Leveraged Restaking (Borrowing)

Loopers earn actively leveraged restaking yield by performing carry trades.

Intro

Loop accepts an array of liquidity provider tokens from Pendle Liquid Restaking Strategies as collateral. Users can borrow ETH to automatically acquire additional collateral, thus establishing a Leveraged Position. Loopers are required to vigilantly monitor the loan-to-value threshold and interest rate assigned to each collateral asset to maintain the health of their position.

Boost

Loopers maintaining a dynamic Liquidity (dLP) value that exceeds 5% of their Total Position Size qualify to receive LOOP token emissions, which can offset the cost of borrowing interest. For users with multiple looped positions, it is necessary to exceed the 5% threshold across the aggregate of all positions to activate any enhancement. It is not possible to apply a boost to just one position. Further details about the Boost and the dLP mechanism are available on the dLP page.

Rewards and Fees

Yield

The Base Yield leveraged from the collateral automatically accumulates within the collateral itself, enhancing the Total Position Size and Net Position Value. A profitable carry trade is contingent upon the yield from the collateral surpassing the interest rate charged.

Boost

LOOP emissions acquired through Boosting need to mature over a 90-day vesting period. The vesting process incorporates a progressively decreasing penalty for early withdrawals, starting with a 90% reduction and diminishing to 25% over this period. This design encourages participants to commit to the full vesting duration, thereby optimizing their potential rewards.

If a user opts to Zap their maturing rewards into the dLP, they must contribute 20% in lpETH and lock it alongside their LOOP rewards for a minimum of three months. This commitment not only yields platform revenue but also secures eligibility for additional LOOP emissions from lending and borrowing activities, particularly if the 5% threshold is no longer met.

Fees

Upon the protocol’s launch, the sole fee imposed is the interest on borrowed ETH. This dynamic interest rate is derived from the utilization rate, reflecting the proportion of ETH available in the Reserve Pool. Users can track the fluctuating interest rate through the position overview, ensuring transparency and informed decision-making.

Risks

The primary risk for Loopers is the potential for liquidation, which can occur due to two main factors:

1. The underlying asset depegs and threatens the Minimum Collateral Ratio (LTV).

2. The interest charged exceeds the base yield of the collateral and the debt increases to a threshold that threatens the Minimum Collateral Ratio.

Additionally, it's important to consider the liquidity of the underlying assets involved in the strategy to minimize significant price impacts when initiating or unwinding loops.