GEAR Liquidity Mining Program [GIP-22]: community ownership up!
UPDATE: changes have been introduced in APYs:
With Allowed List enhanced, limits upped, leverage increased, UI improved — V2 to seems to have it all. But there’s one thing still missing. The one that ticks the entire system, the liquidity for the Credit Account Ninjas to borrow…
Scroll 50% of the page down if you literally just want to ape & dgaf.
With GIP-22 Passing, the DAO has given a go-ahead to a Liquidity Mining Program which focuses largely on incentivising passive LPs to deposit. The proposal also has passed a reward system for V2 Leverage Ninjas who will be the first users of V2 while it’s test in prod. Let’s give you a TLDR:
- The LP LM program is planned to go live on 24th October, 3–5 days before V2 kicks off. The pools are already open though, they are the same as V1 — so you can LP now! You can also do it without any interface, like interacting with Etherscan. See contracts here.
Exact block height LP LM start: 15820000.
Assets: DAI, USDC, ETH, wstETH, WBTC.
Where to ape? Here. When? Now & later!
PS: naturally, since wstETH pool is not deployed yet, it will only go live with LM a bit later. Ideally, it would be live on Monday 24th too at block 15820000, together with the new interface. Alternatively, it might come around in a couple of days max if deployments take a bit more time. Anyway, you can already stock up some wstETH and be ready to ape in!
- The CA Ninja LM will go live around 4th of November. The exact ETH block height will be announced in advance closer to the day. There will be a list of Ninjas and instructions posted around Wednesday, as well as a separate call to go through all the important leverage topics.
- How to claim rewards? While GEAR is untransferable, DAO contributors (can be anyone) will take snapshots of earned rewards every 3–4 weeks and update the claim contracts accordingly. So don’t be alarmed if you can’t claim all your GEAR rewards daily. Keep an eye here when the next merkle will be updated. The numbers will be based on what was voted on: linear per-block allocations, per pool, like the DeFi summer farms. The interface will display these numbers at the FDV voted for according to this logic! Find more in the next sections.
This first section below is a thinking process explainer. Feel free to skip it if you just want to ape and learn how to LP and claim GEAR later on.
First: why the LM at all?
It’s both a bootstrap stage for the protocol, as well as further GEAR supply distribution to make governance stronger & more decentralized.
With the upcoming Leverage Ninja mode, the demand side of liquidity has over 100 high collateral size (100K$ min borrow) potential users that’ll require liquidity for leverage. That leads to a sudden requirement in pool values which could be multiples of what we currently have. That is a great “problem” to have though, and such utilization without major incentives for the Credit Accounts side will prove PMF. But to enable it, we need to bootstrap the “other side”. That other side is passive LPs.
Since Gearbox is a two sided protocol, the liquidity in the passive pools enables the CA (Credit Accounts, aka leverage takers) to function. Meanwhile, the utilization of the pools determines the borrow rate.
With 🐻s rekting us out on the streets, and yields across the integrated protocols dropping to a 2–4% level (see here) — a high borrow rate could render a lot of strategies non-beneficial. That’s a normal market situation across tradfi as well, but we need to get the engines going. As such, in order to ensure that’s not the case, the utilization curve has been re-adjusted to have a lowered borrow rate in the range of 1–2.5%. to ensure that CAs have access to true benefits of composable leverage. The range can be updated as DeFi grows and the yields improve. This forced suppression is just a bootstrap strategy.
Thus, the LM is an effort to ensure that while the interest rate curve is towards the lower end, the LPs too are able to get access to decent APYs. At the same time, the LM also ensures the pools attract the additional liquidity needed for the CAs to make complete use of V2.
You can read about the interest rate curve update below:
How does this LM work?
The total APY number is variable and is volatile, as everywhere. It consists of the organic number taken from fees paid by borrowers (Credit Accounts) + the GEAR LM. Both are variable. The organic one is nothing of the ordinary and depends on the utilization curve. Expect it in the range of 1–2.5%. Why? See the thinking process section above to get the idea.
This is an open-ended LM program with an approved spending of 12 months at the current distribution numbers. That gives contributors and executors the right to issue monthly rewards until October 2023 according to the rules. However, the program can be stopped with another proposal, while parameters [GEAR per block or new pools] can be changed.
The LP side LM is passive in nature where your APY is low-risk with no risk of liquidation. Meanwhile, the CA side LM is more active in nature and your APY is determined by the leverage you take (size you borrow), therefore, it inherently has risks that you decide on your own.
The logic behind the allocation of % is based on expected utilizations. ETH/stETH strategies are higher in APY and are more organic in external protocols, hence larger % total allocated in LM. It’s easier to source Ethereum yields these days rather than stablecoins. WBTC not having that much demand or external farming APY (although can be used for shorting/hedging then) in DeFi is thus given a much smaller allocation.
Liquidity Provider LM +10% GEAR
The APY is designed for an estimated $55M of liquidity. Naturally, if the total pools TVL is higher, that can lead to the APY dropping below 10%. If the pools TVL is lower than the desired optimal number of $55M, then the APY can be higher than 10%. The APY depends on the specific pool, whereas every specific pool has a total GEAR granted per period. That makes up the total GEAR per block per pool. Same as with any farm.
As you can see, if TVL of the pools in reality is below the optimal range voted for — then the APY will be bigger for everyone. Alternatively, if “too much liquidity” is deposited — then the APY scaled down for everyone. What is constant is the rewards per block per each pool.
The total LM is divided at an asset level to determine how much reward is to be allocated to which asset pool. Rewards accrue per block linearly, as APY is an annualized metric. It works like this:
For LP, your total deposits is the metric.
For CA, it’s the capital size you borrow.
Credit Accounts LM +1%
The process is very similar as mentioned above, but instead of looking at individual asset based allocation, we have taken the borrow value required at a 90% level and determined the GEAR Supply required for a 1% APY. It’s less about LM and more about aligning with legendary Legendary Ninjas who are given usage to the protocol and are actively farming.
As you can see, the less a pool has borrowed — the more it “pays” you to borrow from it. The actual Credit Account strategy APYs depend on the pool performance that you choose though. This is just an extra alignment-reward with the community and users.
Practical and Interface Guide
Liquidity Pools LM
Starting on October 24, block height 15820000. You can LP already!
Step 1: Go to the Earn tab of the interface. This is where you’ll be able to see all the assets available for supplying liquidity: https://app.gearbox.fi/pools. The wstETH pool will be open in a couple days, also the interface update.
Step 2: Click on the Supply button for the asset that you want to provide liquidity for as shown below.
Step 3: You’ll be taken to the page where you can decide the amount you want to LP as shown below. Click Supply… you are now mining GEAR!
The 1% withdrawal fee currently there — will be voted out within the next 4 weeks. It was a temporary measure, and will be gone soon. You can disregard it if you plan to stay in the pool for longer than a couple of days.
Credit Accounts LM
Starting on approximately November 4.
Step 1: Go to the “Credit Accounts” and choose the CA you want to open: https://app.gearbox.fi/accounts. In case you go via the “Strategy” page, the rewards will depend on the debt [borrowed] asset you choose. It’s the same concept and rate, you might just not see the extra APY there.
Step 2: Take the position as per the leverage you want and open your Credit Account. Doesn’t matter where or how you ape into farms, all of that is up to YOU. Naturally, the more you borrow, the more GEAR you can earn. That is because the LM here is based on the capital amount you borrow.
Step 3: Once your Credit Account is open, you can see the extra rewards directly on the main page details. Keep in mind that if you are farming, the overall net APY won’t show on this page — that’s extra, inside your Credit Account view. Do be checking that yourself as rates are variable!
LM Claim Page: TBA.
According to the calculations explained in this article, being: your liquidity in a pool / total liquidity in that specific pool * per block award = the interface will calculate those for you. While GEAR is untransferable, the GEAR APY %s are counted as $200M FDV according to the GIP-22 vote.
You can find more on the GEAR distribution in the docs.
While the interface will keep track and update numbers 24/7, the claim of new rewards won’t be 24/7. That is, because GEAR is untransferable right now. Therefore, DAO contributors (can be anyone) will take snapshots of earned rewards every 3–4 weeks and update the claim contracts accordingly. So don’t be alarmed if you can’t claim all your GEAR rewards daily. Keep an eye here when the next merkle will be updated.
It is like the usual DeFi farm in terms of the calculations and linear per-block rewards, but just the claims are every other week. Otherwise, in terms of how it works and accrues rewards, there are no differences to DeFi summer 2020.
As for the plans on transferability, the GEAR launch plan, tokenomics, and other things — they are also in the hands of the DAO [economics committee]. Contribute and shape it how YOU want it to be! And don’t forget to ping delegated who can help carry your voice forward:
Extra: retroactive GEAR LM for 2022
The GIP-22 proposal has also re-utilized the 0.5% of supply “saved” by early on-chain sleuthing. Those tokens were chosen to be repurposed as a reward for genuine members: aka early LPs & CA users.
The early LPs are the addresses that provided liquidity to the pools between the DAO launch in December 2021 to the 13th September pre-merge period. These LPs have helped us bootstrap initial liquidity, test out the security of the pools, and helped the CAs become functional.
In return, the APYs on the pools have constantly been less than 1% while the fee on withdrawal was 1%. While the fee is soon to be removed, it made withdrawing assets a hassle for these legends. For that, they deserve a reward! You can also see a smaller part being dedicated to Credit Accounts users, on a liquidity-borrowed-over-time basis. There was no way to sybil as it all depended on the liquidity or your borrowed amounts.
Find yourself in the list if you were an early user. Claim for these GEARs will be available together with the first LM merkle, in November:
Note: GEAR tokens are still non-transferable, this can of course change at any point basis a DAO vote. Multiple discussions have been going out through the year on discord and the governance forum. See more here.
If you would like to join — just get involved on Discord. Discuss, research, lead and share. Call contributors out on their bullshit and collaborate on making things better. Here is how you can follow developments:
- Website: https://gearbox.fi/
- dApp: https://app.gearbox.fi/
- User Docs: https://docs.gearbox.finance/
- Developer Docs: https://dev.gearbox.fi/
- Forum: https://gov.gearbox.fi/t/start-here-forum-rules/
- Blog: https://medium.com/@gearboxprotocol
- Github: https://github.com/Gearbox-protocol
- Twitter: https://twitter.com/GearboxProtocol
- Snapshot page: https://snapshot.org/#/gearbox.eth
- And, of course, the DAO working docs:
