Loopring

What is Loopring (LRC)?

Loopring is an open-source platform built to host fast, secure, Ethereum-based decentralized exchanges or asset transaction infrastructure. The Loopring protocol can be used to build cheap-to-use, non-custodial exchanges and payment systems.

Trading of assets like equities and cryptocurrencies mostly takes place on centralized exchange platforms. These platforms are operated by for-profit companies that often take custody of user funds, as well as traded assets.

Trading traditional assets like equities can have even more downsides. Internalizers known as market-makers compete for retail investors’ trading data to front-run them in a Bernie Madoff-invented practice called Payment For Order Flow. PFOF is still legal in the U.S. Some of these internalized stock trades don’t even see the light of day on so-called lit exchanges, being routed instead to dark pools. These dark pools prevent stock trades from affecting prices on exchanges. They were originally meant for negotiated trades in extremely large quantities of shares.

Loopring attempts to provide a hybrid solution to these problems. It does it by combining the features of centralized order matching with decentralized, immutable, instant on-chain settlement.

Operating all the way across the stack, Loopring is a multifaceted Ethereum effort, ranging from protocol to product.

When Was Loopring Launched?

Loopring began in 2017 with the vision of being blockchain-agnostic and saw initial deployment on Ethereum via the LRC token and on NEO via LRN. The NEO effort has paused, and a similar launch atop QTUM never came to pass.

Loopring’s 2017 ICO also did not go smoothly. The initial coin offering raised 120,000 ETH worth $45 million at the time. However, the regulations passed by Chinese authorities at the time saw around 80% of the funds returned to investors.

Loopring has gone through several major iterations. Loopring 2.0, which allowed more efficient ring settlement and a new fee model, went live in December 2018.

Loopring 3.0 saw the protocol give Ethereum its first zero-knowledge rollup DEX protocol to the Ethereum mainnet in December 2019.

Who are the Founders of Loopring?

Loopring was founded by Daniel Wang, a software engineer from China and former employee of Google. Wang worked as a CEO of Loopring until early 2022, first stepping down into an advisory capacity and moving on later during the year.

Loopring partnered with gaming giant GameStop in early 2022, providing the infrastructure for the GameStop NFT Marketplace. This partnership had been speculated upon months prior, with Reddit users digging through Loopring’s Github code for clues. Users of the GameStop NFT Marketplace have access to high performance and speeds, as well as provable ownership of assets and the security of Ethereum, thanks to Loopring. Having stepped down from his leadership role at Loopring, Daniel Wang then co-founded zkEVM platform Taiko. Taiko represents a joint effort by Wang and former Loopring colleague and ex-GameStop Head of Blockchain, Matthew Finestone.

How Does Loopring Work?

While it does have a decentralized exchange (DEX) of its own, Loopring is more than that. It’s a modular protocol for building decentralized exchanges.

According to Wang, Loopring treats a DEX as a combination of frontend, backend, and proof-generating operator. Exchanges or marketplaces working with Loopring can choose to perform all three roles or provide one or two roles and team up with specialists in the remainder. Fees are also shared on a bespoke basis.

The Loopring protocol is a collection of Ethereum smart contracts and ZK circuits. These describe the construction of secure, scalable order book-based DEXes, AMMs (Automated Market Makers), and payment apps.

The Loopring protocol, considered the first rollup protocol deployed on Ethereum, is the first element of these offerings. Its fundamental purpose is to provide high performance without compromising on security.

The Loopring relayer, also known as the Loopring operator introduced in Loopring 3.0, is the second element. The relayer interacts with the protocol to make a zkRollup run and hosts and updates the off-chain Merkle tree. It also creates rollup blocks, generates zkSNARK proofs, and publishes data and proofs to Ethereum.

The Loopring protocol is agnostic to the relayer, but the canonical Loopring L2 and products atop it are serviced by the Loopring relayer. The Loopring relayer API can be used by builders, users, and other applications seeking gas-free, high-speed trading and transfers on Ethereum.

Meanwhile, the Loopring Layer2 App is a high-performance, non-custodial exchange featuring AMM and an order book. It is built on the Loopring platform and run by the Loopring Relayer. The app allows users to transfer assets extremely fast, provide liquidity to AMM pools or order books, and swap tokens even at high volumes.

Finally, Loopring has its own smart cryptocurrency wallet with L2 scaling and inbuilt Loopring zkRollup. It’s one of the best places to store your LRC, but we’ll get to that later.

What Makes Loopring Unique?

One of Loopring’s most defining factors is that it allows for extreme performance and scaling without sacrificing Ethereum security. Loopring claims that its throughput exceeds 2000 transactions per second, and these transactions cost a fraction of a cent.

ZkRollups are one of the most secure scaling mechanisms currently available in the blockchain industry. The benefit of zkRollups is that users can access their assets in all circumstances. According to Loopring, no person, company, or state can come between the user and their assets.

The Loopring protocol does not use external validators, consensus, or crypto-economic assumptions. All actions are correct by construction, or else they simply cannot happen. As a result, all exchange operators are constrained to purely protocol-described behavior.

Loopring, therefore, relies purely on Ethereum’s security and Zero Knowledge cryptography.

How is the Loopring Network Secured?

As alluded to above, Loopring leverages Ethereum’s security and adds the extremely powerful zkRollup to the mix.

First of all, Ethereum is currently secured by proof-of-stake (PoS) consensus. It used to be proof-of-work (PoW), but after plenty of accusations about being power-hungry, Ethereum devs took the plunge to the far cleaner PoS.

PoW is generally responsible for environment-focused criticism of cryptocurrency. It’s probably justifiable since Ethereum’s consumption has been down 99.95% since its shift.

PoS, meanwhile, relies on economic incentives and disincentives rather than warehouses full of GPUs. Ethereum validators have to stake a minimum of 32 ETH to the protocol, which they risk losing if they misbehave.

What are zkRollups?

ZkRollups are one of many options for layer 2 networks to provide performance and scalability to congested blockchains like Ethereum. As their name implies, zkRollups are based on zero knowledge cryptography.

Zero Knowledge means that a verifier learns nothing about the data or transactions being verified, aside from whether they are correct. When this correctness is assured, a proof can be created.

ZkRollups bundle a large number of transfers carried out on a network together into a single transaction. All of these transfers are deconstructed and verified via a smart contract.

A zero knowledge proof is used to present and publicly record the block validity. Since the amount of data from many transfers is compacted into a single transaction, the performance increases, and computing and storage requirements decrease.

What is the Use of LRC?

LRC is the native token of the Loopring ecosystem. One of its main uses is the payment of fees for trades and swaps and the minting of NFTs on Loopring, although these fees are very low.

LRC is also used by companies that utilize the Loopring protocol to run an exchange. To do so, they have to purchase and stake a certain number of LRC tokens.

However, LRC staking is not just limited to exchange operators. Anyone can stake LRC to earn a percentage of the Loopring protocol fees. In fact, staking LRC can also lead to transaction fee discounts on the Loopring Layer2 App.

DeFi enthusiasts can also use LRC in liquidity pools. Since Loopring features both order books and AMM, LRC holders offer a valuable service to the Layer2 App by providing liquidity.

Liquidity providers earn a percentage of the trading fees earned by the pool to which they provide liquidity. They also receive LP tokens that they can use to yield farm.

Who Controls Loopring?

Loopring is controlled by the Loopring Foundation and the Loopring Decentralized Autonomous Organization (DAO). The Loopring Foundation is a blockchain research organization building protocols, infrastructure, and user-facing DeFi products for the future of finance.

The current CEO of Loopring is Steve Guo, who took the project’s reins after founder Daniel Wang stepped down in early 2022.

Guo was previously the CTO of Loopring, having joined the project after founding blockchain company Dora Network. Prior to founding Dora Network, Guo also founded PowerMo Information Technology Limited, which was acquired by NYSE-listed Cheetah Mobile.

Notably, Steve Guo was admitted to the University of Science and Technology of China at the age of 15. After graduating with a Ph.D. in computer science in 2005, he began his career at Intel.

How Much Is LRC In Circulation?

Loopring has a circulating supply of 1.33 billion LRC with a maximum supply of 1.375 billion LRC.

The LRC supply is created by ring mining, and nodes on the network are rewarded in LRC for combining orders in circular trades called rings.

70% of trading fees belong to users who stake LRC, with a further 20% going to the Loopring DAO. The final 10% of fees are burned, giving LRC a deflationary element.

How Do You Buy LRC?

LRC is an extremely popular cryptocurrency with considerable interest from retail investors, given its technology and partnerships.

As a result, it is listed on the majority of top-tier cryptocurrency exchanges, but you can also buy it on Ethereum-based decentralized exchanges.

Perhaps best of all, Loopring’s own wallet has built-in fiat on-ramps. So, depending on where you live, you can buy LRC directly from your wallet app using a credit card.

Is It Possible to Buy Loopring Instantly?

Loopring is a layer 2 scaling solution for Ethereum, so it wouldn’t be great if buying it were a slow process. Purchasing LRC directly from your Loopring wallet or the Loopring Layer2 App is also extremely fast, although the former can sometimes be delayed by fiat processing time.

How Do You Store LRC?

As mentioned, one of the best ways to store LRC is by using Loopring’s own layer 2 counterfactual wallet, available for both iOS and Android devices.

The Loopring Smart Wallet is the first Ethereum wallet with zkRollup scaling baked in. The wallet can be deployed on layer 2, bypassing main layer Ethereum and a potentially costly creation fee.

Users who want to engage directly with Ethereum can also enable L1 within the Loopring Wallet, although that will also need to be activated.

The L2 wallet is extremely popular with users since centralized exchanges allow LayerSwap for withdrawals. This means you can withdraw LRC from your account directly to your Loopring L2 wallet at a participating CEX without using main layer Ethereum.

If you prefer browser-based wallets, the highly rated GameStop Wallet is a great option due to its in-built Loopring layer 2 support. In fact, Loopring’s own blog has a comprehensive guide on how to safely and correctly set up your GameStop Wallet.

Loopring Energy Consumption

Loopring is a layer 2 scaling solution and relies on Ethereum for its consensus. While it does deploy nodes dedicated to ring mining, its dependence on Ethereum for consensus means that its energy requirements are extremely low.

Is LRC a Good Investment?

Loopring is an extremely popular cryptocurrency, seen as one of the leading layer 2 scaling technologies in the industry.

While the price of LRC experienced significant volatility across late 2021 and early-to-mid 2022, the project itself continues to develop. Much of the price movement seen in this period could be attributed to its partnership with retail favorite GameStop.

The fruits of this partnership can now be seen by Loopring’s technology playing a crucial role in both GameStop’s wallet and the flourishing GameStop NFT Marketplace.

The GameStop partnership could be seen as a blueprint for Loopring’s adoption by other forward-thinking innovators looking to build exciting products. To this end, Loopring has also been granted a patent for digital asset transactions that solve some of the problems referred to earlier in this article.

The LRC token itself stands to prosper as Loopring technology gains more and more adoption. When exchange owners develop with the Loopring protocol, they need to stake upwards of 250,000 LRC. As more and more partners emerge, so too can the demand for the LRC token.