Unlocking the potential of Nazca’s 0% borrowing design, this tutorial guides you through looping a single asset for amplified returns and minimal risk.
What is Looping?
Looping involves repeatedly borrowing and re-depositing the same asset to increase your overall exposure and potentially earn higher yields. In traditional looping, converting the borrowed asset back to the original asset (through DEXs) can incur fees and introduce price fluctuation risks.
Why is Nazca Ideal for Looping?
Nazca excels in looping strategies due to its unique design:
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0 Borrow Interest Design: Nazca utilizes Blast native yield to subsidize borrowers when utilization rate is low, leading to 0 borrowing rates. This eliminates the typical concern in looping (borrowing costs exceeding lending APY), maximizing your profit potential.
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Simplified Looping: You can loop a single asset without needing swaps, avoiding additional fees and price fluctuations.
Nazca’s innovative features create an ideal environment for looping with minimal risk and potentially high returns.
Step-by-Step Looping Tutorial:
Prerequisites:
- Deposit your asset: Start by depositing your desired amount of the chosen asset (e.g., ETH, USDB) as collateral in the selected pool.
Looping Steps:
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Borrow the same asset: Utilize the “Safe Max” option to borrow the maximum amount of the same asset allowed based on your collateral.
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Re-deposit the borrowed asset: Directly re-deposit the borrowed asset back into the same pool as collateral.
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Repeat: Repeat steps 1 and 2 as many times as desired, considering gas fees and potential diminishing returns.
Example:
Assuming you start with 1000 USDB:
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Loop 1: Deposit 1000 USDB, borrow 719 USDB, and re-deposit it for a total of 1719 USDB in collateral.
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Loop 2: Borrow another 521 USDB and re-deposit, bringing your total collateral to 2240 USDB.
Result:
Now you’re effectively earning
Benefits:
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Increased exposure: Amplify your holdings without liquidation risk, maximizing potential yield from the lending APY.
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Zero Borrowing Cost: Eliminates the risk of borrowing costs exceeding lending APY, a common challenge in traditional looping.
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Simpler and cheaper: No need for swaps between different assets, avoiding additional fees and price fluctuations.
Risks:
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Incentive period ending: Looping becomes unprofitable once the pool’s incentive period concludes and the borrowing rate rises above the lending APY.
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Stablecoin fluctuations: While using stablecoins reduces price fluctuation risk, the strategy hinges on the chosen stablecoin’s stability.
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Smart contract risks: As with any DeFi platform, inherent risks associated with smart contracts exist. Conduct thorough research before participating.
Conclusion:
Looping on Nazca offers a unique opportunity for experienced DeFi users to maximize returns with minimal risk. By leveraging 0% borrowing and incentivized pools, you can amplify your exposure and potentially earn significant yields on a single asset. However, always conduct your own research (DYOR) and understand the associated risks before employing this strategy.
About Nazca
Nazca redefines DeFi on Blast as the ultimate money market, offering the first-ever zero-interest borrowing and a unique Adaptive Equilibrium Interest Rate Model. This innovative platform sets a new standard, empowering both liquidity suppliers and borrowers with unparalleled efficiency.
Team: Nazca team is composed of 11 crypto enthusiasts and seasoned entrepreneurs. Our collective experience spans renowned DeFi projects on Avalanche, NEAR Aurora, and zkSync, with each project reaching over $20M in TVL at peak performance.