Gearbox Is Releasing Its V3 — Here’s What’s New

Gearbox, a composable leverage protocol, has released a V3 upgrade that aims to redefine leverage and lending.

This latest upgrade will build on top of Gearbox’s V2 capabilities by bringing on new liquidity pools, tokens, and the introduction of an immutable smart contract — which is designed to enable better user experience (UX) and allow for further cross-chain deployments without increasing risk.

A composable leverage protocol, in Gearbox’s case, aims to improve capital efficiency by giving users access to leverage across various DeFi protocols.

In V2, the experience around limit orders and portfolio automation is largely restricted to centralized exchanges or layer-2 protocols, where much of the work is handled off-chain, the pseudonymous mugglesect told Blockworks.

“We will be bringing automation on-chain, where you can effectively create bots, which are scripts that would run a trading strategy without you having to custody the customer’s funds,” mugglesect said. “Effectively, operating a trustless fund on-chain becomes possible with V3.”

Liquidity pool expansion

Liquidity pool providers will have the option to remain on the existing Main Bluechip lending pool or move to a new “Alpha passive” lending pool.

Unlike traditional DeFi lending protocols — where borrowers maintain custody over borrowed funds — mugglesect said Gearbox borrowers would not have custody over the assets they borrow from liquidity providers.

“Borrowers actually never have custody over [assets], and [aren’t] allowed to swap them or put them into protocols that can be considered unsafe or illiquid,” he said.

The up-and-coming upgrade, however, is set to allow liquidity providers the option to opt into higher risk exposures and reap a higher annual percentage yield (APY) in return.

“Effectively the decision will be made by the lenders,” he said.

Potential tokenomics revenue share

The V3 upgrade is also bringing to market “Minimum Viable Tokenomics” for GEAR, the protocol’s native token.

GEAR stakers, as a result, will be able to determine where the revenue earned through the Alpha Pool should go — and how it should be distributed.

Although profit sharing for GEAR holders is not yet available, the protocol has indicated that profit sharing is possible down the line.

“What is important is that there is an extra revenue source now,” mugglesect said. “Effectively, the devs create the capability of token utility via staking while the DAO decides how they want to actually execute the value accrual.”

Code for Gearbox’s V3 upgrade is currently being audited. A launch date is likely to be finalized by the end of the second quarter.