# **FAQ for dummies** ## **How does Loop Stake work ?** Leveraged staking through Loop Stake performs recursive borrow/lend of DOT/KSM and liquid staking token (vDOT/vKSM) to amplify yields from the user’s initial deposit. Detailed explanation [here](https://docs.bifrost.finance/builders/loopstake#how-does-it-work). Users can deposit LSTs like vDOT/vKSM and borrow DOT/KSM to multiply their returns. **Here’s an example of how leverage staking works:** - Deposit an LST as collateral through Loop Stake - The program uses the deposited LST to borrow DOT/KSM against the LST up to the user’s intended leverage ratio on Loop Stake - This effectively gives users a larger notional position size of the LST, which multiplies the base yield for users. If staking yields exceed the borrow costs, there is a premium from this Loop Stake. ## **Where does the yields come from ?** The yields come from the implied appreciation of the LST against holding DOT/KSM, minus borrowing costs of the DOT/KSM on Loop Stake. For a more detailed breakdown: The LST price ratio rises every epoch, while the DOT/KSM borrow remains constant. This duration mismatch can mean a temporary dip in DOT/KSM earnings upon initializing a Loop Stake. ## **Can this support other liquid staking tokens in the future?** Yes! We will try to expand the feature to more vTokens in the future. ## **How does unstaking work?** You can unstake by selling a portion of your LST deposits to cover your DOT/KSM borrows. Upon repaying your DOT/KSM borrow, you’ll be able to withdraw your LSTs. Detailed explanation [here](https://docs.bifrost.finance/builders/loopstake#deleveraging-process). There may be losses due to price impact, slippage, and swap fees unless you choose the Redeem mode where you will have to wait the flexible unstaking period to get your DOT/KSM back. Available liquidity is also a prerequisite to unwind. ## **What are the risks of leverage staking?** The outline of risks set out below is non-exhaustive, please make sure you have a good understanding of the product and its risks before using. Risks are listed and detailed [here](https://docs.bifrost.finance/builders/loopstake#risks) and include: - Depeg Risk (exchange rate & Oracle) - **No** Liquidation risk ## **Has Loop Stake been audited?** Loop Stake is a product that utilizes Loop Stake pallet. It has been audited by Oak and can be found [here](https://www.drift.trade/audit)[.](https://github.com/oak-security/audit-reports/blob/main/Bifrost/2024-03-11%20Audit%20Report%20-%20Bifrost%20Finance%20Leveraged%20Staking%20v1.0.pdf)