Gearbox is a generalized leverage protocol that allows anyone to access DeFi-native leverage and use it across various third-party protocols.
Gearbox has two core uses on its platform: lenders and borrowers. Lenders or liquidity providers (LPs) are users who seek passive yield and have a low-risk appetite. LPs on Gearbox operate similarly to Compound as providing liquidity return cTokens to the user. With Gearbox, users get back dTokens, or Diesel tokens, which automatically accrue interest and fees. Borrowers are traders who have a higher risk appetite and want to leverage their positions by borrowing liquidity from Gearbox. Borrowers and lenders are bound together by credit accounts. A credit account is an isolated smart contract containing both the user and borrowed funds, has liquidation thresholds, and has an allowed list of tokens and protocols. Funds on credit accounts are used as collateral to take on debt. Users can operate these funds by sending transactions to their credit accounts. All trades and operations occur through third-party platforms like Uniswap or Curve.
Gearbox takes fees for different operations. If a credit account is liquidated, a 4% fee is distributed to a third-party liquidator and 1.5% fee goes to the protocol. The protocol also takes a spread fee between the APY that LPs receive and the fee that farmers pay for borrowing their assets. All protocol fees are controlled by governance with nothing reserved for core contributors or the foundation.
You can supply assets into Gearbox to earn interest payments paid by borrowers. You can also utilize the platform's one-click strategies to leverage core DeFi positions like staking ETH, stablecoin farming, and Yearn vaults, among others.