In the last two years, we have seen exponential growth in the Ethereum ecosystem, mainly thanks to the big DeFi and NFT trends. Many times, the increase in the demand for transactions has led to significant network congestion, which caused long waits and high gas fees. Anyone who used Ethereum in 2021 is well aware that using one of the numerous DEXs built on Ethereum required an excessive cost, at least for retail consumers. Even before the transition of Ethereum from Proof of Work to Proof of Stake was decided, several layer 2 protocols were born, which represented the best solution to the weaknesses of Ethereum. Loopring is part of this category, but has other interesting features as well.

What Is Loopring (LRC)?

Loopring is a layer 2 Ethereum solution designed especially for developers of DEXs and DeFi applications. The network was born in 2017 by the hand of Daniel Wang, an engineer and programmer with work experience at Google and JD.com. After encountering the drawbacks and difficulties of centralized exchanges, Wang was motivated to develop Loopring, and he set out to establish a decentralized exchange protocol that would allow for the safe and secure trading of cryptocurrencies. In August 2017, Loopring launched an initial coin offering (ICO) to raise funds for its development. The ICO raised approximately $45 million worth of Ether (ETH) in just a few days, making it one of the most successful ICOs of the year. The protocol was initially built on the Ethereum blockchain using smart contracts and the ERC-20 standard, and it utilized a hybrid approach that combined off-chain order matching with on-chain settlement. The initial implementation of Loopring’s decentralized exchange technology was released in December 2017. The project’s introduction represented a crucial turning point because it proved that decentralized trading was possible and sped up the development of the DeFi ecosystem. Since its launch, Loopring has continued to improve its protocol, with updates and upgrades that have enhanced its performance, security, and scalability.

How Does Loopring Work? ZK Rollups and Non-custodial Smart Contracts.

As previously mentioned, DEXs that are built entirely on the Ethereum chain can be slow and extremely expensive. In this case, Loopring acts as a layer 2 of Ethereum, in the sense that, when a user uses the protocol, transactions will take place on Loopring and not on the main blockchain. By doing so, gas costs are cut down and with them the long waits. Layer 2s are solutions that scale their Layer 1, enhance it, and lighten its workload. All operations are in fact taken over by this network, leaving only the aspects related to security and validation to the parent chain (in this case Ethereum). In a nutshell, the core principle of Loopring is to execute transactions off-chain (L2) while keeping important data on-chain (L1). Loopring uses both zk-rollups and non-custodial smart contracts to enable fast, secure, and low-cost trading of cryptocurrencies. They are technical solutions that make it feasible to create DEXs with order books, AMMs, and payment applications.

Zk-rollups is a layer 2 scaling solution that allows a large number of transactions to be processed off-chain and then submitted as a single transaction to the Ethereum mainnet, reducing gas fees and increasing transaction throughput. ZK stands for zero-knowledge (proof), i.e. “zero knowledge of evidence.” It consists of a cryptographic solution that allows a software to reach a certain conclusion without having access to any data. In blockchain, a ZK rollup seeks to achieve this exact goal: ensure secure and transparent transactions by avoiding additional verifications and data exposures. Returning to the case of the interconnection between Loopring and Ethereum, Loopring allows users to send a packet of transactions to Ethereum thanks to zero-knowledge proof. In this way you have full certainty of the correctness of the operations but, at the same time, the workload of layer 1 is greatly reduced. In fact, there is no need for subsequent checks or controls, which is an advantage for the scalability of the network.

Loopring’s non-custodial smart contracts ensure that users remain in control of their funds throughout the trading process. These smart contracts are responsible for enforcing the rules of the exchange and settling trades, while users maintain ownership of their assets in their wallets. This is a great advantage for the user, as he/she no longer needs to trust a centralized exchange, which can be vulnerable to hacks or other security issues. In addition, non-custodial smart contracts ensure that trades are settled in a transparent and trustless manner, without the need for intermediaries. This helps to reduce counterparty risk and increase the security of the exchange.

By combining zk-rollups and non-custodial smart contracts, Loopring is able to offer a highly efficient and secure decentralized exchange experience for users. Below are some of the main benefits.

• Security: The use of Loopring guarantees the security standards of Ethereum, which are among the highest ever.
• Scalability: Platforms built using Loopring have the ability to scale higher and higher.
• Fast transactions: Loopring’s operation is very fast, as it manages to reach a performance of around 2,000 transactions per second.
• Reduced gas fees: Thanks to the layer 2 solution, the transaction costs are significantly lower than those of layer 1.

Loopring is designed to be modular, meaning that different parts of the protocol can be used independently or in conjunction with other blockchain projects. As a result, it provides more flexibility and scalability because developers are not obliged to embrace the complete protocol but can select the parts that best apply to their project. The modularity of Loopring also allows developers to update and improve the protocol more easily, because modifications to one section of the protocol generally do not affect the rest of the system. This can help to prevent potential problems or vulnerabilities from having an impact on the entire network, improving its overall stability and security.

What Is the LRC Token?

LRC is the native utility token of the Loopring protocol. It is an ERC-20 and can be acquired through the Loopring Exchange as well as all major DEXes and centralized exchanges. Its maximum supply is 1,37 billion units, of which 1,33 (97%) are already in circulation (February 2023).

Within the Loopring ecosystem, there are several applications for the LRC token. On the Loopring exchange, it is primarily employed as a method of payment for transaction fees. Users are required to pay a small fee in LRC when they execute trades or move assets on the exchange. In addition, LRC is used as a means of rewarding liquidity providers on the Loopring exchange. The trading fees paid by users, which are given away in the form of LRC tokens, are distributed to liquidity providers who provide assets to the exchange. Finally, LRC is used to govern the protocol and make decisions about its future development. Token holders are able to vote on proposals related to the protocol’s governance, such as changes to the fee structure or the addition of new features. The token allocation is as follows:

• 50% to investors
• 20% to the project team
• 20% to a specific fund intended for the development of the ecosystem
• 10% to collaborators, auditors, exchanges, and so on

Loopring Ecosystem

The Loopring ecosystem includes a variety of projects and initiatives that are focused on improving the efficiency and usability of decentralized exchanges and other decentralized financial (DeFi) applications. These include:

• Loopring Wallet: A non-custodial wallet that allows users to manage their assets and interact with the Loopring DEX and other DeFi protocols.
• Loopring Exchange: A non-custodial decentralized exchange (DEX) built on top of the Loopring protocol. It supports a variety of assets, including Ethereum, ERC-20 tokens, and other Layer 2 tokens. It also offers a range of trading pairs and advanced order types, including limit and stop-loss orders.
• Loopring Pay: A payment gateway that enables merchants to accept cryptocurrency payments from customers using the Loopring DEX.
• Loopring DAO: A decentralized autonomous organization that governs the development and direction of the Loopring protocol.
• Loopring Grants: A program that offers funding and assistance to programmers and business owners who are creating tools and apps on top of the Loopring protocol.

The Loopring ecosystem, as a whole, is a thriving and expanding group of programmers, business owners, and users who are aiming to create a more effective and decentralized financial system. As the ecosystem continues to grow and develop, we will likely see even more innovative applications and tools built on top of the Loopring protocol, as well as new partnerships and collaborations with other projects in the broader decentralized finance (DeFi) ecosystem.

Is Loopring a Good Investment?

The Loopring project has gained a lot of attention and recognition in the blockchain and cryptocurrency communities for its innovative approach to building a decentralized exchange (DEX) that leverages zk-rollups to improve the speed, scalability, and cost-effectiveness of decentralized trading. With DeFi’s continuing expansion and the rising demand for faster, safer ways to trade cryptocurrencies and other digital assets, Loopring is in a strong position to shape the direction of finance in the future. However, it is important to note that like any other blockchain project, Loopring also faces challenges and risks, including regulatory uncertainty, competition from other projects, and the general volatility and unpredictability of cryptocurrency markets. It is recommended to conduct a thorough basic examination of the project before making any investment decisions.

How to Own LRC?

To own LRC, you can use the services of a centralized crypto exchange. Start by creating a Gate.io account, and get it verified and funded. Then you are ready to go through the steps to buy LRC.

News on Loopring

On January 23, 2023, the Loopring team announced that they have signed a strategic partnership with Protocol: Gemini, to bring their immersive Web3 games to Ethereum L2. Protocol: Gemini is a cutting-edge development company that combines augmented reality, blockchain, and metaverses to produce engaging experiences. By building interoperable metaverses, they are dedicated to furthering Web 3.0 principles, values, and methodologies. The collaboration will involve exploring the use of zk-rollup technology, which is used by Loopring to achieve faster transaction speeds and lower fees. The partnership will also focus on exploring new ways to integrate cryptocurrencies into the gaming industry, such as using non-fungible tokens (NFTs) to represent in-game assets. Overall, the collaboration marks a promising new development for Loopring and its efforts to broaden the applications of decentralized exchanges beyond cryptocurrency trading.