Loopring: Ethereum Tool for Decentralized Exchanges and Payments

2022-06-16, 03:35

The trading experience on a Loopring-powered DEX is similar to that on a centralized exchange, which is almost exclusively ordered book-based.

· Utilizing zero-knowledge proofs, Loopring aims to build open protocols for non-custodial, scalable, order book-based exchanges on Ethereum.
· In a statement, Loopring 3.0's team claims that using zkRollup; it can handle up to 2,025 trades per second while maintaining the same level of security as the Ethereum blockchain.
· LRC/ETH, ETH/DAI, ETH/USDT, and USDT/DAI are the current four trading pairs offered by Loopring.io.
· All holders of LRC can stake the Loopring Token (LRC), so they can earn part of the protocol fees paid by Loopring exchanges. Loopring DEX owners have to stake some LRC to build their reputation and be economically secure. DEX owners can also reduce the protocol fee for each transaction by staking LRC for reputation.

In the Ethereum DeFi space, buzzwords like "layer-2," "zero-knowledge," and "rollups" are used to describe projects aimed at reducing the high costs and relatively slow speeds associated with transacting on the Ethereum blockchain.

The Loopring project falls into this category. In November 2021, it became well known after its token price rose. Perhaps you stumbled upon the Loopring Exchange while trying to avoid high Ethereum transaction fees. Although Loopring has only recently gained popularity, it is one of the older and more established DeFi projects, having started in 2017.

The Loopring Project Ltd., the Loopring Protocol, the Loopring Exchange, and the LRC token make up the Loopring Project. This article discusses what Loopring is, how it works, and some things that set it apart.

Cryptoslate

Loopring

Ex-Google engineer Daniel Wang founded Loopring to make Ethereum transactions easier and cheaper while maintaining security.

Loopring is a protocol used to build decentralized exchanges (DEXs) that are non-custodial and use order books. Routing and processing trades match sellers and buyers at a fair market price without requiring that buyers or sellers provide funds for the transaction. Unlike centralized exchanges, the exchange executes trades on behalf of its users, requiring traders to deposit funds.

Loopring is a protocol that operates on layer-2. It is built upon Ethereum's mainchain (layer 1). Unlike other DEX projects such as Uniswap or SushiSwap, they are built directly on layer-1.

Both models have their advantages and disadvantages. The primary advantage of layer-2 DeFi solutions is that they inherit much of the security of layer 1 while being faster and cheaper than mainchain transactions.

The Vision

Loopring is creating protocols, infrastructure, and user-facing products to make finance a reality in the future. The company believes layer two will become the foundation for this new world of finance. (zkRollups).

Looping's decentralized finance (DeFi) feature frees users from having to compromise on performance or security. Loopring's L2 platform allows traders, swappers, liquidity providers, and payment processors to trade, swap, provision liquidity, and pay while maintaining Ethereum's security.

According to the company, users would be empowered and have full control of their assets in a digital economy. It has been shown that non-custodial technology can be competitive with custodial options in terms of speed, cost, and experience. It aims to make decentralized exchanges (DEXs) as efficient as centralized exchanges and compete with incumbent financial technology providers.

It aims to provide users around the globe with zkRollup exchanges and payment protocols that are best-in-class.

How does Loopring work?

A direct Ethereum transaction (layer 1) will cost the same amount regardless of how much data it contains. However, larger transactions (data-wise) processing requires more computing power, making them more expensive. These solutions use layer-2 transactions to resolve this problem.

The Loopring protocol uses zkRollups, a cryptographic technology that uses layer-2. The Loopring protocol uses zkRollups to achieve its security.

Rollups are similar to carpools. Imagine you and three colleagues commute together every day. Each car must pay $10 in tolls. Each would pay $10 if you were to drive separately. By carpooling, both of you pay $2.50 each.

The blockchain context rolls up batches and executes them outside the layer-1 boundaries. Layer 1 consensus is then reached based on the transaction data. It is this batching process that makes layer 2 transactions less expensive.

Zero-knowledge is what "zk" stands for in zkRollups. ZERO knowledge proofs allow one party to prove that a statement is true to another party without disclosing any information about that statement.

What makes Loopring so special?

The Loopring protocol was developed by the team who built the Loopring Exchange, the first ZKRollup-based Ethereum exchange. The Loopring protocol and its technology were proven viable after this.

Likewise, Loopring is an order book-based platform, distinguishing it from other DeFi trading technologies. The trading experience on a Loopring-powered DEX is similar to that on a centralized exchange, which is almost exclusively ordered book-based. In addition, most DEXes rely heavily on user-generated liquidity to generate liquidity, compared with constant automated market makers (AMMs).

As discussed previously, Loopring is an extremely efficient system. Two hundred transactions can be executed on this network every second, more than 10x the number that Ethereum can perform on its own.

What else does Loopring offer?

The Loopring stack is comprised of the following components:

· Loopring: a decentralized exchange protocol based on zkRollup for Ethereum
· Loopring Relayer: the backend that powers Loopring Protocol; Loopring Relayer is the workhorse in the background
· The Loopring Layer2 App (aka Loopring Exchange) is an exchange based on the Loopring Protocol, developed by the Loopring team.
· Loopring Wallet: a user-friendly, self-contained mobile wallet
· The Loopring token - The Loopring native token is the LRC. Holders of Loopring's LRC can participate in Loopring's governance, participate in Loopring's VIP program, and participate in Loopring's liquidity mining.

LRC can be acquired on all major centralized and DEX exchanges and the Loopring Exchange.

The Loopring protocol

The Loopring program works on top of Ethereum's layer 1 (basic) blockchain. Loopring uses its network to process Ethereum transactions to speed up the Ethereum experience. This is equivalent to constructing a side road off the main highway to reduce congestion.

According to Loopring's developers, this allows it to achieve throughput roughly 1,000 times greater than Ethereum, with transaction peaks of 2,025 per second. In addition, unlike Ethereum's high transaction fees, Loopring charges less than one cent per transaction.

You may have heard that Avalanche and Solana are other blockchain that claims to be faster and more cost-effective than Ethereum. They are called layer 1 blockchains, unlike Loopring. This indicates that they are independent blockchains with their validators, the same as Ethereum.

Loopring's token powers a decentralized exchange that lets you trade Ethereum tokens, including USDC, AAVE, and ETH, at a fraction of the price of other decentralized Ethereum applications, including Uniswap. According to CoinMarketCap, Loopring had a daily volume of $13 million as of December 22, 2021; in contrast, Uniswap, the most popular decentralized exchange (DEX), had a daily volume of $1.3 billion.

The Loopring Token

The native token of Loopring is LRC. Members of Loopring's VIP program and liquidity mining are also eligible for Loopring's governance.

ERC-20 tokens such as LRC are available on Loopring Exchange and other major DEXs and centralized exchanges, including Binance, ByBit, Bittet, and OKX.

In June 2021, LRC tokens were launched. The price of LRC has dropped slightly since its December high. Despite this, there is still growth potential. There are currently 1,330,082,009 LRC coins in circulation, and there are 1,374,513,896 in total.

LRC/USDT, 1D (gate.io)

Why does the LRC price fluctuate?

LRC is highly volatile, as any cryptocurrency is. By the end of October 2021, LRC had soared from $0.38 to $3.70, an all-time high. An analyst attributed the hike in price to rumors that GameStop, the video game retailer driving a social-media-fueled price surge at the beginning of 2021, would use Loopring to create an exchange for non-fungible trading tokens (NFTs) - blockchain-based art. However, there has been no statement of a partnership between the two parties.

Interestingly, some analysts believe the price of LRC is closely tied to the success of Ethereum and rival scaling systems and layer 1 blockchains. For example, people believe that scaling will disappear if Ethereum scales itself. In contrast, Vitalik Buterin, Ethereum's co-founder, believes both advancements will complement one another.

The future of Loopring

Loopring has undergone two major upgrades since its launch in December 2017. In December 2018, one of those initiatives focused on improved trade settlement, new fee models, and more flexible order processing. Similarly, Loopring Exchange, the first DEX protocol based on the zkRollup protocol, launched in December 2019.

As the layer-2 market becomes more competitive, we expect to see more upgrades and new features. Loopring has announced exciting product upgrades in 2022, including Loopring Earn, NFT support, and more. You can find more details in Loopring's most recent quarterly report.

Author: Gate.io Observer: M. Olatunji
Disclaimer:
* This article represents only the views of the observers and does not constitute any investment suggestions.
* Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.

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