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 RUN token (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 RUN token. The price starts at the entire circulating RUN 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 It does not re-queue or get withdrawn.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 RUN↔$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 routes 70% of every auction's proceeds to the Afterburner's Buy + Bank mode, which executes a leveraged borrow of $LOOP held permanently. The borrow activity drives $LOOP's BLV (Baseline Value) growth. BLV can increase but never decrease, and every collection's Afterburner contributes to the same growth. See $LOOP.

What makes RUN tokens deflationary?¶

The Afterburner's Buy + Burn mode receives 30% of each auction's sale proceeds and uses them to execute a leveraged buyback-and-burn of that collection's RUN token. Each cycle removes tokens from circulation. See RUN tokens.

How do auction proceeds get distributed?¶

Sale proceeds route through the Afterburner in two modes: 30% to Buy + Burn (leveraged buyback and burn of that collection's RUN token) and 70% to Buy + Bank (leveraged borrow of $LOOP, held permanently). 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 RUN↔$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 RUN, the RUN/$LOOP exchange rate, and the NFT's ETH floor on external marketplaces. An opportunity exists when the auction price converted through RUN → $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 RUN↔$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.