Yield "looping," or leveraging, is a process where a DeFi user repeatedly supplies a yield-bearing asset (e.g., sFRAX) to a lending protocol and borrows stablecoins against it as collateral. The borrowed stablecoins are then used to acquire more of the yield-bearing collateral asset, effectively increasing exposure to it with leverage. This strategy can be profitable if the yield generated by the leveraged collateral exceeds the interest rate (borrowing cost) of the stablecoin loans.
dTRINITY’s unique features help facilitate a better yield looping experience through the vertical integration of its native stablecoin (dUSD) with the protocol’s DeFi components. Specifically, yield-bearing collateral can be supplied to dTRINITY to take out dUSD loans. Borrowing costs for dUSD are then subsidized by its float income, enabling users to leverage more efficiently at lower interest rates.