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For NFT Traders

TL;DR

Trade with the protocol to profit off of arbitrage opportunities it creates.

What You Get

Loophole's structural design generates recurring arbitrage opportunities. On the buy-side, a currency mismatch between LOOP-denominated bids and ETH-denominated markets, plus a triangular spread across LRT, LOOP, and ETH on auction exits.

How It Works

Buy-side arbitrage

The Open Bid prices NFT acquisitions in LOOP, while external marketplaces price in ETH.

When the bid's LOOP value converts to more ETH than the NFT costs externally, you buy the NFT on the open market and sell it to the protocol, capturing the spread.

The bid grows along fixed checkpoints as swap fees accumulate and resets to a lower checkpoint after each purchase. The buy side also works as instant exit liquidity if you already hold an NFT from a supported collection: sell directly to the Open Bid without listing or negotiating, receive $LOOP immediately, and swap to ETH through the LOOP/ETH pool (2% swap fee applies) or hold for ongoing protocol exposure or stake to earn yield.

Sell-side arbitrage

NFTs leave the protocol through Dutch auctions priced in the collection's LRT (Loophole Run Token).

You evaluate a triangular spread across three rates:

  1. The auction price in LRT
  2. The LRT/LOOP exchange rate, and
  3. The NFT's ETH floor externally.

An opportunity exists when the auction price converted through LRT → LOOP → ETH falls below the external floor. The auction price decays over one week toward the reserve floor, so patience can improve entry.

Leveraged borrowing and price manipulation

As Baseline tokens, both $LOOP and LRTs have access to no-liquidation leveraged borrowing. Astute traders can use this to manipulate the token price in their favor - e.g. selling a leveraged $LOOP position to reduce the $LOOP price before selling an NFT into the protocol, capturing a larger number of $LOOP tokens.

How to Participate

Buy-side

Compare the Open Bid's LOOP amount (converted to ETH at current rates) against the collection's external floor.
Opportunities peak when the bid is near the top of its checkpoint range and the external floor is relatively low.

Sell-side

Monitor auction decay alongside the LRT/LOOP rate and external ETH floor. The vault queue creates a holding period between acquisition and auction, during which all three variables drift independently. Execute when the converted auction price sits well below the external floor, accounting for swap fees on each conversion.

Execution. [TBD — UI-specific steps for accepting Open Bids and buying from Dutch auctions]

Risks

  • External floor prices could move between your buy and sell, erasing the spread
  • Swap fees (4% on LRT↔LOOP, 2% on LOOP↔ETH) reduce margins on every conversion
  • Buy-side bid resets after each purchase; if another trader executes first, the spread disappears
  • When selling an NFT to the Open Bid, LOOP's price can move between accepting the bid and swapping to ETH, changing your effective proceeds
  • Execution speed matters; opportunities are competitive and time-sensitive