What is Looping in DeFi – in Simple Terms

DeFi often feels intimidating with words like mint, collateral, staking, liquidation.
One of those words is looping.

Simply put, looping is just repeating the same cycle again and again – to earn more.

How does looping work?

Let’s say you have 100 TON and use the EVAA protocol:
1. You deposit 100 TON as collateral.
2. EVAA allows you to borrow up to 70% of that amount → you borrow 70 stablecoins (e.g., USDT).
3. You swap those 70 USDT back into TON inside EVAA. Let’s say you now have 70 TON.
4. You add these 70 TON back as collateral. Now your total collateral is 170 TON.

EVAA will again let you borrow up to 70% → this time, about 119 USDT.
You can swap them into TON and repeat the cycle.

After several loops, your collateral grows to around 333 TON, even though you only started with 100 TON.
But you also build up debt – roughly 233 USDT in this example.

Why use looping?

The main goal of looping is to boost your yields.
• If a protocol pays staking rewards on TON or offers bonuses for deposits, then by increasing your collateral with looping, you’re earning rewards on a larger balance than you started with.

In other words, you still have the same amount, but it «works» more efficiently.

The downsides of looping
• If TON’s price drops, your health factor decreases. A big enough drop can trigger liquidation – meaning part (or all) of your collateral gets sold to cover your debt.
• You pay borrowing interest. If interest rates are higher than the yield you earn, looping stops being profitable.
• The more cycles you do, the less safety margin you have. Sometimes even a 5–7% drop in price can cause liquidation if you’re fully looped.

Key takeaways

Looping is a tool that lets you earn more on the same assets – but it comes with higher risks.
• Only loop if you fully understand how collateral and liquidation work.
• Don’t go for maximum leverage – always leave a safety buffer.
• Keep an eye on TON’s price and your health factor.

There are many strategies built on looping, and each user chooses the one that matches their risk tolerance.

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