What is Looping?
The Basics
Looping (also called leveraged yield farming or recursive borrowing) is a DeFi strategy that amplifies your yield by repeatedly depositing and borrowing against your assets.
How It Works
1
Deposit Collateral
Deposit an asset (e.g., SOL or an LST like JitoSOL) into a lending protocol
2
Borrow Against It
Borrow a stablecoin or another asset using your deposit as collateral
3
Swap & Redeposit
Swap the borrowed asset back to your original asset and deposit it again
4
Repeat
Continue the loop to increase your effective exposure and yield
Example
Starting with $1,000 USDC:
- Deposit $1,000 USDC → Borrow $700 USDT (70% LTV)
- Swap $700 USDT → $700 USDC
- Deposit $700 USDC → Borrow $490 USDT
- Swap $490 USDT → $490 USDC
- Continue...
Result: ~3x exposure to USDC lending yield with the same initial capital
Benefits
- Amplified yield on your base asset
- Earn staking rewards on a larger position
- Capital efficient way to increase exposure
Risks
- Liquidation risk - If your collateral value drops, you can be liquidated
- Interest rate risk - Borrow rates can spike, eating into profits
- Smart contract risk - Bugs in protocols could lead to loss of funds
- Complexity - Unwinding positions can be tricky in volatile markets
Protocols That Automate Looping
Instead of manually looping, these protocols automate the process:
- Loopscale - Automated loops for LSTs
- Kamino Multiply - One-click leveraged positions
- Jupiter Multiply - Leverage on SOL and LSTs
- Hylo - High leverage vaults
- Carrot Boost - Boosted yield strategies