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Tokenomics

TL;DR

Loophole uses two token layers: $LOOP, the reserve token and collection-specific strategy tokens (aka RUN tokens)
The design generates trading activity at both layers, and ensures $LOOP captures and socializes value from the combined activity of all RUN 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 Afterburner accumulates $LOOP through leveraged borrows (Buy + Bank), driving $LOOP's BLV (floor price) growth. Because every RUN token pairs with $LOOP, a rising $LOOP floor lifts every RUN token's floor simultaneously. Adding a new collection and RUN token 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 RUN token operating independently, weak volume on one RUN token 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. RUN tokens 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 each collection's Afterburner accumulates $LOOP through leveraged borrows (Buy + Bank), combined with fees from trading volume.
  2. RUN tokens are deflationary. Dutch auction completions trigger the Afterburner's Buy + Burn mode, 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 RUN token.

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.