Loopscale is a modular lending platform built on Solana that facilitates borrowing and lending across a diverse range of digital assets, including staked tokens, liquidity provider positions, and other specialized primitives. It replaces traditional pooled liquidity models with an order book-based system to improve capital efficiency and risk management. ^{[1] [2]}

Overview

Loopscale represents a significant evolution in decentralized finance (DeFi) lending protocols by implementing an order book-based approach rather than the pooled liquidity model common in many DeFi platforms. This architectural choice enables more precise matching between borrowers and lenders, resulting in improved capital efficiency and more favorable rates for both parties. The platform operates on the Solana blockchain, leveraging its high throughput and low transaction costs to provide a responsive user experience. ^[1]

The protocol is designed to accommodate a wide variety of digital assets as collateral, including more complex financial instruments like liquidity provider (LP) positions and staked tokens that traditionally have been difficult to utilize in lending markets. This flexibility allows users to unlock the full value of their diverse crypto portfolios rather than limiting them to mainstream assets only. ^[2]

By implementing isolated collateral systems and modular market structures, Loopscale aims to reduce systemic risk that has plagued other DeFi lending platforms during market downturns. The protocol's architecture allows for customized risk parameters for different asset types, moving away from the one-size-fits-all approach common in the industry.

Key Features

Order Book-Based Lending

Unlike pool-based lending protocols where rates are determined algorithmically based on utilization, Loopscale uses an order book system where:

• Lenders and borrowers are directly matched based on their specified terms
• Lending rates equal borrowing rates, eliminating the spread typically found in pool models
• Users can set their own parameters for lending, including rates, duration, and asset exposure
• Capital efficiency is improved through direct matching rather than requiring excess liquidity ^[1]

Expanded Collateral Options

Loopscale supports a diverse range of assets as collateral, including:

• Traditional cryptocurrencies
• Staked tokens (such as staked SOL)
• Liquidity provider (LP) positions
• Yield-bearing tokens
• Memecoins
• Potential support for tokenized real-world assets ^[2]

This expanded collateral support allows users to unlock value from previously illiquid or underutilized assets in their portfolios.

Fixed-Rate, Fixed-Duration Loans

The platform offers predictability for both borrowers and lenders through:

• Fixed interest rates that don't fluctuate during the loan term
• Predetermined loan durations
• Protection from market volatility and sudden rate changes
• Ability to plan financial strategies with known costs and returns ^[2]

Loopscale Vaults

To simplify the user experience while maintaining the benefits of the order book model, Loopscale offers managed lending vaults:

• Professional management by third-party experts (curators)
• Unique strategies and risk profiles for different investment preferences
• Automated deployment of idle liquidity to maximize returns
• Simplified user interface for less experienced DeFi users ^[2]

Loops (Leveraged Positions)

Loopscale provides a feature called "Loops" that allows users to:

• Create leveraged positions on yield-bearing assets
• Multiply rewards from staked tokens and LP positions
• Access fixed borrowing rates for predictable costs
• Implement complex strategies with a simplified one-click interface ^[2]

Technology

Loopscale is built on the Solana blockchain, chosen for its high throughput, low transaction costs, and growing DeFi ecosystem. The protocol's architecture consists of several key components:

• Modular Markets: Separate lending markets with customized parameters for different asset types
• Order Book Matching Engine: Core system that pairs lenders and borrowers based on their specified terms
• Isolated Collateral System: Segregation of different collateral types to prevent contagion risk
• Risk Management Framework: Customizable parameters for different asset types based on their risk profiles
• Smart Contract Infrastructure: Secure, audited contracts handling the core lending functionality ^[1]

The platform's technical design prioritizes capital efficiency, risk management, and flexibility, allowing it to support a wider range of assets and use cases than traditional lending protocols.

Use Cases

For Borrowers

• Portfolio Optimization: Access liquidity without selling appreciated assets
• Yield Farming: Borrow assets to participate in yield-generating opportunities
• Trading: Access leverage for trading strategies with predictable costs
• Tax Efficiency: Avoid triggering taxable events by borrowing against assets rather than selling them
• Collateral Flexibility: Use previously illiquid assets like LP tokens as collateral ^[2]

For Lenders

• Enhanced Yields: Earn potentially higher returns compared to pool-based lending platforms
• Risk Customization: Set specific parameters for lending, including asset types, rates, and exposure limits
• Predictable Returns: Lock in fixed rates for known income streams
• Simplified Professional Management: Deposit into curated vaults for managed lending strategies ^[2]

For Curators

Loopscale offers opportunities for third-party experts to create and manage lending vaults:

• Design custom lending strategies with specific risk parameters
• Earn fees based on assets under management
• Leverage ready-to-use code for vault deployment
• Access Loopscale's ecosystem and user base for distribution ^[2]

Challenges and Considerations

While Loopscale's order book model offers several advantages, it also presents potential challenges:

• Liquidity Fragmentation: Order books may struggle with liquidity depth compared to pooled models in early stages
• Complexity: The increased flexibility comes with additional complexity for users
• Market Adoption: Convincing users to switch from established lending platforms requires demonstrating clear advantages
• Regulatory Considerations: As with all DeFi protocols, evolving regulatory frameworks may impact operations

The platform addresses some of these challenges through simplified user interfaces like vaults and loops, which abstract away complexity while maintaining the benefits of the underlying order book model.

Exploit on Loopscale & Resolution

On April 26, a hacker siphoned approximately 5.7 million USDC and 1200 Solana from the lending protocol after taking out a “series of undercollateralized loans”, Loopscale co-founder Mary Gooneratne said in an X post.

Loopscale has since “re-enabled loan repayments, top-ups, and loop closing”, but “all other app functions (including Vault withdrawals) are still temporarily restricted while we investigate and ensure mitigation of this exploit,” Loopscale said in an April 26 X post.

The exploit only impacted Loopscale’s USDC and SOL vaults and the losses represent around 12% of Loopscale’s total value locked (TVL), Gooneratne added.

“Our team is fully mobilized to investigate, recover funds, and ensure users are protected,” Gooneratne said.

In an April 29 update posted to X, Loopscale confirmed that approximately 19,463 Wrapped SOL (WSOL) (worth roughly $2.88 million) have been returned to its wallets since April 28.

The first two returns included 10,000 WSOL ($1.48 million) and 4,463 WSOL ($660,000), following an earlier recovery of 5,000 WSOL (~$740,000).

“Our pursuit of an amicable resolution regarding Saturday’s incident continues to make progress,” the team wrote. ^[5]

On April 27, Loopscale’s team said it had sent an onchain message to the exploiter, offering them a 10% bounty and a full release of liability in exchange for the return of 90% of the stolen funds.

The team warned that if no agreement were reached within 24 hours, it would contact law enforcement.

At 3:52 pm Eastern Time on April 28, 2025, Loopscale announced it had received a response from the exploiter, who indicated willingness to negotiate a return in exchange for a bounty. ^[5]