> For the complete documentation index, see [llms.txt](https://docs.3jane.xyz/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.3jane.xyz/levered-callable-capital-lcc/mechanism/promise-looping.md). # Promise Looping Promise looping funds a capital call partly with Morpho debt, borrowed against the USD3 the call delivers. It puts promises on fractional reserves: the staker holds a fraction of the promised USDC as capital (margin plus equity), and the rest is borrowed at the moment of the call. * **A larger promise from the same capital.** The promise fee is paid on the full promise. At launch terms a looped promise can be 6.25x the capital behind it, so the same capital earns 6.25x the promise fee of an unlevered promise. * **Committed capital stays productive.** Only the margin is staked. Committed capital can remain deployed elsewhere until called; the staker is still responsible for funding the call. * **One transaction on call.** The leveraged funding helper borrows, funds the call, and posts the delivered USD3 as Morpho collateral atomically. ### Two multipliers A looped promise has two multipliers. They measure different things and apply at different times. | Per $100 promise | Amount | Multiplier | When | | -------------------------- | ----------------------------------------------------------------------- | ------------------------------------------- | ----------- | | Margin | $7.50 | 13.33x promise leverage (7.5% margin ratio) | Staked now | | Equity on a full call | $8.50 of the staker's USDC; with the $7.50 of margin, $16.00 of capital | 6.25x loop leverage (84% LTV) | At the call | | Morpho debt on a full call | $84.00 | | At the call | * **Promise leverage** is a facility term. It sets how much promise each dollar of margin opens, and so how much promise fee that margin earns. * **Loop leverage** is the staker's choice at funding time. It sets how much of a call is borrowed: 1x is an unlevered call paid entirely in USDC. * **The margin counts toward the capital.** A funded call releases a proportional slice of margin, and the helper uses it as part of the payment. This applies to facilities whose margin asset is a USDC vault share (waEthUSDC at launch). * **The backing requirement matches.** Total promise is capped at 6.25x the address's verified net worth, the same as the maximum loop leverage, so every promise the cap allows can be funded looped (see [Backing requirement](/levered-callable-capital-lcc/mechanism/stakers.md#backing-requirement)). ### Funding a looped call For an obligation `O` at loop leverage `L`: ``` capital = O / L (released margin + equity) equity = O / L - released margin (the staker's USDC) debt = O - O / L (borrowed on Morpho) ``` The helper runs the funding in one transaction: 1. **Flash loan.** It flash-borrows the debt plus the released margin's value in USDC from Morpho. 2. **Fund the call.** It pays the obligation into the facility. The facility delivers USD3 in its 35-day funding cooldown (USD3l) and releases the matching slice of margin to the staker. 3. **Post and borrow.** It supplies the USD3l as the staker's collateral on a USD3l/USDC Morpho market, withdraws the released margin to USDC, and borrows the debt. Together these repay the flash loan. 4. **Staker equity.** The staker pays the rest of the capital in USDC. * The position's LTV after entry must be within the staker's chosen maximum. The app caps entries at 84%, below the market's 86% liquidation LTV. * The staker is the Morpho borrower and owns the collateral. The helper keeps no USD3l, USDC, or margin. ### Unwinding * USD3l carries the 35-day funding cooldown, so the helper tracks a cooldown for each looped funding, starting when the call is funded. * Once a cooldown matures, an unwind repays the Morpho debt from the collateral alone: a flash loan repays the debt, the collateral redeems from USD3l to USD3 to USDC, and the remainder goes to the staker as USDC or as cooldown-free USD3. * A partial unwind repays part of the debt and leaves the rest of the position open. {% hint style="warning" %} Looping adds the risks of a levered Morpho position on top of the promise: negative carry, money market liquidity, and liquidation. See [Risks](#risks). {% endhint %} ### Worked example ``` ASSUMPTIONS (launch terms) margin ratio 7.5% (13.33x promise leverage) promise fee 1.25% on the active promise underlying APY 3.5% (the margin's Aave yield) loop leverage 6.25x (84% LTV) liquidation LTV 86% ``` #### 1. Alice promises $1,000,000 * Alice holds $160,000 of DeFi assets, which caps her total promise at $1,000,000 (6.25x verified net worth). * She stakes $75,000 of margin, opening a **$1,000,000 promise**. * Looped at 6.25x, a full call needs **$160,000 of capital**, her whole net worth: her $75,000 of margin plus **$85,000 of equity**. The remaining **$840,000** would be Morpho debt. * Until a call, the $85,000 stays deployed wherever she holds it. #### 2. Yield * Promise fee: 1.25% on the $1,000,000 promise = **$12,500 / year**. * Across her $160,000 net worth, that is **7.81% APY on top** of what it already earns, before any call. * Her $75,000 of margin is staked in the vault, where it earns its underlying APY: 3.5% = $2,625 / year. Her $85,000 of unfunded capital stays where it is; on that part alone the fee is 14.71%. * Measured on the margin alone, the same fee plus the margin's yield is the facility's APY on margin, ≈ 20.2%. These are one fee on different bases, never added together. * Unlevered, the same $160,000 backs a $160,000 promise: $2,000 / year, 1.25% on top. #### 3. 3Jane calls 20% of the pool * Alice's obligation: **$200,000**. * At 6.25x: **$32,000 of capital** and **$168,000 of Morpho debt**. * The call releases $15,000 of margin (20% of $75,000), which counts toward the capital. Alice adds **$17,000 of equity** in USDC. * In one transaction, $200,000 of USD3l is supplied as her collateral against $168,000 of debt, an 84% LTV. * Her promise pays down to $800,000, backed by $60,000 of margin, and keeps earning the promise fee. * The funded $200,000 earns USD3 yield plus the 0.75% funding bonus while its cooldown runs. The loop pays Morpho interest on the $168,000. #### 4. Unwind * After 35 days the cooldown matures. An unwind repays the $168,000 plus accrued interest from the collateral and returns the rest to Alice: her $32,000 of capital plus the loop's net yield, in USDC or USD3. ### Risks Looping adds the risks of a levered Morpho position on top of the promise. The promise stays a binding obligation: if a loop cannot be opened, the call must still be funded in full within the funding window, or the margin is slashed. #### Cost * **Negative carry.** While the loop is open, the position earns USD3 yield and the funding bonus on the full amount funded and pays the Morpho borrow rate on the debt. Both rates float. When the borrow rate is above the position's yield, the loop loses money for as long as it stays open, levered by the debt: at 6.25x, every percentage point of negative spread costs 5.25 percentage points a year on the capital. #### Liquidity * **No liquidity in the money market.** Opening a loop borrows from a Morpho market and flash-loans USDC through Morpho. If the market does not have enough USDC available to lend, because utilization is high or suppliers have withdrawn, the loop cannot open, and the call must be funded unlevered from your own USDC or the margin is slashed. #### Liquidation * **The buffer is thin.** An entry at 84% LTV sits 2 percentage points below the 86% liquidation LTV: a fall of about 2.3% in the collateral's value relative to the debt makes the position liquidatable. Interest accruing on the debt faster than yield accrues on the collateral moves the LTV the same way. #### Exit * **Unwinds can be blocked.** An unwind redeems USD3 to USDC, so anything that limits USD3 withdrawals, such as a pending loss, a waUSDC pause, or withdrawal limits, makes it revert while the debt keeps accruing. The fallbacks are unwinding into cooldown-free USD3 instead of USDC, or repaying the debt with your own USDC and exiting through the normal USD3l cooldown.