Looping LST
Looping with Liquid Staking
Liquid staking involves locking tokens in a staking protocol to earn rewards while receiving a derivative token that represents the staked assets. This derivative can be used as collateral to borrow additional assets, enabling a leverage loop.
Initial Staking: A user stakes a base token (e.g., TON) in a liquid staking protocol (e.g., Tonstakers, Bemo, etc.) and receives a derivative token (e.g., tsTON, stTON, etc.).
Collateralizing: The tsTON is deposited into Factorial as collateral to borrow more TON.
Looping: The borrowed TON is staked again to mint more tsTON, repeating the process to maximize staked assets.
Yield Generation: The compounded tsTON balance accrues staking rewards while maintaining exposure to the underlying asset.
Key Considerations:
Interest Rates: Borrowing costs must be lower than staking yields for the strategy to remain profitable.
Volatility Risk: Significant price fluctuations in tsTON or TON could trigger liquidation events.
Protocol Compatibility: Ensure the chosen protocols support the required assets and leverage functionality.
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