In the world of DeFi, various protocols offer different methods for users to generate leverage. 

In this article, we compare Raft's one-step leverage mechanism with that of Gearbox, one of the most established protocols for composable leveraged strategies in the space. 

Our goal is to positively highlight the differences between the two while casting light on their unique features.

Gearbox Overview

Gearbox is a well-known composable leverage protocol with two sides: passive liquidity providers who earn low-risk APY by providing single-asset liquidity, and active borrowers who borrow those assets to trade or farm with up to 10x leverage in a single click. 

Key aspects enabling leverage in Gearbox include Credit Accounts, which "bind" together lenders and borrowers in this equation.

Raft vs Gearbox: Comparing stETH Leveraging Approaches

Barriers to Entry

Gearbox requires users to satisfy certain conditions, such as a minimum $100k borrow and address approval on their governance forum. 

In contrast, Raft only requires a minimum position size of 3,000 borrowed R, making leverage with R permissionless and open to everyone.

Borrow Rate

Gearbox users pay borrowing fees, which are subject to fluctuations in borrowing rates. 

Raft users, however, do not have to pay any borrowing fees, allowing them to maximize their leverage strategy profitability.

Collateral Choice

While Gearbox allows users to deposit various collateral tokens, Raft only accepts ETH, stETH, or wstETH as collateral. 

Raft's design choice focuses on stETH as the most efficient and censorship-resistant collateral available in DeFi.

Liquidation

Raft's liquidation system is more favorable for borrowers and liquidators compared to Gearbox. 

Borrowers lose less of their collateral in Raft, while liquidators earn more for performing liquidations.

Slippage

Raft allows users to choose their slippage tolerance level and know exactly under which conditions the swap is reverted due to market conditions, unlike Gearbox.

Wrap Up

Raft democratizes the leverage process for a wide user base without imposing limitations on borrowed amounts or requiring approval from governance members. 

As the primary "lender", Raft eliminates concerns about liquidity availability and fluctuations in borrowing costs, ensuring a smooth borrowing experience. 

Moreover, Raft implements a robust liquidation system that effectively mitigates the risk of contagion effects and maintains the overall stability of the platform without intervention from protocol governance.

Find here more info about One-Step Leverage.

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Useful Links

• Website: https://www.raft.fi/

• Twitter: https://twitter.com/raft_fi

• Telegram Channel: https://t.me/raft_fi

• Telegram Group: https://t.me/raft