Loop Stake (Leverage Staking)
Loop Stake main characteristics
Main parameters are detailed here where you can find the Rate Curve of lending Markets.
vTokens: vDOT & vKSM
Max Borrow APY: 50%
Borrow APY - Jump rate: 90%
Leverage staking risk warning Please note that using leveraged staking may have the following potential risks:
Manual redemption may require a long waiting cycle: depending on your current leverage position, when manually deleveraging by using “Redeem Mode”, the redemption of vToken may require waiting for several months.
High borrowing rates may lead to sustained losses: when the liquidity of the Token lending market is insufficient, the increase in borrowing rates may exceed the staking returns of your principal. In this case, your leveraged position will continue to generate losses.
Potential slippage loss when using “Swap Mode” for deleveraging: when you use “Swap Mode” to lower leverage, the system will automatically complete the exchange in the Bifrost Stable Pool. Therefore, depending on the current liquidity situation, Swap may cause unpredictable slippage losses.
Please note, by using this function, you are acknowledging and accepting the aforementioned risks.
Youtube tutorial:
Loop Stake can be accessed through the main DOT vStaking & KSM vStaking pages. Click on the "Loop Stake" tab.
The screen can be divided in 4 main parts:
The lending market: showing the total supply of DOT in the lending market versus the total borrow supply.
The collateral position: the collateralized position is the position which you are allowed to borrow against.
The Loop Stake leveraging feature: you can leverage/deleverage your position from here
Your position summary: showing your LTV ratio, your collateral & debt amounts, and your Net value (the difference between your collateral value and your debt)
Leveraging & Deleveraging
Leveraging your vDOT position
1. Deposit your vDOT collateral. Click on "Deposit" and enter the vDOT amount you want to borrow against. If you have not borrowed any DOT yet: leverage will be 1x.
If you already have a leveraged position: depositing more collateral will decrease your leverage (so as your LTV), reducing the risk.
Click on "Deposit", and sign the transaction in your wallet.
Your first vDOT collateral position is set:
Leveraging. Set the level of Boost you want to achieve from 1x to 4x. More Boost = more risk (you can earn more but if the borrow APY becomes higher you can also lose more). Once carefully chosen, click on "Boost"
Review the impact of your Boost choice on the estimated APY and your LTV ratio.
Click "Boost" and sign the transaction in your wallet.
Once the flash loan operation is confirmed, your overview situation is updated:
vDOT collateral position increased
Your leverage increased
The global APY increased
Your debt increased (Borrowed)
Your LTV increased
Your Net value will increase on a daily basis (as long as the borrow APY does not exceed the staking APY) with some jumps: vDOT ratio increases daily whereas your debt increases linearly.
You can choose to decrease your LTV, then just repeat the operation at steps 1-2.
You can choose to increase your leverage, then just repeat the operation at steps 3-5.
Risk reminder: High borrowing rates may lead to sustained losses: when the liquidity of the Token lending market is insufficient, the increase in borrowing rates may exceed the staking returns of your principal. In this case, your leveraged position will continue to generate losses.
Possible use case to use Loop Stake & mitigate the leveraging risk at the same time.
If you want to exit Loop Stake instantly without using the Swap or Redeem mode :
Lend DOT in the Leverage farming pool in the Farming menu: Earn yield on DOT
Execute your vDOT leverage in Loop Stake by trying to have your DOT debt equal or inferior to your DOT deposited in the leverage pool: Earn yield on vDOT
When you want to deleverage, use the DOT in the Leverage pool to repay your debt.
NB: you can withdraw your DOT at any time as long as your position is less than the "Free" DOT in the pool. The free DOT are the DOT that are not borrowed by users of Loop Stake. In the case your position is higher than the free one, you have to wait users to deposit more DOT in the Leverage pool or users to repay their DOT debts.
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