| Loop | Collateral | Debt | Net APY | Safety |
|---|---|---|---|---|
| #0 | $10,000 | $0 | 5.50% | ∞ |
| #1 | $17,968 | $8,000 | 7.08% | 1.80 |
| #2 | $24,316.9 | $14,374.4 | 8.34% | 1.35 |
| #3 | $29,375.71 | $19,453.52 | 9.35% | 1.21 |
| #4 | $33,406.56 | $23,500.57 | 10.15% | 1.14 |
| #5 | $36,618.35 | $26,725.25 | 10.79% | 1.10 |
| #6 | $39,177.5 | $29,294.68 | 11.29% | 1.07 |
This simulator recursively calculates the next borrowable amount based on your LTV, subtracts friction (fees/slippage), and re-supplies it. We track the cumulative Health Factor and Break-Even time.
Every loop increases your total exposure. While the yield climbs, the 'Liquidation Distance' shrinks. A small price drop can trigger a cascade across all loops, leading to a total loss of initial capital.
Most risk-aware managers stop at 3-4 loops. Beyond this, the incremental yield gain is tiny compared to the exponential increase in liquidation and gas risk. Dimensioning loops correctly is key.
This strategy relies on a positive 'carry'—the spread between Supply APY and Borrow APR. If Borrow APR rises above Supply APY, leverage will multiply your losses rather than your gains.
Modern DeFi aggregators use Flashloans to perform all supply/borrow cycles in a single transaction. This removes the manual swap friction and gas costs of stepping through loops one by one.
