[Note - snapshot has been deleted for now, official vote will occur in ~ 1 week, see here: Discord]
Current Gearbox Pool TVL Caps and Borrow Caps are still set to the conservative pre-launch parameters. The original intent of these parameters was to test in prod with lower risk - i.e. let the protocol run fully on-chain while limiting the total and individual user and protocol losses that could occur if an exploit or loss of funds were to occur.
Gearbox has been functioning for almost 2 months without incident. The initial parameters have succeeded in limiting potential losses, but with a few costs:
- The low individual caps means strategies that are feasible with larger amounts of capital may not be feasible or worthwhile. This means the borrowing demand is artificially capped.
- Lower TVL means less revenue for the DAO
- Liquidators are minimally incentivized due to artificially capped upside (they are taking losses on small accounts while being unable to profitably liquidate on larger accounts)
The purpose of this proposal is to expand Gearbox into the next phase of Leverage 2.0. We have numerous new integrations coming (v2 enters audit at the end of February). On one hand, new integrations mean new risk, regardless of audit status. On the other hand, if we don’t take the training wheels off to some degree, the new strategies may not be feasible to use when they are launched. For this reason as well as the reasons listed above, I propose an increase in Pool Max and Max Per Borrow for all pools.
Below are the current parameters (from Pools & APY - Gearbox Protocol)
| Asset | Pool Max | Min Collateral | Max Per Borrow |
|---|---|---|---|
| WETH | 600 WETH | 0.3 WETH | 10 WETH |
| WBTC | 50 WBTC | 0.02 WBTC | 0.8 WBTC |
| USDC | 3M USDC | 1,000 USDC | 40,000 USDC |
| DAI | 3M DAI | 1,000 DAI | 40,000 DAI |
Below are the proposed parameters:
| Asset | Pool Max | Min Collateral | Max Per Borrow |
|---|---|---|---|
| WETH | 1200 WETH | 0.3 WETH | 125 WETH |
| WBTC | 100 WBTC | 0.02 WBTC | 10 WBTC |
| USDC | 6M USDC | 1,000 USDC | 500,000 USDC |
| DAI | 6M DAI | 1,000 DAI | 500,000 DAI |
The changes are as follows:
- A 2x increase pool max values. The increase is small so as not to outpace demand for borrowing too quickly (larger pools mean lower APRs for lenders, which can create a chicken and egg lending/borrowing problem)
- No change to minimum collateral values. The active contributors seem largely divided on whether the time is right to increase the minimum or not. On one hand, liquidators are losing money on small accounts. On the other hand, smaller accounts mean more data and more users can test out gearbox. See discussion from here for more info: Discord. For now, these parameters are being kept the same and can be increased in a future proposal. I would encourage more DAO members to join the discussions related to the pool minimums.
- A 12.5x increase to individual borrow limits (up to $500k). Large-capital users tend to make up a large percentage of DeFi protocol users, and the low individual caps severely limit the value proposition of gearbox for those users. These changes should keep gearbox TVL reasonably small while enabling individuals to use gearbox more effectively. Most liquidators are utilizing flash loans as well, so larger capital liquidations should remain feasible.
Voting Options:
Vote YES - Approve the updated Pool Max and Max Per Borrow parameters.
Vote NO - Do not change any parameters (or propose alternative values)
