What is Loophole¶

Introduction¶

Loophole runs perpetual onchain trading strategies for NFT collections.

Each collection gets its own "RUN" strategy token paired with a shared reserve token ($LOOP).

The protocol uses $LOOP to bid on NFTs, auctions them for RUN token, and routes the proceeds back into both tokens: burning RUN supply and growing $LOOP reserves.
Swap fees generated at every step fund the cycle and reward participants.

How It Works¶

                               ETH
                                ↕
                              $LOOP
                                │
                ┌───────────────┼───────────────┐
                ↕               ↕               ↕
              RUN₁            RUN₂            RUN₃
           ($PUNKRUN)       ($APERUN)      ($PUDGYRUN)
                │               │               │
                ▼               ▼               ▼
                ↻               ↻               ↻
                │
  ┌─────────── The $PUNKRUN Loop (↻) ────────────────────────────────┐
  │             │                                                    │
  │   Presale ($LOOP)  →  Open Bid ($LOOP)  ◄── RUN swap fees        │
  │                           │                                      │
  │                      NFT acquired                                │
  │                           │                                      │
  │                     Dutch Auction ($RUN)                         │
  │                           │                                      │
  │                         Split                                    │
  │                       ╱       ╲                                  │
  │             30% Burn RUN    70% → $LOOP reserves                 │
  │              (supply ↓)        (floor ↑)                         │
  │                                                                  │
  └──────────────────────────────────────────────────────────────────┘

$LOOP is the reserve token at the center of the system, paired with ETH.
Each supported NFT collection gets its own RUN token paired with $LOOP.

Every RUN token runs the same independent cycle: a presale bootstraps an Open Bid, which receives ongoing funding from RUN swap fees. The Open Bid acquires NFTs with $LOOP. A Dutch auction sells them for the RUN token. The proceeds split between a leveraged buy-and-burn of the RUN token and building a leveraged $LOOP position.

Both $LOOP and the RUN tokens utilize token-owned liquidity within their liquidity pools, giving each token a permanent reserve-backed price floor. Each time the RUN token is burned, these permanent and growing reserves are concentrated in a smaller number of tokens, increasing their floor price per token.

The $LOOP position each collection builds is held permanently, removing $LOOP from active circulation. That position earns ETH fees, which are swapped for $LOOP and deposited into the Open Bid, creating compounding buy pressure for $LOOP and funding the next cycle of acquisitions.

The Loop¶

The protocol runs one independent trading strategy - or "loop" - per supported NFT collection.

Every loop runs through four phases:

FUND¶

Each strategy launches with a presale that raises $LOOP deposits to bootstrap the Open Bid which funds NFT acquisitions. After launch acquisitions receive ongoing funding from RUN<>$LOOP swap fees.

BUY¶

The protocol maintains a perpetual standing bid (the Open Bid) for each collection, priced in $LOOP. External marketplaces price in ETH. The fluctuating ETH/$LOOP rate creates a currency mismatch and ongoing buy-side arbitrage opportunities.

SELL¶

Acquired NFTs queue in a vault and auction one at a time via Dutch auction, priced in the collection's RUN token. The price decays from the entire circulating RUN supply over one week toward a reserve floor. Buyers evaluate three moving variables (RUN price, RUN/$LOOP rate, ETH floor on external markets), creating a sell-side arbitrage surface.

SPLIT¶

Sale proceeds route through the Afterburner and split into two modes: 30% executes a leveraged buyback and burn of that collection's RUN token (Buy + Burn), and 70% executes a leveraged borrow of $LOOP held permanently (Buy + Bank). The growing $LOOP position generates an additional fee source in ETH, which is swapped for LOOP and deposited into the Open Bid and the cycle repeats.

Each cycle strengthens both token layers: RUN supply contracts via Buy + Burn, $LOOP reserves grow via Buy + Bank. These effects compound across collections over time.

Powered by Baseline¶

$LOOP and every RUN token runs on Baseline's Mercury AMM. Mercury utilizes a novel price curve that accounts for total circulating supply to more effectively price the token across each stage of its growth. Additionally, it utilizes token-owned liquidity to enable the tokens to own their reserves and actively deploy them in their own liquidity pool.

This unlocks numerous benefits for Loophole token holders, including guaranteed exit liquidity, a programmatically enforced minimum floor price, fairer and more lucrative fees and native staking, borrowing and leverage.

Participants¶

There are multiple ways to profit from the protocol at different levels along the risk curve.

• Presalers deposit $LOOP in collection presales and receive credit positions earning yield from swap fees.
• NFT traders capture arbitrage from the currency mismatch (buy side) and the three-variable price spread (sell side).
• Token traders trade $LOOP and RUN tokens with built-in leverage and borrowing.
• NFT creators launch your loop and earn royalties from your collection's RUN swap fees, tied to trading volume not individual sales.
• $LOOP stakers earn a share of $LOOP↔ETH swap fees and benefit from rising BLV as every collection accumulates $LOOP.