FAQ¶

Common questions about Loophole, grouped by topic. For definitions of specific terms, see the Glossary.

General¶

How does Loophole generate yield?¶

The protocol runs perpetual NFT trading strategies that create arbitrage surfaces, driving trading volume and swap fees. Yield comes from real fee revenue, not token emissions.

How does the perpetual cycle work?¶

Each collection cycles through four phases: Fund → Buy → Sell → Split. Swap fees from ongoing trading refuel the Open Bid, and the cycle repeats without external capital.

What tokens does the protocol use?¶

Two layers. LOOP is the reserve token paired with ETH. Each NFT collection gets its own LRT (Loophole Run Token) paired with LOOP, eg $PUNKRUN, $APERUN, $PUDGYRUN

Acquiring & Selling NFTs¶

How does the protocol acquire NFTs?¶

The protocol maintains a perpetual standing bid (the Open Bid) for each supported collection, priced in LOOP. The Open Bid grows along fixed checkpoints as swap fees accumulate. See Buy.

How do I sell my NFT to the protocol?¶

Accept your collection's Open Bid. The protocol pays in $LOOP, which you can hold or convert to ETH through the LOOP↔ETH pool. See Buy for how the bid is priced.

How are acquired NFTs sold?¶

Each NFT auctions via Dutch auction, priced in the collection's LRT. The price starts at the entire circulating LRT supply and decays over one week toward a reserve floor.

What happens if an NFT doesn't sell at auction?¶

The NFT stays listed at the reserve floor price until a buyer executes. It does not re-queue or get withdrawn. The next auction starts only after the current NFT sells. See Sell.

Fees & Value Accrual¶

What fees does the protocol charge?¶

4% on all LRT↔LOOP swaps (2% Open Bid, 1% stakers, 1% creator royalties) and 2% on all LOOP↔ETH swaps (1% LOOP stakers, 1% team). See Fee Structure.

How does LOOP's floor price increase?¶

The Split phase deposits 70% of every auction's proceeds into LOOP reserves, permanently raising LOOP's BLV (Baseline Value). BLV can increase but never decrease, and every collection's sales contribute to the same reserves. See LOOP.

What makes LRTs deflationary?¶

The Afterburner receives 30% of each auction's sale proceeds and uses them to buy back and permanently burn that collection's LRT. Each cycle removes tokens from circulation. See LRTs.

How do auction proceeds get distributed?¶

Sale proceeds split two ways: 30% to the Afterburner (buyback and burn of that collection's LRT) and 70% to LOOP reserves (converted to LOOP, deposited into BLV). The ratio is configurable per collection. See Split.

Presales & Staking¶

How do I participate in a presale?¶

You deposit LOOP during a collection's presale window and receive a credit position, a Baseline primitive providing leveraged staking exposure. Your deposit funds the initial Open Bid and pool liquidity. See Presalers.

How do I earn yield as a presaler?¶

Your credit position earns a share of the 1% staker allocation from all swap fees on that collection's LRT↔LOOP trades. Yield accrues automatically and scales with trading volume.

How do I exit a credit position?¶

Credit positions can be unwound to receive the underlying tokens. Because credit positions are leveraged, exit value depends on market conditions at the time of unwinding. See Presalers.

Trading & Arbitrage¶

How do I find buy-side arbitrage opportunities?¶

The protocol bids in LOOP while other marketplaces price in ETH. When the Open Bid's effective ETH value exceeds an NFT's marketplace floor, you can buy the NFT on a marketplace and sell it to the protocol for a profit. See Buy.

How do I find sell-side arbitrage opportunities?¶

Evaluate three variables: the Dutch auction price in LRT, the LRT/LOOP exchange rate, and the NFT's ETH floor on external marketplaces. An opportunity exists when the auction price converted through LRT → LOOP → ETH falls below the external floor.

NFT Creators¶

How do NFT creators earn royalties through Loophole?¶

Creators receive 1% of all swap fees on their collection's LRT↔LOOP trades. This revenue is tied to trading volume, not individual NFT sales. See Fee Structure.

Technical¶

What is Baseline and how does Loophole use it?¶

Baseline provides the token infrastructure that powers every Loophole pair: AMM pools, BLV floor prices, credit positions, and lending. Loophole's contracts orchestrate the trading engine; Baseline's contracts handle all token-level mechanics. See Baseline Integration.