Gearbox V2 AllowedList Alpha: Ahead of the Curve 🧑‍🔬 Peg that bag!
GM gm Degens, Ninjas and Institutions. Welcome to the third part of our AllowedList Alpha series before we bring to you *REDACTED*. If you missed the previous potential integration update on Yearn Finance, follow the link below which will also redirect you to the FRAX farming article.
The assets and adapters we have introduced over the last week are going to be vital to the upcoming Leverage Ninja mode before we roll out the V2 completely to everyone. With every new adapter we introduce new vaults for you to use your leverage position on. While every asset helps us increase the number of vaults you can access on that adapter. The same is now to be brought on our next adapter - Curve Finance.
So much bla bla, wen monies?
For our “Ape first, Read Later” brethrens, at a 7x leverage Gearbox will enable you to earn 21%+ on Curve itself. Nope, not some low liquidity pool. On stETH pool itself. Want to ape? Learn below how it works.
Gearbox V2 will initially launch in Leverage Ninja mode: the leverage side (not the pool side, that’s open to everyone) will be temporarily restricted to a set of degen wallets who will help v2 test in prod a bit. That is, so we can see the system run live with real assets for some amount of time before opening to all.
What is Curve and how does it work?
If you are reading this and are still alive in crypto despite THIS market, it’s unlikely you haven’t heard of or used Curve yet so we’ll only do a smol intro.
Curve is an exchange liquidity pool on Ethereum (like Uniswap) designed for (1) extremely efficient stablecoin [or assets with a peg, like BTC or ETH derivatives] trading (2) low risk, supplemental fee income for liquidity providers, without an opportunity cost.
Curve allows users (and smart contracts like 1inch) to trade between DAI and USDT with a bespoke low slippage, low fee algorithm designed specifically for stablecoins and earn fees. You can learn more about Curve Finance through their FAQ or the whitepaper, or from reading their contracts on-chain.
What new pools are proposed on Gearbox V2?
Before we talk more about this, everything discussed in this article is subject to DAO approval. If the DAO views any of the new proposed additions to the AllowedList as too risky or insufficiently researched (or anything else), then the information in this article will change. Go discuss these things here:
With the new V2 coming out, we aim to introduce 6 Curve pools. The newer additions enables you create leveraged DeFi positions basis your asset and risk preference while enabling you to earn Higher APYs you’d otherwise.
Finally, it’s important to keep in mind that new assets and contracts can be added to the Gearbox AllowedList at any time (as long as the code has been written + it goes through governance approval). So if there’s a Curve pool (or anything else) that you want added to the Gearbox AllowedList, let us know in discord, or even better, start building it yourself as a contributor!
1. Curve 3Pool
The Curve 3Pool is one of the most important stablecoin pools in all of DeFi — it underpins much of the Curve ecosystem because many of their other pools are made up for the 3pool + 1 additional asset (known as Curve metapools).
It also holds almost $1b in assets at the moment. While this pool doesn’t have very high APY, this pool is broadly seen as very safe as long as you are happy to hold the underlying stables (USDC, USDT, DAI). Basically, the risks you are taking are Curve protocol risks + one of the 3 assets depegging. That’s a pretty low low risk compared to whatever else you can face in DeFi.
2. Curve stETH
The Curve stETH is one of the highest TVL vaults (~$1.1b) in DeFi, and for good reason — the APY currently stands at 5.33%, which is pretty good for an ETH farming strategy. In comparison, the vanilla WETH yVault is currently yielding 0.47%. The Curve stETH Pool takes Lido stETH (liquid staked ETH), puts it in a curve pool with vanilla ETH. This does not make the strategy risk free though. Any depegging in stETH against ETH poses risk to your position. You earn the overall yield through 3 mechanisms and then levered up:
- Yield from ETH Staking
- Yield from trading fees on the curve pool
- Yield from Curve token emissions
- Yield from Lido token emissions
3–4–5. Curve FRAX3crv, LUSD3crv and GUSD3crv
We’re grouping these vaults together because they are structurally very similar to each other. Enter Curve metapools!
The FRAX3crv pool is the type where a pool pairs 1 asset with the 3CRV Pool token. So by participating in this pool, you’re (very approximately) holding 50% FRAX and 50% 3CRV, which is made up of DAI, USDC, and USDT. If FRAX is your stablecoin of choice, then this Vault is a decent option for you to earn yield on FRAX as a stablecoin.
The LUSD3crv pool is another one of these pools with 1 asset + 3CRV. In this case, the 1 asset is LUSD, which again means that you’re holding 50% LUSD and 50% a mixture of DAI, USDC, and USDT.
LUSD is generally viewed as one of the most decentralized and censorship resistant stablecoins (the design is similar to original design of DAI, where the only collateral used for LUSD is ETH). So if you’re a decentralization maxi but you still want to earn yield on stables, this LUSD yVault might be a reasonably good solution for you (although keep in mind, since the strategy involves a pool of LUSD + 3crv, if you use this strategy you will have some exposure to USDC, USDT, and DAI). Just keep in mind that recently LUSD has been >$1 peg, so entering the pool (but so is exiting) yields slippage if you are using another stablecoin other than LUSD itself.
Similar to the above 2, GUSD3crv pool on Curve also functions with 1 asset being clubbed with the 3CRV. GUSD is a 1:1 USD-backed stablecoin issued by Gemini. You can redeem a GUSD for $1 at Gemini.
As for the Frax3crv pool, you can read more in a separate article:
6. Curve sUSD Pool
The Curve sUSD pool which this vault is built on predates the metapool design and is instead made up for (approximately, in an ideal world) 25% each of SUSD, USDC, USDT, and DAI.
sUSD is an overcollateralized stablecoin by Synthetix protocol. You can learn more about Synthetix here. sUSD is considered by most to be pretty decentralized, as sUSD is entirely backed by staked SNX as a part of the broader Synthetix ecosystem of synthetic assets and derivatives.
If you’re a believer in the Synthetix ecosystem then this Curve sUSD Pool might make sense as a place for you to park your stablecoins to earn yield.
COMPOSABILITY SPELL -> -> ->
As you add liquidity to Curve, you can use those LP tokens in your Credit Account to either deposit into Convex or Yearn. That way, you can compound even CVX rewards or more! If you are already a Curve user, you could use your LP tokens as collateral on Gearbox 🔥
TEASER: how to use Curve in Gearbox V2
Here are the steps to use the soon newly added Curve pools in Gearbox v2. The steps and UX are broadly the same no matter which pool you are depositing in, so in this case we’ll highlight the Curve stETH vault as it’s currently the one with the highest APY.
The mockups below are not yet live, but shall be soon with Leverage Ninja!
- Connect your wallet to Gearbox V2
- Open a Credit Account with whatever ETH (if you are going to use a stablecoin vault then at this step you’d open a Credit Account with DAI or USDC), approve the asset and deposit your ETH into Gearbox.
- Choose which of the new Curve pools in Gearbox V2 that you want to use — we made the UI super easy to navigate so you can do so in just a few clicks. In this case, we’re using the Curve stETH.
4. The UI will demonstrate to you the effect that depositing into a strategy will have on the parameters of your Credit Account — your new health factor, new amount borrowed, approximate APY, borrow rate, & liquidation price;
5. When you’re happy with your gains and you feel it’s time to withdraw, you can simply click the minus button on the Farm tab in the CA dashboard.
An easier route… Multicall!
Or just go the easy route and take advantage of Gearbox’s multicall: choose the farm destination that’s available, and open -> deposit -> farm without having to go through it all one by one. Checkmate, complexity!
So, what’s the potential APY...?
Currently, out of the new additions, the one with the highest yield is the curve stETH pool at 5.33% APY. Assuming Gearbox has a similar cost of borrow on ETH as Aave (currently 2.68%), we get the following results:
With 7x leverage (the maximum you can borrow would be 9x approximately depending on LTs and LTV — but we’d generally recommend not to max out your leverage so you have a built in a margin of safety), you could be earning 21%+ on your ETH position by using leverage + the Curve stEth pool.
Once again, we’ll stress that this strategy carries some risks. For example, in the event of a significant depeg between stETH and ETH, you could quite end up being liquidated at 7x leverage. Back of the napkin math shows that if the depeg is > ~6% (e.g., stETH goes to 0.94 ETH, which has happened in the past, then you are at risk of being liquidated).
Summarize it for me, Leverage Sensei!
- Curve is an exchange liquidity pool on Ethereum designed for (1) extremely efficient stablecoin trading (2) low risk, supplemental fee income for LPs
- In the near future, Gearbox DAO will have the opportunity to add 7 new Curve Pools to the AllowedList, broadening the choices of yield strategies available to users. More are possible soon after as well.
- These pools include the Curve 3Crv pool, the FRAX, GUSDand LUSD Curve metapool, the Curve sUSD Pool, and the Curve stETH Pool.
- These pools include the Curve 3Crv pool, the FRAX, GUSDand LUSD Curve metapool, the Curve sUSD Pool, and the Curve stETH Pool.
- These new pools will give Gearbox users a bunch of new options for the stablecoins they want to support or be exposed to + an excellent option for earning yield on ETH positions.
- Rough calculations suggest 21% yields with these new additions!
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:
- Main website: https://gearbox.fi/
- General Docs: https://docs.gearbox.finance/
- Developer Docs: https://dev.gearbox.fi/
- Mainnet dApp: https://app.gearbox.fi/
- Governance Forum: https://gov.gearbox.fi/t/start-here-forum-rules/
- Blog: https://medium.com/@gearboxprotocol
- Snapshot: https://snapshot.org/#/gearbox.eth
- Github: https://github.com/Gearbox-protocol
- Twitter: https://twitter.com/GearboxProtocol
- And, of course, the DAO notion pages:
