause harm to the mechanism, such as sandwich attacks and MEVs, a credit account is created as an isolated smart contract, and it has a list of allowed or non-allowed tokens, that is actively updated by the protocol governance board.
To stay true to its promised decentralization, funds deposited on Gearbox protocol will always be on-chain on a smart contract, and will never end up in the custody of a centralized entity.
To protect the funds of the liquidity providers, Gearbox uses an active risk assessment model to measure the quality of a borrower’s portfolio. There will be a “Health Indicator” that reminds borrowers in case they are at risk of liquidation.
Gearbox protocol maintains a reserve fund via its treasury, as a precautionary measure in case of a black swan event such as stablecoin depegging (as what we saw with Terra’s UST) or oracle errors. As with every other business model, a healthy balance sheet is essential for the survival of a protocol. According to the latest data, Gearbox’s treasury has accumulated about US $116M, while borrowing volume is US $63M.
Gearbox uses Chainlink’s price oracle to provide the protocol with price data, similar to most major DeFi protocols at present.
As security is a major concern for many when it comes to DeFi, Gearbox Protocol has undergone six different smart contract audits from ChainSecurity, Consensys Diligence, Sigma Prime, MixBytes, and PeckShield. The fact that they have decided to undergo so many audits, shows the sense of responsibility that the team have for the safety of their customers’ funds.
Although it is no secret that leverage trading is known for its risk, and DeFi smart contracts are still vulnerable to smart contracts loopholes and bugs, seeing the effort and dedication of the Gearbox team to remain transparent while emphasizing on platform security has made us optimistic about the future of DeFi.
The team behind Gearbox
Gearbox’s inventor and CTO is Mikhail Lazarev. He is the founder of the SPB blockchain community and was previously CEO & founder of Tokenstarter. Mikhail is no longer a newcomer to the world of blockchain and DLT.
Other than Mikhail, Gearbox protocol is fully operated by the DAO and has several core contributors ranging from coders to marketers. Again, Gearbox has remained true to the philosophy of decentralization.
GEAR Tokenomics
The token GEAR is out now and available to purchase on Bitrue. However, it is non-transferable until December 23. For more details, please check here.
On the supply side of tokenomics, GEAR will have a maximum supply cap of 10 billion GEAR. However, this could be changed via DAO governance voting in the future. The majority of tokens, about 58%, will be allocated to the community as reward tokens, which could then be used for governance voting or to trade as it accumulates value. Approximately 30% of tokens will be given to the core contributors as an incentive, while 12% will be kept in the protocol treasury.
At present, governance is the only use case of the GEAR token. However, the DAO could add more features to support the token in the future. Considering the concrete revenue model of the protocol, it is plausible that Gearbox will have sufficient ammo to maintain or even prop up the value of the GEAR token, especially as borrowing volume and revenue gradually increase.
Gearbox investors
Although having venture capital on your side is not a 100% guarantee for a successful investment, protocols with some fancy names on their website could catch the attention of many.
Gearbox is backed by a few reputable names in the industry, including E-Girl Capital, 1kx, Galaxy Digital and Santiago (@santiagoroel on Twitter).
Conclusion
To sum up, Gearbox Protocol is one of the rare good quality DeFi products out there that has caught the attention of the crypto community. The product use case is direct and solid, with very simple usability accessible to everyone that wants to start investing in DeFi.
However, we should always remember that trading crypto is highly risky as the industry is nascent and subject to dynamic changes that occur daily. Make sure to always do your own research and manage your risks properly. The team at Bitrue wishes everyone the best in their crypto journey, and happy holidays!
Gearbox is now available to trade on Bitrue!
