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Tokenomics

TL;DR

Loophole uses two token layers: $LOOP, a shared reserve token that captures value from every collection, and LRTs, collection-specific strategy tokens. The design generates trading activity at both layers, capturing swap fees that fund acquisitions, reward participants, and compound the value of both tokens.

Design Principles

Volume-Driven Arbitrage

The protocol is designed around trading velocity. The currency mismatch on both the buy side and sell side create conditions where arbitrageurs profit from exploiting mispricings. Each arbitrage trade generates swap fees. The protocol captures those fees whether prices rise or fall: it profits from volatility, not direction.

Cross-Collection Value Capture

Every collection's auction proceeds permanently raise $LOOP's BLV (floor price). Because every LRT pairs with $LOOP, a rising $LOOP floor lifts every LRT's floor simultaneously. Adding a new collection and LRT doesn't just benefit that collection's holders: it strengthens the floor price of every other collection in the ecosystem. The protocol compounds in value as it scales.

Independent Strategies

With each LRT operating independently, weak volume on one LRT does not drag the others down. Each collection stands on its own fee generation: poor performance in one does not dilute the Open Bid, vault queue, or Afterburner of another.

Token Architecture

$LOOP is the reserve token, paired with ETH. LRTs are strategy tokens, one per supported collection, each paired with LOOP, powering an independent trading strategy.

Two-Sided Value Accrual

Value accrues to both token layers through separate mechanisms:

  1. LOOP's BLV (floor price) grows as it captures fees from trading volume and a portion of NFT sale proceeds.
  2. LRTs are deflationary. Dutch auction completions trigger the Afterburner, a leveraged buyback-and-burn mechanism. Every burn permanently reduces supply, concentrating reserves across fewer tokens and raising the per-token floor of the specific LRT.

Powered by Baseline

Loophole's tokens are powered by Baseline, which enables token-owned liquidity reserves, an enforced price floor, guaranteed exit liquidity, autonomous LPing and more. Learn how the Baseline integration works or read the Baseline docs.