Using revolving loans to earn interest is actually a high-level DeFi gameplay OKX Web3 wallet has added a new Loop loop to earn coins, which directly flattens the entire process loop, leverage, interest generation, Pendle's PT, etc., making it possible for everyone to play this complex DeFi I will explain this thing clearly from plain language to the operation process: vernacular: You deposit a sum of money to earn interest, use it as collateral to borrow money, and then deposit the borrowed money to continue earning interest. You keep borrowing and lending, repeatedly playing with children to increase your interest Don't rush to take action yet, use stablecoins to calculate your account, and you will fully understand Assuming you have 100 stablecoins in your hand and deposit them on Aave at an annualized rate of 5%, just keeping them like this and eating 5 coins a year would result in an annualized rate of 5%, which is average Loop's job is to have you use this 100 yuan as collateral to borrow stablecoins from Aave. Calculated at an 80% mortgage rate, 100 yuan can lend out 80 yuan, assuming a loan interest rate of 4%. The system automatically saves these 80 yuan back into Aave and continues to eat 5% Now you have 180 yuan in your hand and are paying 5% interest, while you owe 80 yuan and are paying 4% interest. Over the course of a year, earning 9 yuan from 180 yuan, paying 3.2 yuan in interest from 80 yuan, and earning a net profit of 5.8 yuan. The principal is still 100 yuan, and the annualized rate has increased to 5.8% It can be seen that there is no way, from 5% to 5.8%, the extra 0.8% is the interest rate difference you can get from borrowing 80 yuan. This set of actions will be repeated, and the 80 yuan can be borrowed for 64 yuan, which will be stored again. The lever will continue to stack up. The more cycles there are, the larger the position rolls, until it reaches its limit. A 100 yuan principal can be rolled into a 500 yuan position, which is 5 times the leverage. At this point, the annualized value can reach 9% Remember two numbers here: The maximum leverage is equal to 1 divided by the mortgage gap. 80% mortgage rate, 20% gap, leverage is 5 times. If E-mode is activated, the collateral ratio of similar stablecoins can be increased to 90%, with a gap of 10%, and the leverage can reach 10 times The annualization after the cycle is equal to the loan interest rate plus leverage multiplied by the spread. 5% deposit and 4% loan, with a 1% spread, 5-fold leverage is 4% plus 5% equals 9%. 10 times leverage is 4% plus 10%, which equals 14% So the core is one sentence: what the cycle earns is not the deposit interest rate, but the interest rate spread between deposits and loans, and leverage amplifies the interest rate spread This also means that the cycle is not about saving more, it's about whether the spread is thick enough. Deposit 5% and borrow 4%, with a 1% interest rate spread. If rolled over 5 times, there will be an additional 4 points. When the loan interest rate rises to 6%, which is more expensive than deposits, and the interest spread becomes negative, the more you cycle, the more you will lose. It is expected that APY will directly become negative, and the principal will be eaten up by the interest The principle has been explained, how do we proceed now First, let's talk about preparation. Cut the OKX Wallet to the X Layer chain and leave a small amount of OKB in the wallet as a gas fee. Without this step, nothing can be signed The first step is to open OKX Wallet, go to the DeFi page, and find the cyclic coin earning option. There are currently two options available: ETH cyclic coin earning and USDG cyclic coin earning. The ETH model uses xBTETH as collateral to borrow xETH and exchange it for more xBTETH, while the USDG model uses USDG as collateral to borrow USDT, using Pendle's PT and YT models Step two, click on the product details and first look at three numbers: estimated maximum annualization, available subscription limit, and maximum number of cycles. The estimated maximum annualization is based on the highest number of page cycles, not a guarantee, and will vary with mortgage income and loan interest rates. If the quota is insufficient or reset to zero, it cannot be subscribed and can only wait for release Step three, click on subscribe, enter the amount, and select the number of cycles. The higher the number of cycles, the larger the deposit and loan scale, but the risk also increases. The actual number of cycles can be selected based on the real-time display on the page Step four, the confirmation page will list a bunch of key data, which should be closely monitored here: deposits, debt, expected annualization, health factors LTV、 Liquidation price, estimated cost, estimated payback time, and slippage point. The closer the health factor is to 1, the more dangerous it is. If it is below 1, it will be cleared directly Step five, turn on Aave E-mode. This step is mandatory, Loop must run in E-mode. For the first subscription, the E-mode will be set first, and then authorized for execution. Note that the same wallet can only open one E-mode category in the same Aave market, so ETH and USDG cannot be held simultaneously. If there are other positions, they need to be disposed of first or changed to a different address Step six, confirm the order and sign all the on chain transactions listed on the page. After all the signatures are completed, the position is built, and Loop will automatically run the entire process of mortgage, loan, exchange, and re mortgage If you want to see your holdings, enter the asset portfolio in DeFi and open the corresponding Loop. You can see the total value, yesterday's earnings, cumulative earnings, as well as the current position and risk data To exit, click on redemption, select the currency to be credited, enter the quantity, or directly choose 25%, 50%, or all. Confirm the changes in deposit debt before and after redemption, complete authorization, and the system will automatically release the position, repay the debt, and return the remaining assets to the wallet. Please note that the final amount received may be affected by market prices, slippage, and liquidity, and the actual execution on the chain shall prevail Special reminder: For the USDG version, two items, PT-USDG and YT-USDG, will be generated during the subscription process. PT will be deposited into the account, while YT will be kept in the wallet. Never sell or transfer YT with cheap hands, otherwise you will have to buy it back and make up for it when redeeming. The PT expiration date is October 29, 2026, and it will not be automatically redeemed upon expiration. You need to handle it proactively on the position page Finally, there is risk, which must be taken into consideration Loop is not a guaranteed product. The more cycles there are, the higher the loan size, transaction losses, and liquidation risks, but the returns may not necessarily be higher. Once the borrowing cost exceeds the collateral income, APY becomes negative and the principal will be lost. When the price drops or interest accumulates, the health factor decreases, and if it falls below 1, it will be liquidated. There are only three ways to save it: reducing the cycle, adding collateral, and repaying loans In addition, both subscription and redemption incur costs such as exchange fees, slippage, and gas. The time taken to obtain them is too short, and the profits cannot cover these losses at all Circulation is a magnifying glass. When the interest rate spread is positive, it helps you amplify your profits. When the interest rate spread reverses, it amplifies your losses. First calculate the interest rate spread and then click on the subscription. Don't just focus on the estimated annualization and drool