One Pool, Many Markets

Gearbox Protocol separates the source of liquidity from the utilization of liquidity. This architecture allows a single passive liquidity source to fund diverse, isolated lending strategies simultaneously.

The Wholesale Bank Model

To understand the flow of capital, view the architecture through the analogy of a banking system:

1. The Pool (The Wholesale Bank)

The Liquidity Pool acts as a Wholesale Bank. It is a massive, passive reservoir of capital (e.g., USDC, WETH, or DAI).

• Role: It accepts deposits from lenders and holds the funds securely.

• Mandate: It does not lend directly to end-users. Instead, it lends capital to "Retail Branches" (Credit Suites) based on strict credit limits.

2. Credit Suites (The Retail Branches)

Credit Suites (technically "Credit Managers") act as Retail Branches. Each branch is a specialized lending product with a specific mandate.

• Role: They borrow liquidity from the Wholesale Bank (Pool) to fund Credit Accounts for users.

• Mandate: Each suite defines a specific strategy, such as "Low-Risk Stablecoin Farming" or "High-Leverage ETH Staking."

This separation allows the protocol to offer low-risk and high-risk products side-by-side without fragmenting liquidity.

Risk Isolation (Debt Ceilings)

In a monolithic lending protocol, bad debt in one asset can drain the entire pool. Gearbox prevents this via Risk Isolation.

The Pool assigns a Debt Ceiling to each Credit Suite. This is the maximum amount of capital that specific branch can borrow from the bank.

• Scenario: A Pool holds $100M USDC.

• Allocation:

  • $80M is allocated to a "Blue Chip Strategy" (Low Risk).

  • $10M is allocated to an "Emerging Asset Strategy" (High Risk).

• Isolation: If the "Emerging Asset Strategy" suffers a catastrophic failure, the maximum loss to the Pool is capped at $10M. The remaining $90M is mathematically isolated from that specific risk vector.

This ensures that lenders are protected from the tail risks of specific aggressive strategies, while still benefiting from the higher utilization they generate.

The Diesel Token (Unified Yield)

Lenders interact only with the Pool. When they deposit assets, they receive Diesel Tokens (e.g., dUSDC, dWETH).

• Unified Exposure: The Diesel Token represents a pro-rata share of the entire Wholesale Bank's assets.

• Aggregated Yield: The yield is generated by the interest paid by all connected Credit Suites. Whether the capital is used for staking, farming, or trading, the interest flows back to the Pool and appreciates the value of the Diesel Token.

This abstracts the complexity of multiple markets away from the lender. The lender provides liquidity once and earns a blended yield from a diversified basket of on-chain credit strategies.

Learn More

• Technical Implementation: How the passive vault handles deposits and withdrawals.

  • Pool (The Liquidity Vault)

• Market Configuration: How specific rules and strategies are defined for each branch.

  • Credit Suite (The Strategy Module)