Terms like “layer-2,” “zero-knowledge proofs,” and “rollups” are presumably relevant to anyone who has spent time in the Ethereum DeFi sector. These words in the context of Ethereum often refer to initiatives that address the high prices and comparatively sluggish transaction speeds in the Ethereum blockchain.
High transaction fees and congestion still exist on the blockchain even after the Ethereum merge, which marked the long-awaited switch to a proof-of-stake consensus process. A protocol that seeks to address these issues is loopring. This article has all aspects of loopring explained.
Overview: Loopring
So, What is loopring? Loopring is an Ethereum-based program that intends to motivate a global user network to run a platform that makes it possible to establish new kinds of crypto asset exchanges. One of the most recent decentralized finance (DeFi) protocols is loopering, which offers this platform using a variety of cryptocurrencies, including its own LRC token.
Since its inception in 2017, loopring has been committed to eliminating the two main drawbacks of decentralized cryptocurrency exchanges; decreased efficiency and increased costs compared to centralized competitors. It introduced a cryptocurrency exchange platform Loopring.io in March 2020.
Zero-knowledge rollup, or zkRollup, is a type of cryptography that makes Loopring’s platform stand out. It helps to avoid the slow speeds and high costs associated with decentralized exchanges on Ethereum. This feat is accomplished by removing the majority of transaction processing from the frequently overburdened blockchain, which serves as the foundation of cryptocurrency trading.
What is loopring token?
So what is LRC token? The Loopring network’s utility token is the loopring crypto coin, also known as LRC. It is an ERC-20 token. It drives all network operations, including payments, benefits, and liquidity. Users must pay transaction fees in the form of LRC whenever they trade on the Loopring network.
The Ethereum token Loopring (LRC) promotes itself as “an open-source, audited, and non-custodial exchange protocol.” By utilizing zero-knowledge proofs (ZKPs), a technique for strengthening cryptocurrency privacy, the protocol seeks to enable anyone to develop non-custodial, decentralized exchanges on top of it. ZKPs ensure users always have control over assets.
The maximum quantity of loopring coin (LRC) is 1,374,513,896 LRC, with a circulating supply of 1,245,991,469 LRC. Since the Loopring protocol’s inception, more than 20 million LRCs have been burned, and any locked-up LRC for running exchanges is currently off the market.
Who owns Loopring crypto?
Daniel Wang, the CEO and founder of Loopring, had previously founded the centralized exchange Coin Port in 2014. Unhappy with the potential of the centralized model, he and his team— Jay Zhou, the company’s chief marketing officer, and Johnston Chen, the chief operating officer—began developing the Loopring platform.
In 2017, Loopring started an initial coin offering (ICO), raising 120,000 Ethereum, equivalent to $45 million. However, loopring had to return a significant amount of the funds during the ICO due to tighter restrictions governing these offerings at the time in China.
The remainder was utilized by the Shanghai-based Loopring Foundation, a nonprofit organization, to develop the protocol. The protocol changed from Loopring 2.0 to Loopring 3.0 in December 2019, which increased efficiency by about 1000 times. In the same month, it collaborated with Bitcoin to include oracles.
Unable to find other firms willing to build DEXs-based technology, Loopring created its decentralized exchange In February 2020. The non-custodial Loopring Exchange, which also serves as a payment app, is built on orderbook and automated market maker (AMM) trading.
How does loopring work?
So how does loopring work? Here is a simplified explanation. The amount of data in any transaction determines the costs to perform it directly on Ethereum (layer 1). The more extensive data transactions demand more processing power, which drives up the expense. In order to address this, layer-2 solutions try to conduct transactions outside of layer-1.
Loopering is a Layer-2 protocol that uses a type of cryptography called zkRollups. In zkRollups, the “zk” stands for “zero knowledge.” Zero-knowledge proofs are cryptographic techniques that let one party convince another that a claim is valid without disclosing any details.
When using a base layer blockchain like Ethereum, rollups are a scaling system that gathers batches of transactions before “rolling” them into a single transaction. Similarly, zkRollups combines hundreds of transactions into a single transaction, enabling quick and inexpensive exchanges outside the Ethereum network.
Users must first move funds to a smart contract run by the loopring protocol to start trading on a Loopring exchange. The computation required to complete deals is then moved off of the core Ethereum blockchain by Loopring exchanges.
This information includes things like order history and account balances for particular users. To complete deals between users who initially matched off-chain, Loopring settles transactions on the Ethereum blockchain.
Unlike a conventional, centralized exchange, Loopring is an open-source protocol. Order matching is open to all entities in this protocol. The order matching system led to the development of two distinct types of Loopring exchange services fees: transaction fees and “ring-matching cost-saving” fees.
Another essential factor is that loopring is constructed on a set of smart contracts, each carrying out distinct operations.
- Mix-matched contracts control the status of orders in the loop, track volume and prices, and ensure communication with other smart contracts.
- Order Contracts keeps track of cancellations and order databases.
- Registration Contracts oversee token deposits and services for exchanges using the Loopring platform.
- Stats Contracts calculate exchange volumes and prices between token pairings.
What is the aim of loopering?
Most cryptocurrency exchanges occur on centralized exchanges controlled by private businesses that manage user funds and match trade orders. However, there are several risks with using these platforms, such as Lack of security, transparency, and liquidity.
It gave birth to Decentralized exchanges as a response to deal with these problems. Users in decentralized exchanges maintain ownership of their private keys by dealing directly with the underlying blockchain, setting them apart from centralized exchanges.
So, loopring aims to develop a hybrid platform that includes critical elements of both decentralized and centralized exchanges. With the use of hybrid approaches, the protocol seeks to preserve the benefits of decentralized exchanges while eliminating their inefficiencies.
Some key features of loopring
Exchange risk and counterparty reduction
Members of loopring do not need to transfer tokens to exchanges for custody. Tokens always stay in their blockchain addresses during a transaction. Even after placing orders, members can move their tokens around because Loopring will automatically modify the trading quantity at the starting price.
Decentralized
A decentralized smart contract on the blockchain automatically executes orders while keeping trades’ funds in their possession.
Cross-chain protocol
Loopring’s aim was to be independent of any particular blockchain. All ERC20-like tokens on a given blockchain can trade under loopring protocol as long as the network supports smart contracts.
Ring matching
Loopring is a decentralized, automated trading intelligence interface that connects blockchains and cryptocurrency exchanges. It utilizes the user’s balance sheet to generate liquidity within the platform and split simultaneously placed orders into smaller pieces across all market venues. It permits users to realize liquidity many times greater than that directly available in the market.
What Makes Loopring Unique?
Loopering addresses one of the main problems plaguing the Ethereum blockchain. Even after the Ethereum Merge, it still has issues with network sluggishness and high transaction costs. Through its payment method, Loopring enables all Ethereum users to transact without having to pay outrageous Gas fees.
Loopering combines the advantages of both centralized and decentralized cryptocurrency exchanges. Its creative use of zkRollups enables it to operate more efficiently and affordably than any other decentralized exchange established on the Ethereum blockchain. It also enhances the security of centralized exchanges.
Algorithmic traders can now apply high-frequency trading tactics on DEXs (Decentralized exchange) for the first time thanks to Loopring’s high-level performance capabilities. A Loopring uses a cryptographic technique that eliminates frontrunning. The fact that loopring is orderbook-based distinguishes it from other trading technologies used in the DeFi market. Trading on a Loopring-powered DEX is more similar to trading on centralized exchanges.
Loopring protocol is audited, open-source, and independent of any outside validators; nobody, including businesses and governments, can interfere with users’ access to their cryptocurrencies. Users receive digital receipts for all transactions and withdrawals, guaranteeing that funds are always retrievable, even if there are problems with the decentralized exchange.
The Loopring protocol can complete up to 2,000 transactions per second, with each trade on the Layer-1 blockchain costing between 450 and 800 GAS. As the Loopring Foundation continues to refine the fundamental Loopring Protocol, these statistics are certain to become more efficient regularly.
It’s noteworthy that zkRollups are only one suggested method for improving the Ethereum blockchain’s suitability for DeFi applications. Plasma, Optimistic Rollups, xDai, and Matic are some competing cryptography proposals.
Customers’ crypto assets run the risk of having their security compromised because they typically give centralized exchange authority control of their private keys. The end consequence is a steady stream of well-publicized hacking attempts against the servers that house the funds amounting to millions of US dollars. Loopring promises to give traders back control over their holdings to avoid the risks of a centralized exchange.
What Gives Loopring Value?
The loopring price or value is affected by several standard variables, including project news and development information, market sentiment, the movement of cryptocurrencies on exchanges, and the state of the economy overall.
The deflationary nature makes loopring price prediction difficult. Additionally, any tokens issued by exchange operators whose stakes are penalized or whose fees are burned will reduce supply, impacting the price and market capitalization.
At the end of October 2021, the loopring stock price exploded. Analysts attributed the price increase to rumors that GameStop, a video game retailer, would utilize loopring to establish a market for trading NFT art.
GameStop did launch its Loopring NFT marketplace. However, this did not lead the price to spike back up to previous highs. In line with the majority of tokens, LRC price in 2022 fell precipitously during the bull market in cryptocurrencies, reaching as low as 30 cents as of September 2022.
Conclusion
One of the first layer 2 solutions to use zkRollups to enhance the usability of the Ethereum blockchain was loopring. But since then, Ethereum has advanced significantly and has started the Merge to increase scalability. Still, Loopring offers a decentralized exchange that operates quicker and with cheaper fees than alternative options available.
Evidently, loopring is stepping into the world of centralized and decentralized exchanges and gives Loopring the appearance of facing some formidable competition. However, Loopring intends to work with these exchanges to implement much-needed liquidity for users.
The loopring protocol is constantly developing and introducing new features, thanks to a sizable community. The Loopring protocol has the ability to fundamentally alter how future DEXs are created in a crypto industry that is grappling with high transaction fees and slow scaling rates.
