Glossary¶
Afterburner¶
The leveraged buyback and burn mechanism. Receives a portion of Dutch auction sale proceeds (default 30%), uses them to execute a leveraged buy of LRT from the market, then permanently burns the purchased tokens. The leveraged buy amplifies price impact beyond what the proceeds alone would achieve. The burn concentrates the same reserves across fewer tokens, raising each remaining token's per-token floor (BLV).
Arbitrage surface¶
A set of price relationships that create opportunities for profitable trades. Loophole creates two: the buy-side currency mismatch (ETH vs LOOP) and the sell-side arbitrage across ETH floor, LOOP, and LRT.
Baseline¶
The token infrastructure layer Loophole is built on. Provides AMM pools, BLV floor prices, credit positions, and leveraged borrows. https://www.baseline.markets.
BLV (Baseline Value)¶
The programmatically enforced floor price of a token, i.e. the minimum price it can trade at. Determined by the protocol reserves held in its contract. BLV can increase but never decrease. The BLV rises incrementally from fees generated through trading volume. Learn more.
Checkpoint¶
A reference point in the Open Bid's pricing curve. The bid grows along a fixed series of checkpoints that enforce linear increases. After each NFT acquisition, the bid resets to a previous checkpoint. Prevents sudden bid spikes from fee volume surges.
Credit position¶
The instrument received by presalers. A Baseline primitive that represents tokens deposited into the protocol, providing leveraged staking exposure and earning yield from the 1% staker allocation of LRT swap fees. Can be unwound to receive underlying tokens.
Creator royalties¶
The 1% allocation of LRT swap fees directed to the original creators of the NFT collection associated with that LRT. Funded by trading volume, not individual NFT sales.
Currency mismatch¶
The foundational arbitrage mechanic created by the protocol bidding for NFTs in LOOP while all other marketplaces price in ETH. The fluctuating ETH/LOOP exchange rate creates ongoing arbitrage opportunities.
Dutch auction¶
A descending-price auction format. In Loophole, each NFT auctions starting at a price equal to the entire circulating supply of the collection's LRT, decreasing over one week toward the reserve floor. One auction runs at a time per collection.
Holding period¶
The time gap between NFT acquisition and sale, created by the vault queue. During this period, the three price variables (ETH floor, LOOP, LRT) drift independently, manufacturing arbitrage opportunities that didn't exist at acquisition time.
LOOP¶
The reserve token at the center of the Loophole ecosystem. Paired with ETH. All LRTs are paired with LOOP. Captures ecosystem-wide value through reserve deposits from every collection's NFT sales.
Leveraged Borrows¶
A Baseline mechanic where traders take leveraged positions through the protocol's native lending capabilities. Leveraged borrows are counted as staking by the protocol, and earn (leveraged) staking fees. Generates trading volume and swap fees.
LRT (Loophole Run Token)¶
A collection-specific token representing a perpetual trading strategy tied to a particular NFT collection. Examples: $PUDGYRUN, $APERUN. Each LRT is paired with $LOOP for trading and runs its own "loop" - the four-phase trading engine.
Open Bid¶
The perpetual standing offer maintained by the protocol to acquire NFTs from each supported collection. Bootstrapped with liquidity from an LRT's credit presale. Funded ongoing by the 2% acquisition allocation of LRT swap fees. Priced in $LOOP. Grows along fixed checkpoints and resets to a previous checkpoint after each acquisition.
The Loop¶
The core market making mechanism that operates a perpetual cycle of NFT acquisition and auction. Each collection runs its own independent instance.
Presalers¶
Participants in an LRT's initial presale. They deposit $LOOP and receive credit positions which earn them yield through a 1% swap fee. Distinct from LRT holders who acquire tokens on the open market.
Queue¶
The sequential ordering of NFTs in the vault waiting for Dutch auction. One NFT auctions at a time per collection. Queue depth determines how long each NFT is held before reaching auction.
Reserve floor¶
The minimum price in a Dutch auction, set as an artificial floor in LRT to prevent selling NFTs at a loss. If an NFT's auction price decays to the reserve floor without selling, the NFT remains listed at that price until a buyer executes.
Swap fees¶
Fees charged on token trades in the protocol's AMM pools. LRT pools charge 4% (split 2% Open Bid, 1% stakers, 1% creator royalties). LOOP pool charges 2% (split 1% LOOP stakers, 1% team).
Sell side arbitrage¶
The sell-side arbitrage condition created by three simultaneously moving price variables: the NFT's ETH floor price on external marketplaces, the active $LOOP price, and the active LRT price. Auction buyers must evaluate all three to determine if an arbitrage opportunity exists.
Vault¶
The contract that holds NFTs between acquisition and Dutch auction. NFTs enter the vault when sellers accept the Open Bid and wait in the queue until their auction is triggered. Not a treasury: the vault is a holding mechanism, not a reserve.