Gyroscope Protocol

Gyroscope is an all-weather stablecoin designed to be decentralized, scalable, and highly liquid.

System Overview

Gyroscope is an all-weather stablecoin. It's backed by a reserve portfolio that diversifies all DeFi risks - such as regulatory and governance risks - not just price risk. A Gyro Dollar can be minted for a price near $1 and can be redeemed for an amount near $1 in reserve assets, as determined through a new Automated Market Maker (AMM) design that balances risk in the system and concentrates liquidity around the $1 peg.

First line of defense: the all-weather reserve

The Gyroscope mechanism aims by default to being 100% reserved. The first line of defense is the all-weather reserve composition, which diversifies all risks in DeFi to the extent possible, considering more than just price risk but also censorship, regulatory, counterparty, oracle, governance risks etc. In early stages, the reserve will be mostly composed of other stablecoins, deployed in various fashions, but may vary long-term. A large shock to the reserve would only occur if there are even larger problems in other DeFi systems and Gyroscope aims to provide the least worst outcome.

The Gyroscope reserve is designed to segregate different risks into different vaults (triangles).

Second line of defense: Gyroscope AMMs

Gyroscope involves new AMMs for a primary market (PAMM), through which Gyro Dollars are minted and redeemed, and secondary markets (SAMMs), which are designed to concentrate liquidity around the peg between mint and redemption quotes from the PAMM. Should the reserve experience a large shock (the first line of defense is breached), then the PAMM adapts to maintain liquidity around the peg to a safe extent and otherwise protects the reserve from being depleted through a circuit breaker that reverts liquidity to sustainable price levels.

These PAMM dynamics are designed to foster coordination in a game. The intuition behind this game draws on two sources of value: the value of the reserve as well as the intangible value from economic usage of the system. If there is enough of the latter source of value, which may be the case mid-to-long-term), then users will tend to coordinate to maintain the peg even if there are shocks to the reserve value. The PAMM design provides the opportunity for users to coordinate to maintain the peg, but with a circuit breaker in the PAMM shape in case they don't. The circuit breaker ensures that the reserve cannot be depleted and guarantees that the system has the chance to recover through yield and as the underlying space recovers.

Tertiary lines of defense

Gyroscope also includes further lines of defense. The reserve can be recapitalized through auctioning governance tokens. In fact, Gyroscope governance is incentivized to do this at opportune times to build asset buffers against shocks as opposed to solely as a last resort backstop during a crisis. The Gyroscope mechanism can also work side-by-side with a leveraged loans mechanism (like Maker) to strengthen stability.

In the background: a new robust and highly liquid DEX

Gyroscope involves multiple SAMMs, which each concentrate liquidity within the PAMM band between Gyro Dollars and another paired asset. These provide guarantees on highly liquid paths in and out of Gyro Dollars. The SAMMs are also independent from each other: if the paired asset in a SAMM fails, then the remaining SAMM pools can still function, unlike one common AMM pool today. The SAMMs will form the center of a network of connecting pools that will allow efficient trades. Some Gyroscope reserve vaults will deploy assets into pools that augment this network, and other existing AMM pools will connect with paired assets in the SAMMs.

Gyroscope SAMM and reserve pools form a DEX network, in which liquidity is robust to pool failures.

Continue on to learn more about how the Gyroscope mechanisms work.

Gamified Testnet

The Gyroscope gamified testnet is out. Follow our walk-through here to play the game and join the community.

These docs are under heavy development.