[GIP-81] Gearbox V3 Launch Parameters

Summary

As discussed earlier (see Wen V3… deployment and V3 Gov & Tokenomics discussions on Discord ), it is proposed to launch Gearbox V3 with focus on the Margin Trading use case at first. This does not mean at all that the protocol itself will be focused on this use case only. Quite the contrary, the modular architecture of v3 solves risk management issues and makes the passive lender model more fair in terms of risk/rewards. However, launching a new protocol is always quite a complex task, so we want to reduce this complexity at the time of launch. Shortly after (within a month or two after the launch), leverage farming will also be moved from v2 to v3. Which farms and with what parameters exactly, should be decided and confirmed by the DAO later in December / January. Today, we discuss the setup and parameters for margin trading specifically, and Credit Managers related to it.

Specification

AllowedList: Tokens & Protocols

Gearbox Protocol has two key policies: the Allowed Contracts List and the Allowed Tokens List. These policies restrict users from interaction with malicious contracts and specify what assets can be considered as collateral inside a Credit Account. You can read more about policies here.

It is proposed to divide allowed tokens into three groups depending on volatility and on-chain liquidity: Tier-1, Tier-2, and Tier-3. Not based on a project quality, but based on the liquidity available for these avenues in the avenues (specific DEXes) which Gearbox can interact with.

This separation will allow us to implement separate limits for Credit Accounts depending on Assets-tier. These limits are important when liquidating accounts: a one-time liquidation of a big position of low-liquidity asset can lead to high price impact and bad debt (a canonical example of such a case here is the recent CRV case on Aave, fortunately ended well). Separate limits for individual position sizes becomes possible by implementing a separate Credit Manager for each Assets-tier (read more architecture explanations here).

Safety: the above proposal + collateral limits, truly limit the exposure of the protocol to assets. So let’s design the launch in the most safe way possible! It can all be adjusted later.

Limits

Tier	Min borrow amount	Max borrow amount
Tier 1	20k$	1M$
Tier 2	20k$	500k$
Tier 3	20k$	200k$

The minimum position size comes from the need to reward the liquidators and depends on the liquidation premium sizes. As liquidation of simple ERC-20 tokens is less gas-expensive (600-700k gas), 20k$ limits should be a fair limit for 4% liquidation premium and 1.5% liquidation fee.

Tier 1 assets: WBTC, WETH, stETH, USDC, DAI

Tier 2 assets: MKR, UNI, LINK, LDO

Tier 3 assets: CRV, CVX, FXS, APE

It is also proposed to add several farming options so that users can utilize composable leverage advantages - when they can Short or Long and farm at the same time. With this purpose we consider Yearn USDC, WETH and WBTC vaults as well as sDAI. In this specific Credit Managers, farming won’t be the main use case. So in order to limit risks, to enable access without Ninja SBT, and to separate use cases - there is no requirement to have all farms here.

Open Access - No Ninja SBT

Speaking of which, trading-related Credit Managers, if approved, will have no Ninja SBT list. A fully open access without the mumbo jumbo. As for farming Credit Managers a few weeks after launch, it is advised to keep the Ninja SBT model due to the higher safety requirements with farming and large borrow limits. But that will be discussed in a separate proposal later.

Protocol Fees

APY spread: 25

The protocol takes a spread fee between the APY which lenders receive and the fee & farmers pay for borrowing their assets. Read more. 25 spread value means that 80% of interest paid by borrowers goes to the pool, while 20% to DAO Treasury.

Liquidation fee & Premium

Liquidation fee & premium are fees applied to liquidated Credit Accounts (fee part goes to Treasury, premium - to liquidator). These parameters stay the same as in v2 - see details in GIP-20. Current values are 4% and 1.5%.

In addition to these parameters, it is proposed to add Quota Fees depending on the type of Credit Manager:

• 0.01% for Tier-1 assets
• 0.02% for Tier-2 assets
• 0.05% for Tier-3 assets

During the first 3 months, we suggest setting flat 0.01% fees for all assets, and turning on full-fees structure 3 months after v3 launch.

Pools and Parameters

This section discusses the options for each of the pools. In total it is proposed to create 3 pools: USDC, WBTC, WETH pool. For each pool, below is a list of parameters for each allowed token:

• LT - liquidation threshold represents LTV for this token considered as collateral (read more)
• Quota Limit is total amount of this tokens that can be used as collateral
• Min/Max quota rates*: for using of risky assets as a collateral in Credit Account, user pays an additional fee - Quota Fee. The exact value Quota Fees are defined by Gauges depending on weekly votes of GEAR-stakers, while DAO sets min and max threshold for it.

* It should be noted that the final rate that users will pay is (organicBorrowApy + currentQuotaApy)*(1+APYspread).

Also at the launch of v3 it is proposed to set limits on the size of the Credit Managers for security purposes: 3M$ limit for each Credit Manager. The pool’s limit is proposed to be 100M$.

WBTC pool

Token	Quota Limit, M$	LT	Min quota rate, %	Max quota rate, %
WBTC	-	-	-	-
WETH	30	90	0.04%	12%
stETH	30	90	0.04%	12%
USDC	30	90	0.04%	12%
DAI	30	90	0.04%	12%
FRAX	30	90	0.04%	12%
USDT	30	90	0.04%	12%
MKR	5	82.5	0.8%	24%
UNI	5	82.5	0.8%	24%
LINK	5	82.5	0.8%	24%
LDO	5	82.5	0.8%	24%
CRV	2.5	72.5	2.4%	40%
CVX	2.5	72.5	2.4%	40%
FXS	2.5	72.5	2.4%	40%
APE	2.5	72.5	2.4%	40%
yvWETH	30	87	0.01%	15%
yvWBTC	30	87	0.01%	15%

Pool limits later will be increased, while current tokens limits are security related.

* Here all the prices denominated in $, while in contracts they should be done in underlying WBTC, so divider 35000 is applied for each $-valued number.

WETH pool

Token	Limit, M$	LT	Min quota rate, %	Max quota rate, %
WBTC	30	90	0.04%	12%
WETH	-	-	-	-
stETH	30	90	0.04%	12%
USDC	30	90	0.04%	12%
DAI	30	90	0.04%	12%
FRAX	30	90	0.04%	12%
USDT	30	90	0.04%	12%
MKR	5	82.5	0.8%	24%
UNI	5	82.5	0.8%	24%
LINK	5	82.5	0.8%	24%
LDO	5	82.5	0.8%	24%
CRV	2.5	72.5	2.4%	40%
CVX	2.5	72.5	2.4%	40%
FXS	2.5	72.5	2.4%	40%
APE	2.5	72.5	2.4%	40%
yvUSDC	30	87	0.01%	15%
yvWBTC	30	87	0.01%	15%
sDAI	30	87	0.01%	15%

* Here all prices denominated in $, while in contracts they should be done in underlying WETH, so divider 2000 is applied for each $-valued number.

USDC pool

Token	Limit, M$	LT	Min quota rate, %	Max quota rate, %
WBTC	30	90	0.04%	12%
WETH	30	90	0.04%	12%
stETH	30	90	0.04%	12%
USDC	-	-	-	-
DAI	30	90	0.04%	12%
FRAX	30	90	0.04%	12%
USDT	30	90	0.04%	12%
MKR	5	82.5	0.8%	24%
UNI	5	82.5	0.8%	24%
LINK	5	82.5	0.8%	24%
LDO	5	82.5	0.8%	24%
CRV	2.5	72.5	2.4%	40%
CVX	2.5	72.5	2.4%	40%
FXS	2.5	72.5	2.4%	40%
APE	2.5	72.5	2.4%	40%
yvWETH	30	87	0.01%	15%
yvWBTC	30	87	0.01%	15%
sDAI	30	87	0.01%	15%

* Here all prices denominated in $, while divided 1 (meaning 1USDC=1$) is applied for each $-valued number.

Swaps Routing

List of pools allowed for swaps bo Smart Router specified here. These settings determine which pools are used to find the path for swaps. Here it is suggested to add largest by liquidity pools for tokens from Allowed List.

Voting

Simple Approve/Reject voting for parameters set