SECTION 1: APPLICANT INFORMATION
Applicant Name: amplice, 0xmikko, ivangbi, apeir99n
Project Name: Gearbox Protocol
Project Description: Gearbox is a composable leverage protocol that aims to be the credit layer infrastructure for all your prime brokerage needs. It utilizes an account abstraction primitive called Credit Accounts (functionally a kind of leverage-enabled smart account) that allows Gearbox users to put up to 10x more assets to work than they deposit. Some examples of things that Gearbox users can do include margin trading with leverage through Uniswap/Curve/Balancer, or leverage farm on Convex pools/Yearn vaults, or leverage staked via Lido, or leverage restake and leverage points via EtherFi and Renzo, or leveraging NFTs/RWA/and other assets in the future. When they wish to withdraw funds, all they need to do is pay back the loan (plus accrued interest), and they can withdraw their original deposit + profits. No fixed terms on the borrowed funds. Combining lending and prime brokerage in the same protocol.
V1 was in December 2021, V2 was in November 2022, and V3 went live in December 2023. 6+ audits with $2M+ spent on security, and luckily never a security incident or bad debt in the protocol so far. We have been around for a long time, tested things, and are finally happy to make the leap to L2 rollups!
Team Members and Roles:
- 0xmikko - inventor, tech lead
- apeir99n - product lead
- ivangbi - shitposter, 12 year old child
- van0k - smart contract dev
- lekhovitsky - smart contract dev
- harsh - backend and infra
- doomsower - backend and infra
- esser - frontend dev
- muggle - head of marketing
- nikitakle - community lead
- amplice - chief propagandist
- allindots - illustrator in residence
Project Links:
- Website
- Farming dApp
- PURE margin trading dApp
- Analytics Charts
- User Docs
- Dev Docs
- Github
- Telegram
- Discord
- Notion
Contact Information
Point of Contact: ivangbi, amplice, 0xmikko
Point of Contactâs TG handle: @ivangbi, @amplice
Twitter: @ivangbi_, @amplice_eth, @0xmikko_eth,
Email: ivangbi@gearbox.foundation, amplice@protonmail.com
Do you acknowledge that your team will be subject to a KYC requirement?: Yes
SECTION 2a: Team and Product Information
Provide details on your teamâs past and current experience. Any details relating to past projects, recent achievements and any past experience utilizing incentives. Additionally, please provide further details on the state of your product, audience segments, and how you expect incentives to impact the productâs long-term growth and sustainability.
Team experience:
The team is not anon by any means. Backers are all public too.
Gearboxâs DAO contributors come from a wide range of backgrounds, most are crypto and DeFi veterans of one sort of another - for the sake of brevity weâll just provide some highlights.
Mikael, inventor and tech lead, is an ETHGlobal hackathon finalist in February 2021 - actually, this hackathon project was the earliest version of Gearbox itself. He previously was a hackathon winner for projects like NuCypher (Threshold now), and had his own IT company prior.
Apeir99n worked in fintech for more than 10 years and has PhD in math, now modeling risk scoring and LTVs for the protocol. Another one of the core members is ivangbi, one of the core creators of the popular lobsterDAO group on telegram. amplice has created propaganda videos for numerous projects including Prisma, Astaria, Based Ghouls, the Steady Lads Podcast, Sushi, Hegic and many others, and is also occasionally dabbles in angel-ing. Others are chads too, check Notion for their links and roles.
What novelty or innovation does your product bring to Arbitrum?
The Credit Account primitive is (in our view) a major innovation that unlocks a huge amount of capital efficiency whilst adhering to the core principles of DeFi - namely, self custody and composability. Gearbox is the originator of the Credit Account and is battle-tested, having been live for over 2 years with 0 bad debt incurred and 0 smart contract hacks.
The idea of generalized and composable leverage - where users have a way to deploy more capital than they currently have without being locked into any given vault or strategy - is extremely powerful and unlocks a range of new and unexplored dimensions of DeFi. You decide leverage, where to use it, how to trade and when. There are no vaults or pre-made strategies, you can manage it however you want within the permissions. Imagine having x10 the funds in your account abstraction wallet and doing things the same way you are used to. Supercharging your Metamask wallet with 10x, essentially⌠Thatâs our goal!
This is doubly true on Arbitrum, where the combo of low cost of transactions + flourishing DeFi ecosystem + composable leverage will allow users an unprecedented amount of freedom to lever up to get exposure on the assets and strategies that they want, in any combinations that they choose.
Is your project composable with other projects on Arbitrum? If so, please explain:
Yes - composability is at the heart of Gearbox in a way that is true of few other protocols.
Gearbox is essentially pointless and useless if there are no other DeFi protocols. All the farming, trading, and all liquidity is routed through Gearbox to other protocols we integrate. You can see in the next sections how we bring $180M+ volumes to Uniswap, Curve, Balancer - and contribute to their LPs earning fees.
Also actively contributing >125m in TVL to protocols like Etherfi, Renzo, and Ethena, with similar TVL contributions to Lido, Convex, and Yearn previously.
Our initial deployment (done on February 26, and live on March 2) is our margin trading product (Gearbox PURE), primarily because this is a safe initial deployment that has been fully battle tested on mainnet and has been live on mainnet for some time. As we continue our journey on Arbitrum we will add more and more composability, with an emphasis on Arbitrum native/aligned protocols.
This is our (rough) deployment plan for Arbitrum:
- The very first thing is getting the protocol itself deployed to Arbitrum. As mentioned, v3 has been live on mainnet for some time and went through extensive audits and so forth, and in fact weâre out of âalphaâ now on mainnet. We know there is worry in the LTIP forum posts about haphazard/rushed deployments. In our case, because we are (initially) deploying the same thing to Arbitrum that we have already deployed to mainnet, there are no such worries. We have ALREADY deployed Gearbox PURE to Arbitrum - the margin trading side of Gearbox, which allows people to use leverage when trading on Uniswap and other DEXs (Camelot integration on the swaps side is coming). This is step one and will be done before the March 3rd deadline. (Update: Protocol is deployed and live as of March 2nd)
2. We also promise to run a points/referral program (which we are calling âSTIMMIESâ) which will function as a kind of âgrant matchingâ that is referred to in the LTIPP application. These points will eventually be claimable as GEAR tokens every two weeks. The STIMMIES amount allocated to Arbitrum is 20,000,000 GEAR which is equivalent to $400,000 at current GEAR prices, and has already been approved by Gearboxâs DAO. See here.
3. We would also be happy to create some sort of co-grant with GMX or other trading platforms on Arbitrum to create a basis-trading product, which would ARB the funding rates/borrow rates between our protocols (e.g long on Gearbox at a cheaper borrow, short on GMX where funding rates are higher, you have a delta neutral yield position). Gearboxâs distinct borrow rate structure compared to traditional perp trading platforms sets the stage for a basis trading product that would bring more competitive rates across Arbitrum and invite users to take advantage of such delta neutral yield strategies. Platforms such as GMX would be an ideal candidate for that.
4. Shortly after deployment (within the first couple of weeks probably) we should be able to add assets that are Arbitrum native to PURE. The initial deployment already allows leveraged longs on ARB, PENDLE and GMX. Further assets will depend on liquidity and other factors, but on top of GMX/PENDLE we are imagining assets like GRAIL, RDNT, MUX, MAGIC, XAI, DMT, and so forth.
5. Within 6 weeks after initial deployment, we plan to launch our first Arbitrum native integrations. For instance, as mentioned above, we are currently coordinating with Camelot to enable margin trading swaps through their DEX.
6. Gearbox aims to unlock the leveraged restaking narrative for Arbitrum, building on our success from Mainnet (~29,500 ETH restaked through Gearbox). When Renzo launches on Arbitrum (done) and has reasonably liquidty, we will be able to add leveraged restaking as well (this is neccesary for orderly liquidations, we are literally chatting to them about getting this done ASAP as of March 15th, so itâs coming very soon). We have also convinced Renzo to deploy points incentives to Gearbox on Arbitrum in a greater amount than they are incentivizing Gearbox on Mainnet, we will highlight this in a later section in this application.
7. Mid to late April (~8 weeks after deployment) we should be able to deploy leverage farming to Arbitrum for protocols that weâve already integrated on mainnet (e.g Curve, Balancer). Arbitrum users will then be able to leverage farm on curve pools or balancer pools on majors + potentially on some of the aforementioned Arbitrum native assets. Obviously this will depend on our risk assessments relating to liquidity/distribution of tokens to be added and so forth.
8. Down the line (stretch goal is within the 12 weeks LTIPP is running, would depend on complexity and whether things needs audits and so forth), we would be adding more and more integrations on Arbitrum, with the goal of making everything that is safe and DeFi related on Arbitrum leverage-able. After all, our goal at Gearbox is to allow people to leverage anything. Integrations that we have in mind at the moment include JonesDAO and Abracadabra, but definitely open to suggestions/conversations of what is most interesting here.
Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?
Yes, there is Sentiment, which is deployed on Arbitrum but unfortunately was exploited and has not yet relaunched. There is also Delta Prime, which is deployed to both Avalanche and Arbitrum - for their Arbitrum deployment, they currently have about ~$8M TVL.
We differentiate from these in the following ways:
- Gearbox was the pioneer of the âCredit Accountâ concept
- On top of being the pioneer of the âCredit Accountâ concept, weâre also the largest protocol of our kind by some margin (100m TVL more than the next largest)
- Security first mindset, no exploits so far and no bad debt
- Focus on leveraging (pun intended) whatever DeFi ecosystem weâre in. On Arbitrum, that means working to integrate as many Arbitrum native protocols as possible to open up new possibilities of what can be accomplished in our Credit Accounts.
How do you measure and think about retention internally? (metrics, target KPIs)
We are a protocol that gives users the ability to borrow funds in order to lever up in other areas of DeFi. I think ultimately we understand as a team that if DeFi is thriving and there are interesting opportunities available, then people might be interested in deploying leverage. Using Gearbox only makes sense if what you earn has a pretty good chance of being > what you pay in interest on your borrowed funds.
Historically, our most popular use-cases have been leveraged stablecoins pools (when yields were good), leveraged staked eth via Lido (when staked eth yields were closer to 5-6% rather than 3.5%), and leveraged restaking (where people are accruing points that have speculative value attached).
This is all pre-amble to make the point that basically, retention is simple for us - if we have strategies where users can deploy leverage and make good returns relative to the risks they are taking by borrowing money, we will retain users, and if not, then we wonât.
Most of our contributors have been around the block when it comes to DeFi and have seen multiple cycles - when it comes to DeFi, virtually nobody will continue using your product long term if it is A) not profitable or B) less profitable than some other thing. You can win on the margin with better reputation, more history and a better record of security/safety (like Yearn or Aave have, for example), but the key is to present profitable (or good risk/reward) opportunities to our users.
Therefore the primary KPIs that we have are relatively straightforward. We have a two sided lending/borrowing market, where our goal is to make borrowing worth it for our users. If borrowing is worth it for our users, we will have a high utilization rate. Good utilization rate leads to good APYs for our passive lenders, which will attract more TVL. It follows then that our primary KPIs are:
- TVL growth
- Consistently healthy utilization rates (60-90%)
- Growing total transaction volume and volume that flows through other protocols via Gearbox. Allowing users access to leverage to deploy into the protocols of their choosing promotes both composability and capital efficiency in the DeFi ecosystem.
In support of all of the above, a secondary KPI (harder to measure, as it must be balanced against security/safety, which is absolutely key in any DeFi protocol and is honestly our devsâ biggest priority) is the amount of in-demand integrations that are added, such that it is worth it for users to use leverage on X newly-integrated protocol. Adding new integrations is cool, but doing so for the sake of doing it is ultimately pointless - the key is to drive more borrowing, so the integrations that we add on our Arbitrum deployments should be prioritized based on real user demand/need.
Relevant usage metrics - Please refer to the OBL relevant metrics chart . For your category (DEX, lending, gaming, etc) please provide a list of all respective metrics as well as all metrics in the general section:
| Metric Name | Metric Description |
|---|---|
| Daily Active Users | A time series metric representing the daily count of unique addresses interacting with the protocolâs contracts. |
| Daily User Growth | A time series metric representing the daily user growth (in addresses) interacting with the protocolâs contracts. |
| Daily Transaction Count | A time series metric representing the daily number of transactions interacting with the protocolâs contracts. |
| Daily Protocol Fee | A time series data representing the daily total protocol fee generated. For example, swap fees, borrowing fees, etc., comprising all economic value generated through the protocol, contracts, apps, etc., by users. |
| Daily Transaction Fee | A time series, daily total transaction fees generated daily by interactions with the protocolâs contracts. |
| Daily ARB Expenditure and User Claims | Data on individual ARB incentive claim transactions made by users, as incentivized by the protocol. It should include the timestamp, user address, and the claimed ARB amount. The spent ARB will allow for the normalization of growth metrics. |
| Incentivized User List & Gini | The list should include users incentivized by the protocol along with their performance metrics. For instance, if trading volume is incentivized, this would be a list of traders with their respective trading volumes. If liquidity providers are incentivized, it would include a list of LPs and their liquidities in USD. Protocols should also strive for more uniform engagement levels across a wide user base for long-term sustainability, which will be measured through a gini coefficient across reward recipients. |
| TVL | A daily time series expressed in USD, calculated as deposits minus borrows. |
| Withdrawals | A daily time series expressed in USD for the amount of net withdrawals out of the protocol |
| Borrowed Amount | A daily time series measured in USD for each asset and in total. |
| Daily Borrowing Volume | A daily time series measured in USD for each asset and in total. |
| Daily Deposits Volume | A daily time series, presented in USD for each asset and in total. |
| List of Depositors | A list of current and past participants who have deposited during the incentivized period to the protocol. The list should include depositor addresses, their current deposits in USD, time-weighted deposits in USD, and the duration of their deposit participation. |
| List of Borrowers | A list of current and past participants who have borrowed from the protocol during the incentivized period. The list should include borrower addresses, their current borrowings in USD, time-weighted borrowings in USD, and the duration of their borrowing participation. |
| Utilization Ratio | Optimize the ratio of borrowed to available assets, indicating healthy demand and potential for higher interest revenue. |
| Loan Origination Volume | Track the volume of new loans created to measure growth and market penetration. |
| Default/Liquidations | Minimize the rate of defaults to ensure platform trust and financial health. |
Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan:
Yes, of course!
Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal? If so, please disclose the details of that arrangement here, including conflicts of interest (Note: this does NOT disqualify an applicant):
No arrangement or tokens have been given for any grant help. We, of course, try to chat to teams prior. That is, to understand what composability to bring to Arbitrum and in what order. Camelot, Abracadabra, Curve, Balancer, Uniswap⌠We have also asked a few questions in LTIP chat. All transparently.
SECTION 2b: PROTOCOL DETAILS
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the protocol native to Arbitrum?:
Gearbox launched in 2021 on Mainnet and wants to premiere its suite of products on Arbitrum. Making it the first expansion of its kind for our users and community.
On what other networks is the protocol deployed?
None. Mainnet only until the Arbitrum deployment on the 26th of Feb.
What date did you deploy on Arbitrum mainnet?
Deployed on February 26, and live (activated by the DAO) on March 2.
Address 0xEf3Cfa199137387047318a06EFba931dB07e7b4B | Arbiscan These are all tx related to Arbitrum deployment by executor (for more info, check Gearbox governance model).
Do you have a native token?:
Yes, our native token is GEAR.
It is bridgeable to Arbitrum via the official bridge, and GEAR tokenomics/staking is live on Arbitrum (necessary as part of v3 deployment).
You can see token supply information here and the utility/staking model here.
Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run? Please share results and dashboards, as applicable?
Just prior to the launch of Gearbox V1 in December 2021, we utilized an innovative method called âCredit Account Miningâ to aid in the decentralization of the protocol from day 1 whilst saving the protocol gas costs. In short, a fixed amount of GEAR tokens could be claimed by anyone who was willing to help deploy a Credit Account - which cost over $1,000 in gas fees for each. For the sake of brevity, we wonât go into more detail here, but for those interested you can learn more about how credit account mining went here. The end result was a more decentralized DAO from day 1, with 5% of GEAR tokens distributed to 5000 addresses and 1804 ETH spent on gas fees for the 5000 credit accounts.
Current Incentivization: How are you currently incentivizing your protocol?
We are currently incentivizing our v3 lending pools with GEAR, with 41,150,538 GEAR to the ETH pool per year and the same amount to the USDC pool per year. WBTC incentives were (very) recently discontinued.
This amount (41,150,538 GEAR) is approximately $1m USD a year in GEAR for each of these pools. Note that this is somewhat higher than what the USD amount was when we introduced this incentive program.
We also have STIMMIES, which is technically not live yet but has been approved. STIMMIES is a trading competition/loyalty program designed for PURE margin trading. The goal of STIMMIES is to help increase product awareness and adoption through gamification and incentives and to bring more sophisticated traders to Gearbox. Traders will earn STIMMIES for their trading activity on PURE, which will be redeemable for $GEAR every 2 weeks. The STIMMIES program fund has 0.5% of $GEAR supply, which will be allocated up until the end of Q1. The funds will be processed every 2 weeks as per tradersâ activity.
At the end of Q1, if some $GEAR remains, itâll be rolled over to the next installment of STIMMIES if the program is continued. Otherwise, it will be returned to the DAO treasury.
A portion of this (40% â 20m GEAR or ~$400k) will be directed to the Arbitrum deployment of PURE, as we feel that margin trading is more likely to gain momentum with users in a lower fee environment where more nimble trading can occur with smaller sized positions and better/faster execution.
**Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem related program?
No
Protocol Performance: [Detail the past performance of the protocol and relevance, including any key metrics or achievements, dashboards, etc.]
Currently TVL is ~160m, up about 300% since the launch of Gearbox V3, Prior highest TVL at the start of the last bear market was 131M.
Previously, at the start of the bear market last cycle, we contributed 30m to Lido TVL, and 50m+ to Convex TVL. Currently we are contributing a combined 120m of TVL to liquid restaking protocols, ~60m to Etherfi and ~60m to Renzo - these would actually be higher but weâre currently capped as ETH utilization is quite high at ~90%. Weâre also currently contributing ~15m to Ethena (this would also be higher except its currently running up against system limits).
Extremely high organic rates for lenders demonstrate the PMF we have managed to find on the leverage side - our organic rates for ETH lenders are currently ~23% (this is excluding any token incentives, which would push it to 27%). This is probably the best organic ETH yield you can get on the market currently (without using leverage). Similarly, our USDC organic yields are at ~27% right now (excluding incentives, with token incentives its at 32%).
180m of Gearbox induced volume on mainnet DEXs (Uniswap, Curve, Balancer) since v3 launched just 3 months ago.
Protocol Roadmap: [Describe relevant roadmap details for your protocol or relevant products to your grant application. Include tangible milestones over the next 12 months.]
We laid out our plans for Arbitrum in the above section on composability, so for the sake of brevity here is the shortened version:
- Deploy margin trading product to Arbitrum before LTIPP deadline [DONE]. Deploy incentive program on margin trading (effectively a co-grant) [Q1]
- If there is interest, create a co-grant for the development of a basis trading product that utilizes Gearbox/GMX (or other perps platforms) for delta neutral borrow/funding rate ARB. [grant created Q1]
- Add Arbitrum native assets where risk parameters allow (things like MAGIC, PENDLE, GMX etc) [Q1]
- Camelot integration to allow margin trading swaps to route through camelot liquidity [Q1]
- Gearbox leveraged restaking deployed to Arbitrum shortly after Renzo launches [Q1]
- Gearbox leveraged farming fully deployed to Arbitrum, with access to multiple pools in Convex, Curve, Balancer, etc [Q2]
- More Arbitrum DeFi integrations (JonesDAO, Abracadabra, etc) to make as much of Arbitrum DeFi âleverage-ableâ as possible.[Q2/Q3]
- Launch of Gearbox/GMX basis trading product (follow on from step 2. above) [Q3]
As for plans more broadly, our recent addition of Redstone as a compatible oracle solution + the v3 introduction of quotas and gauges, we are strongly positioned to move rapidly on interesting/in-demand integrations. Our end goal is to be the âleverage layerâ for DeFi - providing leverage wherever it is secure and in demand. I think adding more in demand tokens as tradeable assets in our Margin Trading product is something of a priority, and on the leverage farming side I think it will somewhat depend on what strategies are in demand and how safe they are to integrate. We want to go where users want us to go, so in some sense we will respond to new innovations and narratives that appear in DeFi. We are also working with other DeFi protocols to find ways to incentivize our lending pools so we can build a base of durable liquidity on the lending side.
In addition to the above, I believe we are in the early stages of exploring NFT integrations. We will also be exploring deployments to other L2s in due time
Special Note: Was not sure exactly where to put this information, but our grant advisors suggested we mention this. Our current USDC pool on the Arbitrum is USDC.e - the advisors noted that Arbitrum DAO is trying to encourage the use of native Arbitrum USDC over USDC.e. This isnât a problem for us, we intend to sunset the existing USDC.e pool and redeploy with Arbitrum native USDC now that weâve been made aware of Arbitrumâs preference for this.
Audit History & Security Vendors:
Gearboxâs Audit History
V3 Audits
-
ChainSecurity (Q2-Q4 2023): full V3 coverage, reports (see multiple files)
-
ABDK (Q2-Q4 2023): full V3 coverage, reports (see multiple files)
-
Decurity (08/11/2023 - 20/11/2023): governor audit, report
Previous versions, including audits of many of the V3 contracts:
-
ChainSecurity (23/02/2022 - 19/10/2022): full V2 coverage, report
-
Consensys Diligence (25/07/2022 - 12/08/2022): full V2 coverage, report
-
Sigma Prime (21/02/2022 - 06/08/2022): partial V2 coverage, report
-
Consensys Diligence Fuzzing (04/10/2021 - 13/12/2021): V1 coverage, report
-
ChainSecurity (31/08/2021 - 13/12/2021): V1 coverage, report
-
MixBytes (06/07/2021 - 22/12/2021): V1 coverage, report
-
Peckshield (22/07/2021 - 10/08/2021): initial version coverage, report
-
Peckshield (09/04/2021 - 03/05/2021): first iteration coverage, report
Bug Bounty Program
Max bounty of $200k, see our Immunefi page here and further details about the scope of the bug bounty program in the docs.
Security Incidents: [Has your protocol ever been exploited? If so, please describe what, when and how for ALL incidents as well as the remedies to solve and mitigate for future incidents]
Gearbox has never been exploited (touch wood).
SECTION 3: GRANT INFORMATION
Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.
Requested Grant Size:
650,000 ARB
Justification for the size of the grant:
The yields across the industry have become more competitive with L1s and L2s bringing out lucrative point systems and airdrops. For GEAR to tap into our community of LPers, whales and market makers, we want to offer competitive rates. We are proactively securing TVL and are confident that we can boost growth with our requested grant size.
Scaling our liquidity effectively will allow us to put a spotlight on all planned integrations. So ultimately our liquidity increase will benefit all DeFi projects on Arbitrum that Gearbox plans to integrate with (which, eventually, is all of them). Gearbox composability means that it is almost definitional that usage of Gearbox = magnification of usage of another DeFi protocol. A grant to GEAR is a grant towards Arbitrum DeFi.
The requested grant will be used for three purposes:
- To bootstrap ETH and USDC lending side pools on Gearbox
- To incentivize activity on Arbitrum aligned/native strategies, pools, and assets
- To incentivize mainnet users to switch to Arbitrum in cases where a strategy exists on both
Lending Side Incentives
In periods of low to moderate demand for leverage via credit accounts, organic APYs are roughly 2.5%-3.0% (typically higher than rates on the same assets on Aave).
In order to attract the lending side TVL necessary to support Gearboxâs margin trading product + forthcoming leverage farming deployment, we would need incentivized APYs to be pretty attractive for potential depositors - attractive enough to incur switching costs from whatever yield sources they are currently using over to Gearbox.
Our goals are roughly to attract ~15m of TVL for our ETH and USDC pools respectively. Based on a survey of yield opportunities on Arbitrum for yield on ETH/ETH-like tokens as well as stablecoin yields, we anticipate that we will need approximately 10%-15% APYs on each of these pools to attract the necessary amount of assets.
Some ETH/USDC yield comps from DefiLlama on Arbitrum
Based on the above snapshot of yields, it appears that ETH yields would need to be ~10% and stablecoins yields would need to be ~15%.
So that is 7.5% additional yield (on top of ~2.5% organic) to reach 10% on the ETH pool and 12.5% additional yield to reach 15% on the USDC pool.
7.5% * 15m + 12.5% * 15m = $3,000,000 per year
$3,000,000 / 4 (LTIPP is a 12 week program, which is approximately one quarter) = $750,000
ARB price is currently $1.9 â $750,000 / 1.9 = 394,736 ARB tokens. For ease, we will call this 400k ARB.
Incentives for âArbitrum nativeâ strategies + incentives for users to use Arbitrum rather than Mainnet
While the lending side TVL is necessary for the functioning of the protocol, itâs not what makes Gearbox an exciting and innovative protocol. The interesting part about Gearbox is the composable leverage it gives users, which in turns allows it to magnify demand for other protocols in the DeFi ecosystem.
As such, we would like to use a portion of the ARB grant to incentivize the leverage side as well. There are two cases where it would be interesting to incentivizethe leverage side:
- The case where we are adding incentives to leverage on âArbitrum nativeâ protocols
- The case where we are essentially incentivizing mainnet users to switch and do the same activity, except on Arbitrum
A first step could be to incentivize those who are trading on Gearbox PURE to take positions in assets that belong to Arbitrum focused projects - assets like GMX, PENDLE, MAGIC, and so forth. Adding these assets to PURE is relatively straightforward and should happen quickly. Applying the same approach that we take to our STIMMIES program, but focusing on Arbitrum native/aligned assets would be a good first step in incentivizing the leverage side.
We propose allocating 100k ARB to incentivize margin trading on Gearbox towards this purpose.
Additional incentivization could involve rewarding users who take leveraged positions on newly integrated vaults, pools, and strategies/protocols that are particularly Arbitrum aligned. We are still in the process of discussing integrations with a number of projects that are deployed on Arbitrum, and in many cases our integrations are somewhat contingent on other factors (for example, we often require either a Chainlink and/or Redstone oracle price feed) - so it is difficult to specify what specific strategies or protocols might be incentivized here. Some types of more complex integrations (for example, something like Pendle) may also require new audits.
Additionally, we would want to have incentives to encourage users to use Arbitrum rather than mainnet when deploying capital into strategies that exist on both chains.
Here are some ideas of the types leveraged positions that could be rewarded:
- Margin trades that route through Camelot
- Leveraged ETH LST positions (stETH, cbETH, rETH)
- Leveraged ETH LRT positions (Renzo)
- Leveraged Abracadabra pools
- Leveraged GLP positions
- Leveraged JonesDAO strategies
We propose 150K would be allocated towards incentivizing users on the leverage side by rewarding ARB to strategies that are most likely to cause a positive flywheel effect (much like the one weâve seen on Mainnet with both leveraged restaking as well as Ethena).
We will likely start off by incentivizing leveraged restaking strategies on Renzo to entice people to switch from mainnet â Arbitrum, but subsequent rounds of incentives could go to any strategy/pool depending on what we are able to integrate + what strategies have organic user interest.
Grant Matching:
We are providing 20,000,000 GEAR in incentives as part of STIMMIES on Arbitrum. At current prices that is equivalent to $400,000. We are committed to our launch on Arbitrum and see the strong DeFi ecosystem as a natural next stage for Gearbox, and we believe our deployment of this incentive program to Arbitrum demonstrates this. Note that this incentive program has already been allocated for and approved by the DAO, which means that we are committing to this regardless of the outcome of this grant application.
On an additional note, while this is not âgrant matchingâ per se, Renzo has agreed to help us entice lending side users from Mainnet to switch to Arbitrum. While they are offering points on both Mainnet and Arbitrum to Gearbox lenders, Arbitrum lenders are going to get 1x points, whereas Mainnet lenders are currently only getting ~0.6x points. Essentially, Renzo has kindly agreed to try to help us out a little bit with bootstrapping lending liquidity on Arbitrum.
We thought it was noteworthy than we were able to work with a third party protocol and have them agree to give points incentives to Gearbox users on Arbitrum that were > what they were giving us on Mainnet
Grant Breakdown: [Please provide a high-level overview of the budget breakdown and planned use of funds]
400,000 ARB to incentivize Gearbox passive lending pools
100,000 ARB to incentivize margin trading on tokens of protocols that are Arbitrum focused or Arbitrum native(e.g Pendle, GMX etc) - deployed alongside Gearboxâs STIMMIES program for more general trading/referral rewards
150,000 ARB to incentivize users on the leverage side, with a focus on A) enticing Mainnet users to switch to Arbitrum on popular strategies that exist on both (e.g Renzo Liquid Restaking) and
B) incentivizing âArbtrum alignedâ strategies that already have organic user interest (e.g potentially things like leveraged GLP, leveraged JonesDAO, etc.)
Total: 650,000 ARB
Funding Address: 0x2c31eFFE426765E68A43163A96DD13DF70B53C14
Funding Address Characteristics: 5/10 Multisig (same participants as mainnet treasury multisig)
Treasury Address:
Arbitrum Treasury Multisig 0x2c31eFFE426765E68A43163A96DD13DF70B53C14 (Arbitrum)
Mainnet Treasury Multisig 0x7b065fcb0760df0cea8cfd144e08554f3cea73d1 (Mainnet)
Mainnet Vibes Multisig (Marketing & Community expenses) 0x8ACEd4217bA809B0F7164cdbAF7c4901Bd6575Ac
Contract Address: will be provided later
SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES
Clearly outline the primary objectives of the program and the Key Performance Indicators (KPIs), execution strategy, and milestones used to measure success. This helps reviewers understand what the program aims to achieve and how progress will be assessed.
Objectives:
- Bootstrap lending side TVL on Gearbox to 30m, total protocol TVL to 35m on Arbitrum
- Establish clearly that there is demand for for credit account usage on Arbitrum by reaching consistently high utilization ratios of 60-90%
- Demonstrate the power of composable leverage by facilitating 500m of transaction volume for other protocols deployed to Arbitrum
- Integrate at least one âArbitrum alignedâ protocol that Gearbox has not integrated on mainnet
Execution Strategy: [Describe the plan for executing including token distribution method (e.g. farming, staking, bonds, referral program, etc), what you are incentivizing, resources, products, use of funds, and risk management. This includes allocations for specific pools, eligible assets, products, etc.]
400,000 ARB: On the passive lending side, the distribution will be straightforward âfarmingâ, with rewards proportional to the size and duration of deposits - based on current comparable yields on Arbitrum, the rewards would be split 62.5% to USDC and 37.5% to ETH (but Gearbox would like the maintain flexibility to adjust the rewards between the two pools based on the TVL, competitor yields, and most importantly borrow demand for each pool).
100,000 ARB: Used to incentivize margin trading, specifically on assets that live primarily or exclusively on Arbitrum, such as PENDLE, GMX, MAGIC and so forth. We will use the infrastructure that we have created for our STIMMIES trading incentives program to track usage as needed and distribute rewards every 2 weeks alongside GEAR rewards earned from STIMMIES.
150,000 ARB: Used to incentivize strategies show organic user demand, whether they are new users or existing users of Gearbox. Examples of such strategies include LSTs, LRTs, various convex/curve/aura/balancer pools, as well as âArbitrum onlyâ strategies like levered GLP, JonesDAO, etc when they get integrated (subject to oracles/audits). Distributed as straightforward farming rewards proportional to position size, using the same methodology that GEAR is currently distributed with.
What mechanisms within the incentive design will you implement to incentivize âstickinessâ whether it be users, liquidity or some other targeted metric?
As discussed in an earlier section of this grant, our view is that people will use Gearbox when there are DeFi opportunities out there that can more than justify the cost of borrow. Over the course of the life of our protocol, this has alternately been stablecoin convex pools, Lido staked ETH, and now points farming via liquid restaking tokens via Etherfi/Renzo and Ethena shards farming. If users are losing money, no amount of loyalty will prevent them from withdrawing from our (or any) protocol.
Therefore the only way long term to truly incentivize stickiness (in DeFi at least) is to continue to integrate more and more protocols such that we are always ready to provide leverage on the best, most profitable opportunities that appear in DeFi. The only limiting factor here is safety and security.
As such, our job at Gearbox is to keep building towards more composability by integrating more other protocols, as long as they can be integrated in a safe and secure way. If we manage to do this, then our users will always have access to the best opportunities available in DeFi, and will be able to lever up on these opportunities, and they will keep using Gearbox.
Specify the KPIs that will be used to measure success in achieving the grant objectives and designate a source of truth for governance to use to verify accuracy. [Please also justify why these specific KPIs will indicate that the grant has met its objective. Distribution of the grant itself should not be one of the KPIs.]
- Gearboxâs Arbitrum TVL in lending pools (30m) + total Arbitrum TVL (35m)
- Utilization Rates of 60%-90%
- Total Gearbox-originated transaction volume through other Arbitrum protocols of 500m
These should all be relatively straightforward to track. We could use Gearboxâs analytics page if that is acceptable, or alternatively we can set up a Dune dashboard.
Grant Timeline and Milestones: [Describe the timeline for the grant, including ideal milestones with respective KPIs. Include at least one milestone that shows progress en route to a final outcome. Please justify the feasibility of these milestones.]
For passive lending side TVL KPIs (this is straightforward)
- [Weeks 1-4] Hit 5m TVL on Arbitrum
- [Weeks 5-8] Hit 15m TVL on Arbitrum
- [Weeks 9-12] Hit 30m TVL on Arbitrum
For utilization ratios:
Achieve target utilization ratios on at least one of the two pools in the first 4 weeks and (more or less) maintain this throughout the period of the 12 weeks of LTIPP.
Important to note that utilization ratios are a very straightforward way to measure whether or not there is demand for leverage and in particular for either leverage farming/strategies or trading products that we provide, so this both simply and effectively measures whether or not we are achieving our goals of successfully incentivizing the leverage side the protocol.
For total transaction volume routed through other Arbitrum projects:
This kind of target can be hit all in one go when one particular strategy garners attention or becomes very profitable. As such, this goal should not be a linear one (e.g 3 weeks in â we have 125m of tx volume generated, 6 weeks in â we have 250m, etc).
Case in point - upon the integration of leveraged liquid restaking, the transaction volume that we generated for DEXs in 1 week was ~41m, whereas up to that point total v3 (since late December) volume transacted through all DEXâs via Gearbox was ~73m.
Basically, when demand for leverage strikes it happens quickly, and leads to a large amount of usage in a relatively short period of time. As such, there is no intermediate milestone here other than the goal for achieving 500m in transaction volume through any other Arbitrum deployed protocols by the end of the LTIPP period.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?
Gearbox is uniquely positioned to benefit the Arbitrum ecosystem because it acts as a magnifier for interesting projects/protocols on Arbitrum - without integrations with other protocols, Gearbox doesnât do much of anything. The whole thing only works because it leans fully on composability.
So, for example, if there is some cool new DeFi protocol that gets built on Arbitrum, a Gearbox integration would allow that protocol to magnify its usage/TVL/other metrics. When this happens, it also opens up a robust lending market that allows for strong ETH and stablecoin yields, so itâs really a win-win-win, for Gearbox, for other DeFi projects, and for Arbitrum as well.
Gearbox in fact never really âtakes awayâ from any other protocol or ecosystem, in some sense it can only be multiplicative in a good way because of the way its built.
Some stats to demonstrate this: At times through the bear market that we all suffered through, Gearbox contributed:
- 30m TVL to Lido
- 50m+ TVL to Convex
- Total tx volume through Gearbox is ~8b (6b+ that went through other protocols).
Currently Gearbox is contributing 65m+ in TVL to Liquid restaking protocols (split between Etherfi and Renzo) via the power of composable leverage.
Gearbox also contributes a substantial amount of swap volumes - in many cases, entering and exiting leveraged positions via Gearbox involves some swaps through DEXs like Uniswap, Curve or Balancer. Gearbox v3 (only live since the end of December) has generated 130m+ of swap volumes through the aforementioned DEXs.
However, thatâs just one half of the whole story - the other thing to consider is that, on top of Gearboxâs composability, itâs also modular. Itâs not just Gearbox that integrates and builds on top of other protocols - other protocols can (and have) built strategies and vaults on top of Gearbox.
Both Brahma protocol and Mellow protocol have previously built strategies on top of Gearbox
While neither of these particular products achieved PMF for these protocols, it demonstrates that there is demand for Gearboxâs composable leverage, not just from DeFi users but also as a useful money lego (remember those?) for other projects to build on top of.
In fact, other DeFi protocols have consistently shown support for Gearbox - not just by building on top of Gearbox but also by depositing assets into Gearboxâs lending pools as a show of support (and for pretty good APYs).
This part is a little bit less data driven and a little bit more starry eyed belief from an overeager DAO contributor
Itâs also worth noting that the true potential of Gearbox still lies somewhat untapped (in this authors opinion). Because of the composable nature of the Credit Account, the true power of Gearbox lies not just in the fact that you can use leverage on your favorite DeFi protocols. The unexplored aspect of Gearbox thus far is its multiplicative nature - it allows you to use leverage on your favorite DeFi protocols in any combination that you choose.
Thus far, because of the relatively small pool of integrations that weâve had (âblue chipâ stuff only), plus the high cost of gas on mainnet, this potential hasnât fully played out yet. But with the launch of v3 (thanks to some nifty innovations on the risk side and some new oracle options), we have the ability to add smaller protocols, and we have the ability to integrate things more quickly. V3 + the lower tx cost on Arbitrum mean that a whole new world of possibilities will open up in terms of whatâs possible with Credit Accounts, especially as we add more and more integrations to the Arbitrum deployment. In the long run, our goal is to turn Gearbox in the leverage layer for DeFi - meaning you can leverage anything thatâs reasonably safe and secure. Which, in a low tx cost environment, effectively means you can mix and match any strategies, assets, pools or vaults, in any combo you want, with leverage, to build exactly the position you desire. This is an extremely powerful financial tool, and we can do it all without sacrificing self custody or composability.
TLDR: Gearbox is nothing without its composability with other protocols, so it is definitionally always additive or multiplicative to the ecosystem itâs deployed in. Gearbox is also a building block that other protocols can (and have) built on top of. Thanks to the above, Gearbox also has the support and confidence of many other major DeFi protocols. All of this should help Gearbox contribute strongly to the flourishing of an already excellent Arbitrum DeFi ecosystem.
Plus, when it comes to what Gearbox might be able to do one day, you ainât seen nothing yet.
Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream?
Yes
SECTION 5: Data and Reporting
OpenBlock Labs has developed a comprehensive data and reporting checklist for tracking essential metrics across participating protocols. Teams must adhere to the specifications outlined in the provided link here: Onboarding Checklist from OBL . Along with this list, please answer the following:
Is your team prepared to comply with OBLâs data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO? Are there any special requests/considerations that should be considered?
Yes to the data requirements, no we donât need special considerations.
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard? [Please describe your strategy and capabilities for data/reporting]
We have a contributor (harsh) who spends a good chunk of their time on analytics/data, as well as a number of enthusiastic volunteers (pdotal for example) who we could offer grants/bounties to in order to fulfill these requirements if needed
Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? This report should include summaries of work completed, final cost structure, whether any funds were returned, and any lessons the grantee feels came out of this grant. Where applicable, be sure to include final estimates of acquisition costs of any users, developers, or assets onboarded to Arbitrum chains. (NOTE: No future grants from this program can be given until a closeout report is provided.)
Yes
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the programâs funding stream?
Yes
