Looping

Looping is a leveraged borrow strategy that allows users to farm yield of an yield-bearing asset at a leverage in a high LTV lend-borrow use case.

On TownSquare, Efficiency Loans are optimized for looping yield as the LTV gets up to 95% in Efficiency mode for correlated assets.

You can conduct looping with your MON Efficiency Loans or your Stable Efficiency Loans, both of which are recommended compared to do looping via General Loans.

In the case of looping an LST as an example, you can

• Collateralize & borrow: create a MON Efficiency Loan and collateralize shMON LST to borrow MON

• Get more collateral asset: stake MON into more shMON (external to TownSquare)

• Collateralize again (loop) to borrow more: collateralize the newly staked shMON into the same loan to borrow more MON

• Repeat the loop until the LTV is maxed out.

The benefit of looping allows you to earn the shMON staking yield multiple times with limited liquidation risks with correlated assets.

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Automated loop vaults will be an available feature on TownSquare, allowing users to deposit and choose a leverage to loop without having to repeat the steps themselves.

More on this can be found at the Automate Loop Vaults (coming soon) page.