Baseline Integration¶

Purpose¶

Baseline provides the token infrastructure that Loophole's perpetual trading engine requires. Building on Baseline means $LOOP and every RUN token 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% $LOOP stakers, 1% team).
• RUN↔$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 routes 70% of each auction's proceeds to the Afterburner's Buy + Bank mode, which executes a leveraged borrow of $LOOP. The borrow activity drives $LOOP BLV growth. Every collection's Afterburner accumulates $LOOP, so BLV grows across the entire ecosystem.
• RUN BLV. Each RUN token inherits a floor price through its $LOOP pair. As $LOOP's BLV rises, the effective floor of every RUN token rises with it.

BLV can increase but never decrease. This is enforced by Baseline at the contract level.

Credit Positions¶

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

Credit positions earn 1% of that RUN token'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 RUN 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 RUN token 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 RUN 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 routes proceeds through the Afterburner: 30% executes a leveraged buyback-and-burn of $PUDGYRUN (Buy + Burn), and 70% executes a leveraged borrow of $LOOP held permanently (Buy + Bank). The borrow activity drives $LOOP BLV growth, and fees from the accumulated position flow to the Open Bid.

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)
                                        │
                                        ▼
RUN Trading                ──→    AMM Pool (swap + fee split)
                                        │
Leveraged Borrowing        ──→    Lending (leverage via AMM)
                                        │
                                        ▼
Open Bid / Auction /       ──→    Fee Distribution (2%/1%/1%)
Creator Royalties
                                        │
Split (30% Buy + Burn)     ──→    AMM Pool (leveraged buyback + burn RUN)
Split (70% Buy + Bank)     ──→    Lending (leveraged borrow + hold $LOOP)