The ‘credit card moment’ of DeFi lending comes to Web3 wallets

Gearbox Protocol, the “credit layer” for DeFi, aims to emulate the mass adoption success of credit cards by introducing wallet-native, real-world credit to the DeFi ecosystem.

The decentralized finance (DeFi) space has seen steady growth over the past few years, yet it remains a niche within the larger cryptocurrency landscape. While onchain newcomers often enter the space through gaming, non-fungible tokens (NFTs), memecoins and artificial intelligence ventures, only a few explore more advanced functionalities of DeFi, such as lending protocols.

Many of these protocols still rely on similar overcollateralized models, which may feel cumbersome to both newcomers and seasoned users. A pressing question emerges: How can DeFi recreate the success of traditional credit cards, which achieved mass adoption by delivering credit precisely where and when people needed it?

DeFi as a seamless credit layer

Gearbox Protocol positions itself as a “credit layer” for DeFi by integrating directly into Web3 wallets. It aims to bring credit functionality directly into Web3 wallets, eliminating the complexities of multiple approvals and guesswork around protocol discovery. The organization’s vision is that users, once they hold crypto assets in their wallets, should be able to borrow natively without navigating an array of separate platforms.

The platform has been operational since 2021, focusing on enabling loans with higher leverage options while also ensuring user safety through extensive audits. The protocol features isolated pools, unique interest rates per asset and a partnership with Chaos Labs to enhance security. By emphasizing credit solutions within wallets, the team seeks to drastically improve DeFi’s accessibility for newcomers and experienced onchain participants.

DeFi lending comes to wallets

Although there are tens of millions of crypto holders worldwide, only a small fraction engage with lending protocols. Many new users enter the ecosystem through entertainment-focused avenues like gaming and NFTs, rarely crossing over into more complex financial products.

Source: Gearbox Protocol

Gearbox approaches this challenge by offering wallet-native credit, introducing a familiar concept — borrowing — directly where users manage their tokens. This approach aligns with the broader “fat account” thesis: the idea that onchain users prefer an all-in-one experience where the same wallet can handle multiple services without complicated bridging processes.

Credit that aligns with real usage

Another persistent issue is the lack of “real” credit in DeFi. Most lending occurs on an overcollateralized basis, which is a far cry from traditional finance systems that allow borrowers to access substantially larger sums than their collateral.

One sixth of the world uses credit cards. Not even one 50th of onchain users use lending protocols...

But they all use wallets. DeFi grows when credit comes natively to everyone's wallets. ⚙️🧰 pic.twitter.com/bIx9MaljlO

— Gearbox ⚙️🧰 Protocol (@GearboxProtocol) January 5, 2025

Gearbox Protocol seeks to mirror this real-world model by letting users borrow anywhere between 0.01 and 15 times their deposited funds without requiring these funds to be locked away permanently. By reducing the need for over-the-top guarantees, the protocol hopes to entice more everyday users to participate in DeFi, positioning credit as a tool for practical applications rather than just speculation.

Streamlined discoverability and user experience

Beyond allowing greater borrowing power, Gearbox aims to simplify DeFi for newcomers, who often have trouble discovering the right protocols and having confidence in their legitimacy. Integrating over 30 audited DeFi protocols, Gearbox offers a curated menu that is accessible directly in compatible wallets through emerging account abstraction standards, supporting both ERC-4337 and ERC-7579.

Each transaction is checked against a user’s collateral balance in real time, ensuring that borrowing limits remain both safe and accurate. At the core of this design is Credit Account Abstraction, which serves as the protocol’s technical backbone.

New participants do not have to wade through endless documentation or perform multiple wallet approvals every time they want to explore a new platform. Instead, they can pick from a roster of thoroughly vetted projects, benefiting from a streamlined path to investment, lending and other advanced financial activities.

Looking ahead: the 2025 vision

While credit has existed for centuries, its exponential growth in the mainstream occurred once credit card companies began placing credit in everyone’s pocket. Gearbox plans to spark a similar “credit card moment” in DeFi by 2025 when borrowing natively in wallets becomes widespread. By that time, the organization believes improved credit abstractions will boost engagement, moving DeFi closer to the penetration levels seen in TradFi.

Source: Gearbox Protocol

The protocol’s success so far underscores its potential. In the past year, it reported around $2.5 billion in transactional volume, with $4 million in profits and a return on capital employed outpacing established lending protocols by several multiples. If these figures are any indication, the stage is set for an onchain credit revolution that could reshape how everyday users interact with decentralized finance.