Unleashing the Potential: Amplifying Yields and Allocation in Xloop Finance - Xloop Finance

Xloop Finance is a groundbreaking 0% interest rate borrowing protocol built on top of the GMX protocol. Initially launching on Arbitrum and expanding to networks like BSC, Avalanche, Polygon, and more, the protocol empowers borrowers to leverage five prominent collateral options: ETH, GMX, GLP, wstETH, and ARB.

At the core of Xloop Finance is its focus on GMX and GLP, which are yield-bearing assets. This unique approach inspires special protocol designs that enable automatic yield compounding, resulting in the accumulation of more GMX and GLP.

A visual art on the looping process (Source: Midjourney)

For example, Alice can bring in $100,000 worth of GMX or GLP and borrows $50,000 worth of IOU at a 200% collateral ratio (excluding fees). By burning $1,546.39 worth of XLOOP tokens, Alice mints $51,546.39 worth of XDC at a 97% minting ratio. This process ensures that the total system value remains unchanged at that moment. This minting ratio (97%), driven by market confidence on XDC, is separate from the collateral ratio. More details about several ratios within the Xloop Finance system will be detailed in a separate article.

The borrowed XDC tokens can be further swapped into GMX or GLP, introducing additional collateral into the system. Continuing with the example, the $51,546.39 worth of XDC can be swapped into GMX of equal value (excluding fees and slippage) and re-introduced into the Xloop protocol to borrow $25,773.2 worth of IOU tokens at a 200% collateral ratio. This looping process can continue until an equilibrium or some limit is achieved. Hence, this concept can be viewed as a form of leveraged borrowing, enabling borrowers to benefit from significantly amplified compounded yields.

The yields generated in Xloop Finance are allocated in a balanced manner. Seventy percent of the yields are dedicated to enhancing and optimizing the protocol, ensuring continuous improvement of loan health factors. The remaining 30% of yields are distributed among key participants within the ecosystem, including LP providers, Xloop stakers, IOU depositors to the stability pool, and team members. The initial allocation assigns 23% to LP providers, 17% to team members, and evenly splits the remaining 60% between the staking contract and stability pool. These percentages may be adjusted based on the practical needs of each category.

Yields are amplied and distributed among major participants (Source: Midjourney)

This design creates a sustainable and rewarding experience for stability pool depositors, who earn constant rewards without having to wait for unpredictable liquidation events. Similarly, Xloop stakers benefit from a continuous influx of yields, augmenting their staking rewards beyond unpredictable and unforeseeable redemption fees alone.

Xloop Finance aims to provide a secure and rewarding platform for borrowers, LP providers, stakers, and all participants within its thriving ecosystem. By combining innovative borrowing mechanisms, strategic collateral options, and a thoughtful distribution of yields, Xloop Finance is redefining the possibilities of decentralized finance.