Looping and Enhanced Yield

iA Borrow allows all users to enhance their SOL staking APY by performing looping.

In simple terms, looping means using the stablecoin borrowed from iA Borrow to buy and stake more SOL. The staked SOL earns additional yield. The total yield is better than that of the without looping

Example Ali stakes 100 SOL in Goldsand (@ $100/SOL price), deposits the resulting iASOL in iA Borrow and mints 5000 iAUSD. Ali swaps the 5000 iAUSD to 50 SOL and stakes the purchased 50 SOL with Goldsand.

This example describes one iteration of looping, the looping process can continue further by borrowing iAUSD against the new 50 SOL collateral, buying more SOL and so on. Yield without looping:

with 8% staking APY, the yield is 8 SOL annually

Yield with 1 loop:

Yield from original deposit is 8 SOL annually

iAUSD -> SOL conversion forfeits a share of the staking yield (~ 2.66 SOL) annually

Yield from the looped SOL (50 SOL) is 4 SOL annually

Total yield = 8 + 4 - 2.66 = 9.33 SOL annually ( 9.3% yield APY instead of 8% yield APY)

Max Looping

Max looping means performing the looping iteration multiple times to maximize the yield. The risk of multiple looping is minimal if all loops use the same LTV.

Example

For a 100 SOL staking positions can make 5 loops at 60% LTV generating a total staking position of

$Total_{staked} = 100 + 100*0.6+100*(0.6)^2+....+100*(0.6)^5 ~=230.56$

After 5 loops, the staked position has achieved 230% leverage. The leveraged position earns ~ 44% more yield than native staking

In the current implementation, the max LTV is set to 66%. In the future, a higher LTV will be permitted specifically for the looping use case.

Risks of Looping

Looping is a leverged long on SOL. Liquidations of a looped position can cause irreversible losses to the position owner. At liquidation, a larger part of the collateral will be sold to cover the outstanding loan.