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Baseline Integration

TL;DR

Loophole is powered by Baseline. Every token pair, floor price guarantee, fee mechanism, and yield instrument in the protocol runs on Baseline: AMM pools, BLV floors, credit positions, and leveraged borrowing.

Purpose

Baseline provides the token infrastructure that Loophole's perpetual trading engine requires. Building on Baseline means $LOOP and every LRT inherit guaranteed floor prices, native leverage, programmable fee capture and more.

How It Works

Loophole is built directly on Baseline — its AMM pools, BLV floor pricing, credit positions, and leveraged borrowing. Loophole's contracts orchestrate the trading engine; Baseline's contracts handle all token-level mechanics. This section covers how each fits into the protocol. For internal mechanics, see the Baseline documentation.

AMM Pools

Every tradable pair in Loophole is a Baseline AMM ("BMM") pool:

  • LOOP↔ETH pool. The reserve-layer pool. Charges a 2% swap fee (1% LOOP stakers, 1% team).
  • LRT↔LOOP pools. One per collection. Each charges a 4% swap fee (2% Open Bid, 1% stakers, 1% creator royalties).

Fee splits are configured at the pool level through Baseline's fee distribution parameters. The protocol sets the total fee rate and allocation percentages when deploying each pool. [TBD: specific deployment function signatures and configuration parameters.]

BLV (Baseline Value)

BLV is Baseline's floor price mechanism. A token's BLV is determined by the liquidity reserves held in its pool contract. BLV can increase but never decrease.

Loophole uses BLV on two layers:

  • LOOP BLV. The Split phase deposits 70% of each auction's proceeds (converted to LOOP) into LOOP reserves. Each deposit permanently raises LOOP's floor price. Every collection's auctions feed into the same LOOP reserves, so BLV grows across the entire ecosystem.
  • LRT BLV. Each LRT inherits a floor price through its LOOP pair. As LOOP's BLV rises, the effective floor of every LRT rises with it.

BLV deposits are one-directional. Once reserves enter the pool contract, they cannot be withdrawn. This is enforced by Baseline at the contract level.

Credit Positions

When a presaler deposits LOOP during an LRT presale, they receive a credit position. Credit positions are created at pool initialization — when the LRT price equals its BLV — giving presalers leveraged entry from the floor rather than from an actively traded price.

Credit positions earn 1% of that LRT's swap fees in perpetuity and can be unwound for the underlying spot tokens at any time, subject to pool liquidity. Swap fees at the LRT layer distribute to both credit position holders and spot token stakers.

[TBD: specific function signatures for minting and fee routing.] For credit position internals, see the Baseline documentation.

Leveraged Borrowing

Leveraged borrowing uses Baseline's native lending mechanism. Token traders use it to take leveraged positions on LOOP or any LRT through the protocol's AMM pools.

When a trader uses leveraged borrowing, they interact with Baseline's lending contracts through the same pools that handle spot swaps. This generates additional swap volume and fee revenue for the protocol.

The additional volume flows through the same fee structure as spot swaps: 4% on LRT pools, 2% on the LOOP pool — making leveraged borrowing a direct contributor to Open Bid funding, staker yield, and reserve growth.

For details on leveraged borrowing mechanics, see the Baseline documentation.

Example

A new collection ($PUDGYRUN) launches on Loophole. The integration with Baseline proceeds as follows:

  1. Pool deployment. Loophole deploys a PudgyRun↔LOOP Baseline AMM pool with a 4% swap fee configured to split 2%/1%/1% across Open Bid, stakers, and creator royalties. [TBD: deployment function and parameter format.]
  2. Presale. LOOP deposits mint credit positions at pool initialization price (BLV). 10% of presale proceeds seed the pool's initial liquidity. The remainder funds the Open Bid.
  3. Trading. Spot swaps and leveraged borrowing activity on the PudgyRun↔LOOP pool generate fees. Fee distribution routes allocations to the configured recipients.
  4. Auction proceeds. When a Pudgy Penguin sells at auction, the Split converts 70% of proceeds from PudgyRun to LOOP. That LOOP deposits into the LOOP↔ETH pool's reserves via Baseline's BLV deposit mechanism, permanently raising LOOP's floor price.

Every step touches Baseline infrastructure. The protocol layer orchestrates the trading engine; the Baseline layer handles all token mechanics.

Flow

Loophole Protocol Layer          Baseline Layer
─────────────────────────         ─────────────────────────

Presale (LOOP deposits)    ──→    Credit Position (mint at BLV)
                                        │
                                        ▼
LRT Trading                ──→    AMM Pool (swap + fee split)
                                        │
Leveraged Borrowing        ──→    Lending (leverage via AMM)
                                        │
                                        ▼
Open Bid / Auction /       ──→    Fee Distribution (2%/1%/1%)
Creator Royalties
                                        │
Split (70% to reserves)    ──→    BLV Deposit (permanent floor raise)
Split (30% Afterburner)    ──→    AMM Pool (buyback via swap)