Leverage Ninja mode: Gearbox V2 is LIVE!
** V2 and the whole infrastructure are currently being tested for bugs, including the new interfaces. This process is vital for security & user experience! Then, multisig signing & connecting it all together. Could take until Oct 31.
Passive Pools have filled up, and V2 is about to be launched into Leverage Ninja mode… But what is Leverage Ninja, how does it relate to V2, and how do you get involved? How to use this composable leverage?!
- PART 1: practicalities around Leverage Ninja list.
- PART 2: farming strategies and alpha for Leverage Ninjas 🥷 Scroll to the middle of the article if you just want the how-to & alpha.
- PART 3: actual practical guide and how-to composable leverage.
- PART 4: … secret Ninja Bible.
PART 1: What is this “Leverage Ninja” mode?
Leverage Ninja [GIP-21] mode is what we call initial launch of Gearbox V2, where the addresses that can open Credit Accounts will be somewhat restricted so that we can test in prod a bit before launching V2 to everyone. Meanwhile, the passive pool side LM program is with no limits:
Note that this is not an exclusive whitelist or anything like that — virtually anyone can be added to the list, simply ask us to be added in the forums, or in discord — the DAO will be updating the list every few days.
The Ninja list is enforced at the contract level. It’s not a UI ‘trick’, which means that you cannot bypass the restriction by using a different frontend or something like that. Let’s get more practical things out the way…
1. The number of Credit Accounts a Ninja can open is limited
Even if you are on the list, the number of Credit Accounts you can open — is limited. In most cases, it’s 1 per address. So that means as soon as your CA is closed [whether you got liquidated or you close yourself] — the Access Pass is essentially burned. In some cases, there are more than 1 possible to open. Check your address to confirm for wave 1 [and later] how many you have— or wait for the game to see Leverage Sensei deliver you the news…
Functionally, the way that this works is that each address on the list will be allowed to mint an SBT (Soulbound Token). When you create a Credit Account, this SBT will be “used up”. This means that if you open a Credit Account and then close it, your address will no longer have the SBT in it and you won’t be able to re-open another Credit Account. Those SBTs are not transferable [duh] and you can’t buy them, don’t be lied to!
Users will be able to request more than one SBT on a case by case basis — this will be applicable for users who want to run Credit Accounts in multiple base debt assets (e.g they want to run one strategy that borrows ETH and the other one that borrows DAI — those would be two different Credit Accounts, requiring two Leverage Ninja mode SBTs).
2. There are min & max borrow limits for Credit Accounts
The limits on Credit Accounts are enforced on the contract level by minimum borrow and maximum borrow limits, as per the DAO governance process. Check the latest here:
That basically means the minimums are: $25K x 5 [because $25K is you collateral and you borrow $100K total], or $50K x 3, or $13K x9… So essentially around $13K as the minimum collateral — if you are an absolute degen in a pegged stablecoin farm doing close to maximum leverage…
Which can actually be okay! How & Why?! — See the PART 2 below.
The reason for this is basically down to liquidators: in this initial period, we want to incentivize would-be liquidators to participate in the ecosystem, and a higher minimum collateral ensures that liquidations will be profitable enough for third party liquidators to participate. While this amount may seem high, it makes more sense for Gearbox to set high parameters initially and then gradually lower them — this ensures that liquidations will always happen in an orderly manner.
If you want to participate in Gearbox V2 as soon as possible but can’t meet the minimum borrow amount, you can also join in on the fun on the passive LP side, which also has liquidity mining going on!
PS: but isn’t Leverage Ninja Mode just an exclusionary whitelist designed to benefit insiders? — No!
We will be updating the list at least every few days so it’s not the case that if you aren’t already on it, that you missed your chance forever.
One security point about Leverage Ninja mode
In the event of a vulnerability, the number of people who can open Credit Accounts + the number of Credit Accounts each user can open —increases the chance of a bug bounty rather than an exploit. It also limits the attack surface itself. And overall, increases the chance that the exploit would be reported for a bug bounty… This gives more time for whitehats to probe and investigate Gearbox while its running live with real users:
Get up to $200,000 for reporting vulnerabilities.
PART 2: alpha for Leverage Ninjas 🥷
First… is there Liquidity Mining for Credit Accounts?
— Yes, from approximately November 4, stay tuned.
It’s less liquidity mining and more so alignment with key protocol users. The same as with the passive LP, what is fixed is the total GEAR per block per debt pool. The APY in GEAR is counted also at $200M FDV while GEAR is untransferable, and depends on the size you borrow, excluding your collateral. The details of the LM program, including for usage of Credit Accounts during Leverage Ninja mode, can be found here.
Okay, but why should I be excited about Gearbox V2?
Put in simple terms, Leverage Ninja and Gearbox V2 will allow you to do MORE of whatever you love doing in DeFi. You can have your Curve LP strategy be done with 10x the capital size, and your Uniswap trade with 5x+ the size as well! As such, Gearbox increases capital efficiency of possibly any protocol or farmer/trader position.
Gearbox is your leveraged DeFi wallet. Continue doing what you love, but with more capital ❤
Farm in Curve, Convex, Yearn… with all these!
Keep in mind that the “MAX ROI” figure that is currently displayed on the Gearbox strategy page doesn’t take into account the true cost of borrowing, since Credit Accounts are just only going live as this article gets posted, which means that the cost of borrowing might still be close to 0% across borrowable assets. This will change once Credit Accounts are properly live and utilization increases. In. few hours! But the utilization curve will mostly be flat enough apart from the ultra-high levels.
We estimate that the borrowing costs are approximately:
- 2.1% for USDC/DAI
- 3.5% for ETH/BTC
- and 1.4% for wstETH
These are the back of the envelope estimations we did for what the borrowing cost for Credit Accounts would be at 80% utilization given current Gearbox V2 parameters. For more details, see here.
It’s important to note that leverage inherently comes with risks. While we are excited about the potential yields that Gearbox offers Credit Account users, anytime you are using leverage, you are at risk of being liquidated.
One big risk factor with using stablecoin strategies + leverage is that in the event of a depegging event, you could be liquidated.
— Higher yields come with higher risk
— By using leverage, you are accepting the possibility of liquidationPlease keep the above in mind the possible risks and learn!
Stablecoin Strategies
V2 comes with a variety of new stablecoin strategies available to Credit Account users, and of course we’ve also included the strategies that were carried over from V1 as well. We’ll highlight some of the highest ROI stablecoin opportunities available on Gearbox right now.
- A Strategy for Decentralization Maxis (and other fans of LUSD)
If you’re a big fan of decentralization, then you’re probably a big fan of Liquity and perhaps you’re partial to using LUSD as your stablecoin of choice. If that’s the case, you’ll be happy to hear that LUSD is now one of the assets in the Gearbox V2 AllowedList, and you can now earn yields in the Convex LUSD3Crv pool.
This strategy takes your stables (either DAI or USDC, depending on what you’ve borrowed in Gearbox), puts them into the Curve LUSD3Crv pool, then additionally deposits your Curve pool tokens into Convex.
The Convex website shows APYs for this pool projected at 5.99%.
At 10x leverage with a borrow cost of 2.1%, your APY via Gearbox becomes: (5.99% * 10) — (2.1% * 9) = 41%
Again, we strongly discourage anyone use 10x leverage, so with at 8x leverage (which is substantially safer from liquidation), you can get:
(5.99% * 8) — (2.1% * 7) = 33.2%
So it’s possible to earn 33.2% with a stablecoin strategy with Convex + Gearbox V2… With yields like this, maybe you’ll be able to stay ahead of 10% inflation after all!
- A Strategy for Fraximalists
If you’re a fan of FRAX, this new Gearbox strategy will excite you.
One of the big new integrations in Gearbox V2 is our Convex integration, and this strategy utilizes that integration along with our inclusion of FRAX in the AllowedList. This strategy takes your stables (either DAI or USDC, depending on what you’ve borrowed in Gearbox), puts them into the Curve Frax3Crv pool, then deposits your Curve LP tokens into Convex.
On the Convex website, the APY for the Frax3Crv pool is projected at 3.05%. At 10x leverage, you’re borrowing 9 times your collateral amount, so:
(10 * 3.05%) — (9 * 2.1%) = 11.6%
Keep in mind that at 10x leverage, you have virtually 0 room for any fluctuation between the value of FRAX or other stables in the 3crv pool (USDC/DAI/USDT) relative to your debt asset.
Something like 8x leverage gives you a decent margin for fluctuation between FRAX and other stables provided that the peg doesn’t break totally.
- Comfy Yearn Strategies (USDC/DAI vaults)
If you’re relatively conservative and you only feel safe when you’re comfy in the most well known stablecoins (DAI or USDC) and you don’t really want exposure to other newer stables, then your go-to strategies will be the Yearn USDC or Yearn DAI vaults.
Yearn is the gold standard when it comes to DeFi yield aggregators, and their reputation is strong when it comes to security.
Assuming you are more or less agnostic about using DAI vs USDC, then as of right now, you’d probably deposit your funds into the Yearn DAI strategy over the USDC strategy — the DAI strategy has a “Max ROI” of 28% versus 14% for the USDC one. Of course, that changes with the market.
The Yearn DAI vault is yielding 2.83%. At 10x leverage:
(2.83% * 10) — (2.1%*9) = 9.4%
and at 8x leverage: (2.83% * 8) — (2.1%*7) = 7.9%
ETH Strategies
Perhaps you’re a true ETH hodler. Or perhaps you bought the picotop of the bull and you’re refusing to sell until you breakeven. It doesn’t matter what your reasoning is, if you want yields denominated ETH, Gearbox is here to help you to juice your yields with leverage.
- Lido stETH pure ETH leveraged liquid staking
Right now, Lido shows staking yields of 5.5%, so with 10x leverage:
(5.5% * 10) — (3.5% * 9) = 23.5%
and with safer 8x leverage: (5.5% * 8) — (3.5% * 7) = 19.5%
That’s right. With Gearbox + Lido, you can now earn 19.5% yield on Leveraged Staked ETH… This is among the highest ETH denominated yields you can find anywhere in DeFi. There’s a reason why the Lido integration was one of the things we were most excited about!
- Convex stETHCrv
(10 * 5.18%) — (9 * 3.5%) = 20.3% [max dumbo degen]
With leverage at 8x: (8* 5.18%) — (7 * 3.5%) = 16.94%
If in the long run, you expect periods of higher trading volumes between stETH and ETH, then the Convex stETHCrv strategy might be the one that you want to use.
- Yearn WETH
If you like to keep things simple, the Yearn WETH vault is currently generating yields that are pretty great for a vanilla WETH vault. This isn’t always the case — there are times when pure ETH denominated yield (as opposed to stETH yields) can be hard to come by. But right now, the yields are good, and its also the case that many people simply prefer using Yearn for security and peace-of-mind reasons.
Right now the Yearn WETH vault has an APY of 4.92%. The vault uses a number of different strategies in the backend (more details here). At 10x:
(10 * 4.92%) — (9 * 3.5%) = 17.7%
There’s less depegging risk with the Yearn WETH vault compared with the stETH strategies detailed above, but we still don’t recommend 10x leverage. With 8x leverage: (8* 4.92%) — (7 * 3.5%) = 14.86%.
For a vanilla WETH strategy that goes through Yearn, 14.86% is good!
PART 3: practical guide and how-to.
First of all, you should understand what a Credit Account is:
So, how do I actually ape in?
Luckily for you, all of the strategies outlined above are part of our “Ready Strategies”, where you can ape into them with just one click… That’s thanks to our new Multicall in V2, you can read more about it here:
Here’s how you do it.
- Go to gearbox.finance and click “Launch dApp”. You can also just go to the dApp directly, but we wanted you to check the new landing page :D
2. Click into the “Credit Accounts” Tab.
3. Click “Connect Wallet” and choose what you must.
4. Read the terms and conditions, then click “Agree and Login”, and sign the subsequent signature request in your wallet. It’s a gasless signature.
5. Click the “Strategies” button on the pink blob at the top of the screen. And then select the strategy that you want to ape into (lets use Convex stETHCrv since its right near the top). But you decide which one it is!
6. Choose your collateral assets (can be multiple) → how much of each of those assets you want to deposit as collateral → how much you want overall leverage factor to be → then click the button to ape in!
A few things you can notice here:
- You will get an overall Health Factor: make sure to keep it above 1 to stay safe from liquidations! Unless you are farming with correlated assets which assumes Health Factor to be low with no high risk.
- If your debt asset is correlated to your farm → you will get an approximate “Liquidation Price” calculation. For Curve pools and most of the farming, it means that any of the assets inside your farm would need to depeg to that value to cause a liquidation. That is because Curve pools trade into (rebalance) the cheapest asset inside of the pool.
In case your collateral and/or debt asset are not correlated [stable-stable, eth-steth, etc.] then the liqudation depends on many factors and can’t be so simply calculated. Because then you need to consider a depegging event, an asset price drop relative to that debt, or any other position mixed up… too much!
7. Approve your collateral(s) and ape in one click into it → DONE! Ninja, you have succeeded 🥷 Yieldsssss
A little FAQ section for Ninjas
- What is Health Factor;
- How to avoid liquidations;
- What are different asset and farm LTVs relative to debt assets;
- How to open a Credit Account;
- What more strategies are there…
MYOS: like BYOB, but better!
Make Your Own Strategy / Bring Your Own Booze
Gearbox doesn’t force you into 1 click-strategies…
All of the strategies listed above are some of the things that the Gearbox devs think will prove most popular, but they are by no means an exhaustive list of everything you can do in Gearbox V2. Also, remember that:
- Especially in the first days, interface could be extremely buggy — and that’s not something you want to see when you deal with high leverage. So understand those risks and accept them.
- As a result, it’s better if you know how contracts work, because Gearbox Protocol is fully on-chain! You don’t need the interface, you are not required to use it. End of the day, you can just do with a terminal.
- YOU CHOOSE the debt asset (DAI/USDC/WBTC/ETH/wstETH). That is the asset you borrow, so it is your debt — basically, the asset you trade “against”. All the positions & farms you take are priced in this asset for the sake of Credit Manager calculating your Health Factor.
- YOU CONFIGURE leverage factor: safu x3, riskier x6, or degen x8–10. Depending on the position and collateral you choose, LTV be higher or lower, allowing you to borrow more. You can increase capital efficiency with correlated debt-vs-farm positions (stables to stables debt, stETH to ETH or wstETH debt, etc.)
- YOU APE into the farm you want to: Curve LUSD3crv / GUSD3crv / Frax3crv / sUSD3crv… -> then you can decide to go farm either in Convex or Yearn! All of that is up to you. Source yield, make more ROI than your borrowing rate -> GGWP!
- YOU ENJOY ser enjoooyer. Collect the yields and keep track of your Health Factor, of course! Just keep it in the yellow-green, and even stronger market moves shouldn’t really be an issue for you.
Don’t forget, the most powerful thing about Gearbox is that you’re ultimately in control of your own destiny.
You get to choose what you do, and what collateral to use, and what level of leverage you’re comfortable with. That means that you aren’t ever locked in to specific strategies. With Credit Accounts live, I’m sure many gigabrains among the wider community will start coming up with new and interesting strategies that might intrigue you.
Playing with different collaterals can lead to very interesting positions/exposures. If you use ETH as collateral, borrow BTC, then sell your BTC for ETH, then turn your ETH into stETH, you’re effectively long the ETH/BTC ratio with leverage AND earning staking yields.
If you use wstETH as collateral, borrow ETH, then buy stETH on the open market, you’re earning staking yields but you’re also betting that the stETH/ETH price gap will close (doing arbitrage).
As the final sauce… how about a short/long that PAYS you?
No, not negative funding rates. This is all spot leverage…
These are just a couple of examples off the top of my head.
The possibilities of weird combinations of debt assets, collateral assets, and protocol usage are endless… And they will only go up as Gearbox V2 is further developed and new integrations get added.
In other words, what I’m saying is…
So — what are you waiting for? Go join the ranks of the Leverage Ninjas, request access, and open a Credit Account in a few hours among the first!
PART 4: Ninja Bible
Leverage is a complex tool, so you must know all the intricacies of how it works. Sensei prepared a bible with formulas & tips on how to safely max out your leverage and increase capital efficiency.
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:
