What are use cases of Gyroscope?
Exemplary use cases of Gyroscope infrastructure
The concentrated liquidity in the GYD Trading Pools, made possible by Gyroscope's Dynamic Stability Mechanism (DSM) design, makes Gyro stablecoin liquidity exceptional in the stablecoin space.
For this reason, a natural use case of Gyroscope is as a trading hub asset. Like USDT predominantly today, many low slippage trades can be made possible by connecting through GYD Trading Pools within the Balancer v2 trading ecosystem, where the first GYD Trading Pools will be deployed. Early liquidity provision on the GYD Trading Pools at launch can be bootstrapped using liquidity mining.
Stylized visualization of the Gyroscope stablecoin trading network
The exceptional Gyro stablecoin liquidity and stability also makes Gyro stablecoins an ideal collateral for use in other DeFi protocols. For instance, protocols with liquidations can incorporate the observable DSM redemption price as a floor on the liquidation value when adapting risk parameters. Further, the boosted GYD trading pool liquidity means that liquidations are likely to be settled at much better rates. Altogether, this means that collateral can be used more efficiently.
While the system is healthy and the reserve is generating good yield, parts of that yield may be passed on to Gyro stablecoin holders in the form of an interest rate (like Dai's DSR).
While speculative usage of stablecoins is the predominant use case today, the long-term future of a successful stablecoin is in real economic usage (e.g., as a currency). The following examples provide theoretical use cases:
- Firstly, crypto-native businesses will be able to use Gyroscope for treasury management, without needing to rely entirely on banking infrastructure of other stablecoins with centralization risks.
- Secondly, a non-custodial, censorship resistant stablecoin will be useful for households in unstable markets and geographic regions. It provides a means for value to be stored, offering a savings alternative with a reduced prospect of sharp devaluations, and without restrictions on the movement of capital or confiscation of funds.
- Lastly, one mechanism in the DAO toolkit is a universal basic income (UBI) scheme, which can help to bootstrap early economic usage. The idea is that, through such a program, if you can prove that you're a unique person, you would be able to earn a regular allotment of Gyro stablecoins delivered on a Layer-2 (no high transaction fees!) that can be used in various ways. This serves to get first adopters using Gyroscope, regardless of whether they are able to provide capital of the size needed for liquidity farming. This could be supported by an early bootstrapping of the protocol reserve.
Separate from Gyro stablecoins, investors can also choose to provide liquidity directly to the vaults built for the Gyroscope reserve. These vaults will automate various yield strategies in robust and secure ways. For instance, long-term vault strategies will be non-upgradeable within a given vault. And other vault strategies will be secured from governance risks using the Gyroscope governance mechanisms. Both serve to make governance attacks impossible or unprofitable.