Unit 2 · Level 3 · Lending & borrowing
Looping: leverage in a trench coat
Looping is DeFi's favorite magic trick: deposit ETH, borrow stablecoins against it, swap them for more ETH, deposit that too, and go again. Each loop grows your ETH exposure using the same starting money. Yield farmers loop to multiply an APY; traders loop to multiply a bet. Either way, what they've built is leverage; it just doesn't say so on the label.
Free to play. No ads, no token, no account needed to start.
What you get asked
Walk through two loops, starting with €1,000 of ETH:
Each loop borrows half of the last deposit and stacks it back on. Your exposure grows while your real capital stays €1,000.
After those two loops (€1,000 + €500 + €250 deposited), how many euros of ETH exposure do you have?
€1,750 of ETH riding on €1,000 of real money: 1.75× leverage. Every extra loop adds less exposure but keeps adding risk.
What has looping actually created?
It's the same borrowed-money physics as a leveraged trade, wearing a yield-farming costume. The APY multiplied, and so did the drawdown.
Every extra loop moves your liquidation price ___ to the current market price.
More debt against the same real capital means a smaller dip wipes you out. Loop enough times and an ordinary red day becomes a liquidation.
A vault advertises '30% APY' from looping a 6% lending rate. What is the extra 24% really?
Leverage doesn't create yield; it multiplies both the yield and the ways to lose. Remember the Trading course rule: size every position so the worst day is survivable. 🐜
The rest of this unit
Loans with no credit check: just collateral, math, and a liquidation bot watching.