How to use Looping

Leverage, or "Looping," is an advanced feature that allows you to multiply your exposure to $BREAD using borrowed $BERA. This powerful function automates what would otherwise require multiple transactions, helping you create a significantly larger $BREAD position with minimal upfront capital.

You can only have one active loan position at a time. If you already have a Standard loan, you cannot create a Leverage position until you close your existing loan (and vice versa).

Vault depositors that wish to start looping must use $BERA, or open a $BERA loan and send it to another address and use looping from there

Understanding the Looping Mechanism

What is Looping?

Looping allows you to amplify your exposure to BREAD tokens by using a single transaction to create a leveraged position. Unlike traditional borrowing that requires you to provide collateral first, looping lets you start with just $BERA and build a leveraged $BREAD position instantly.

How to create a looped position

1. Navigate to the Leverage Interface

• Go to the "Borrow & Loop your asset" page from the main navigation

• Select the "1 Click Loop with Bera" tab at the top of the interface (next to "Borrow against Bread")

2. Enter Your Target Amount

• In the input field labeled "Borrow instantly, no collateral," enter the total target amount of $BERA you want to create the leveraged (looped) position

Note: you are NOT entering "how much you want to spend" but rather the "target position size." This is similar to specifying "I want to be long 10,000 BERA worth of BREAD on 25-100x leverage"

3. Set Your Desired Loan Duration

• Use the horizontal slider to select your desired loan duration (1 to 365 days)

• You can also use the "MIN" and "MAX" buttons to quickly set durations

• The front-end shows you the Borrow APR

Note: since there is a minimum interest fee, it may not make sense to do loan duration shorter than 90 days

4. Review Complete Position Details

Before proceeding, carefully review all the position details displayed:

• Expiration Date: When your leveraged position expires

• Recorded Borrow Amount: The total amount of $BERA being borrowed

• Leverage Baking Fee: The fee charged for using the leverage feature (typically 1.42%)

• Interest Fee: The total interest charged on the borrowed amount

• Leveraged Position: The total amount of $BREAD you'll receive, with effective leverage multiplier

• Total Payable: The actual amount of $BERA you need to send in this transaction

5. Confirm and Execute Your Leverage Transaction

• Click the "Loop" button at the bottom of the interface

• Your wallet will prompt you to confirm the transaction

• Once confirmed, the protocol will execute all the looping steps atomically

• After processing, your leveraged position will appear in the "Active Position" section

The technical process behind looping

When you initiate a Loop transaction in BREAD Protocol, the contract performs a single mathematical calculation to create a leveraged position:

1. Takes your input bera amount and calculates the baking fee:

   • Leverage Baking fee (currently 1.42% of your $BERA)

2. Calculate userBera the amount of BERA usable for the leveraged position:

   • userBera = bera - bakeFee

3. Calculate userBorrow and overCollateralizationAmount based on 99% collaterization ratio:

   • userBorrow = userBera * 99%

   • overCollateralizationAmount = userBera - userBorrow

4. Calculate interest based on loan duration and userBorrow

   • interest = getInterestFee(userBorrow, numberOfDays)

5. Under the hood, it creates a leveraged position in $BREAD as follows:

   • Mints $BREAD tokens with your input $BERA (minus fees)

   • Establishes a loan with your $BREAD tokens as collateral

   • All calculated and executed in a single, atomic transaction

   • The user needs to pay bakeFee + interestFee + overCollaterizationAmount

Example 1: Starting with 10,000 BERA (90-day duration)

Input: 10,000 BERA
↓
Fees:
- bakeFee: 142 BERA
↓
userBera: 9,858 BERA
userBorrow: 9,759.42 BERA
overCollateralizationAmount: 98.58 BERA
↓
Interest rate: 6.9% * 3 / 12 = 1.725% (for 3 months)
- interest: 168.35 BERA
↓
Total fees: bakeFee + interest = 310.35 BERA
Total Bera Required: Total fees + overCollateralizationAmount = 408.93 BERA
↓
Total Leveraged Position (in BERA terms) = userBera = 9,858 BERA
Implied Leverage (excluding fees): userBera / overCollateralizationAmount = 100x
Implied Leverage (including fees): userBera / Total Bera Required = 9,858 / 403.93 = ~25x

The effective leverage is ~100x if you ignore fees, because it's a 99% LTV loan

Inclusive of the bake fee and interest fee, the effective leverage is ~25x because your 403.93 BERA (bake fee + interest fee + overcollateralization amount) controls a BREAD position worth ~9,858 BERA.

Looping FAQ

Q: How much leverage can I achieve through Looping?

A: The leverage before fees is always 100x (99% LTV). After fees, the leverage multiplier varies 25-30x, though this varies based on current protocol parameters and fees. The interface will show you the exact multiplier (e.g., "7.48 BREAD (24.56x)") before you confirm your transaction.

Q: Can I extend the duration of a looped position?

A: Yes, the same way you can extend a normal loan.

Q: Is there a minimum amount required to use the Loop feature?

A: No, just slightly more than dust is required. However, note that only 1 position can be active at a time, so if you open a very very small position and want to increase it via looping, you should close it first or use another wallet to take advantage of the discounted baking fee (1.42%)

Q: Can I add more collateral to an existing leveraged position?

A: No, and it does not make sense to - since $BREAD always rises relative to $BERA and interest is paid up front, there is never any need to add collateral

Q: Can I close my leveraged position early?

A: Yes, you can close your leveraged position at any time before the expiration date using either direct repayment with $BERA or the Flash Burn ("Burn Collateral" ) method.

Q: What happens to my leveraged position if the value of $BERA drops in USD terms?

A: Your position's USD value would decrease, but the $BREAD/$BERA ratio will continue to improve due to the protocol's design. Remember that Baker DAO ensures $BREAD only appreciates against $BERA, not necessarily against USD.

Q: Is there a way to partially close a leveraged position?

A: Yes, the 1-click looping method is simply a cost-efficient way to establish the position. Beyond that - it's the same as a normal borrow.

Q: Can I have multiple leveraged positions simultaneously?

A: No, you can only have one active loan position at a time, whether standard or leveraged. You must close your existing position before opening a new one.