Earning (Passive Agressive)
Within Loop ecosystem, lenders, or creditors, play a crucial role by providing ETH for others to leverage, receiving lpETH as a receipt token.
Last updated
Within Loop ecosystem, lenders, or creditors, play a crucial role by providing ETH for others to leverage, receiving lpETH as a receipt token.
Last updated
For the Lenders, we are providing three unique strategies for you to earn on Loop: Staking, Locking and LPing.
So what are those strategies about? And what's the difference between them? And how to earn on Loop exactly? We will explain with the example of ETH Lenders.
No matter which strategies you are going to apply to earn on Loop, you will need to obtain lpETH first.
lpETH is essentially a receipt token. When you lend out 1 ETH, you receive 1 lpETH in return. Those who hold lpETH are our valued Lenders.
Easy! You can head to https://app.loopfi.xyz/ and buy lpETH with ETH or WETH at a 1:1 ratio.
Or, if you previously participated in Epoch 1, AKA the Pool Points Party and deposited your LRT assets into the Loop protocol, you can simply Convert your LRTs, such as eETH, ezETH, rswETH, etc., into WETH, and mint lpETH with the WETH at a 1:1 ratio here at https://poolparty.loopfi.xyz/epoch2-eth
Since we've got the lpETH already, head to https://app.loopfi.xyz/#/earn/stake and here you could see there are three unique strategies for you to earn with your lpETH: Stake, Lock and Balancer liquidity Lock.
First thing first, staking lpETH will earn you yield with a high APR and Quaaloops at a 1x boost.
Lenders can engage in a passive earning strategy by staking lpETH, which collects yields from different leveraged restaking strategies employed by active participants known as Loopers. Loopers utilize the ETH provided by lenders to multiply their exposure to Loop Restaking Tokens (LRT) and pay interest. This interest is accumulated in a pool and continually distributed to both dLP lockers and lpETH stakers, thus rewarding lenders with a share of the protocol revenue.
When staking lpETH users receive slpETH.
Users do NOT need to do anything but hold slpETH to receive yield.
Yield is not paid directly to slpETH holders; rather, it accumulates within the staking contract, which results in the "value" of slpETH rising over time. Users are able to unstake their slpETH at any time, at which point they receive an amount lpETH reflecting the staked amount plus any increase in value of slpETH from the time the user staked until unstaking.
The amount of slpETH a user will receive when staking lpETH will depend on the current value of slpETH. At launch the value will be 1 slpETH = 1 lpETH, but slpETH is expected to slowly increase in value as protocol yield is transferred into the Staking smart contract.
Lenders can also choose to lock their lpETH on Loop. For that, instead of receiving yield based on a high APR, lenders will receive a 5x boost for the points, AKA, the Quaaloops, and which will guarantee them a higher $LOOP airdrop.
This strategy is more for pure LOOP airdrop farming.
The third strategy for lenders to earn is to provide liquidity to the pool of lpETH-WETH on Balancer and lock the LP on Loop. By doing that, lenders can earn 10x boost for Quaaloops and along with the yields from the Balancer pool. Here, you get the combo of points and yields.
lpETH can be bought with ETH
lpETH can be traded on DEXes
lpETH can be staked (for slpETH) to receive borrowing interest
lpETH can be locked in the dLP to unlock the Boost or receive borrowing interest
lpETH can be provided as liquidity on various DEXes
lpETH can be locked
lpETH can be redeemed for ETH
An inherent risk within the Loop ecosystem arises when an looped collateral experiences rapid depegging. If the value of an underlying collateral depegs more swiftly than liquidation mechanisms are triggered, this can lead to scenarios where lpETH becomes undercollateralized. In such cases, the protocol could accumulate bad debt, jeopardizing the stability and security of the pooled assets. This risk underscores the importance of vigilant monitoring and responsive adjustment of liquidation thresholds to maintain the integrity and safety of the lending system.
An additional risk involves the potential depegging of lpETH. Should the concentrated liquidity for lpETH prove insufficient, selling pressure could affect the lpETH to ETH exchange rate. While this scenario would not directly trigger liquidation events on the Loop platform, it could cause such events on other protocols where lpETH is accepted as collateral. Additionally, a depeg could impact the realization of rewards from staking lpETH.
