🤔 What is Loopring ?
Loopring is an open protocol for building high-performance decentralized exchanges.
Loopring operates as a public set of smart contracts responsible for trade and settlement, with an off-chain group of actors aggregating and communicating orders.
Although blockchains inherently provide trustless trading, there are problems with building exchanges purely on-chain. Specifically, processing speed, throughput, and computation costs.
Performing all exchange steps on-chain can be prohibitively expensive, or impossible to emulate centralized exchange speed and performance. For these reasons, Loopring has moved almost all data and computation off-chain but leverages zero-knowledge proofs to retain trust-minimized properties.
💡 What role does LRC token play ?
LRC is the native cryptocurrency of Loopring. It is used for:
- Transaction fee: Users pay LRC tokens as transactions fees to perform trades on Loopring.
- Developers building and running DEX on Loopring have to stake min 250K LRC tokens. These tokens are slashed in case the DEX operators act dishonestly ie not submitting transaction data in a timely manner, not allowing users to withdraw their funds etc.
- Exchanges can also stake additional tokens to reduce the maker/taker fees.
- Governance: Loopring team has plans to hand over the governance of Loopring protocol and treasury to LRC holders in the future.
📝 Origin of Loopring
Loopring (LRC) was founded in 2017 by software engineer Daniel Wang.
After getting a Masters’s degree in Computer Science from Arizona State University, Daniel Wang worked as Lead Software Engineer at medical manufacturing company Boston Scientific before working at Google as Tech Lead and Senior Software Engineer.
The whitepaper of Loopring was launched on September 8, 2018.
The initial coin offering (ICO) for Loopring took place in August 2017 and raised $45 million. However, most of the funds raised were returned to ICO participants due to China’s tightening regulations. The rest was used for development of the protocol by the Loopring Foundation, a non-profit operating out of Shanghai.
In December 2019, the protocol transitioned from Loopring 2.0 to Loopring 3.0, leading to an almost 1000x improvement in efficiency.
After struggling to find third parties to build DEXs on the protocol, Loopring released its own decentralized exchange in February 2020. The non-custodial Loopring Exchange is based on both order book and automated market maker (AMM) trading and also functions as a payment app.
👴🏻 Daniel Wang - Founder
The founder and current CEO of Loopring Foundation, which manages the development of Loopring protocol, is Daniel Wang, a software engineer and entrepreneur based in Shanghai, China.
Wang has a bachelor’s degree in computer science from the University of Science and Technology of China, as well as a master’s degree in the same field from Arizona State University.
Prior to starting work on Loopring, Wang has held multiple managerial and executive positions in major tech companies: he was a lead software engineer at the medical device manufacturer Boston Scientific, the senior director of engineering, search, recommendation and ads system at the Chinese e-commerce giant JD.com, as well as a tech lead and senior software engineer at Google.
Wang has also co-founded several companies: Yunrang (Beijing) Information Technology Ltd. and the cryptocurrency services firm Coinport Technology Ltd.
😌 What problems does it solve ?
- Fragmented liquidity: Every exchange has its own stand-alone order book which is not shared with other competitor exchanges. Whereas, all DEXs built on Loopring share a common order book. This results in deep order book which can support large orders with little slippage and has lowest spreads.
- Cheap, scalable and fast: Loopring uses ZKRollups that allows Loopring to execute thousands of trade for less than 1 cent.
- No trusted third party:
- Users do not have to trust Loopring team. The code is open source, anyone can see and verify how the code works.
- Users are in control of the funds at all times they do not have to send funds to a centralized exchange for trading.
- Government regulation: Most governments strictly regulate crypto exchanges as they are threat to the existing well-established players in the market. However, governments cannot regulate a decentralized exchange built on Loopring.
🤖How does it work ?
The following ecosystem participants jointly provide all functionalities a centralized exchange has to offer:
- A common wallet service or interface that gives users access to their tokens and a way to send orders to the Loopring network. Wallets will be incentivized to produce orders by sharing fees with ring-miners.
- With the belief that the future of trading will take place within the safety of individual users’ wallets, connecting these liquidity pools through Loopring protocol is paramount.
- Consortium Liquidity Sharing Blockchain/Relay-Mesh:
- A relay-mesh network for order & liquidity sharing. When nodes run Loopring relay software, they are able to join an existing network and share liquidity with other relays over a consortium blockchain.
- Notably, relays need not join this consortium; they can act alone and not share liquidity with others, or, they can start and manage their own liquidity sharing network.
- Relays are nodes that receive orders from wallets or the relay-mesh, maintain public order books and trade history, and optionally broadcast orders to other relays (via any arbitrary off-chain medium) and/or relay-mesh nodes.
- Ring-mining is a feature – not a requirement – of relays. It is computationally heavy and is done completely off-chain.
- Relays are free in:
- How they choose to communicate with one another,
- How they build their order books,
- How they mine order rings (mining algorithms).
- Loopring Protocol Smart Contracts (LPSC):
- A set of public and free smart contracts that checks order rings received from ring-miners, trustlessly settles and transfers tokens on behalf of users, incentivizes ring-miners and wallets with fees, and emits events.
- Relays/order browsers listen to these events to keep their order books and trade history up to date.
- Asset Tokenization Services (ATS):
- A bridge between assets that cannot be directly traded on Loopring. They are centralized services run by trustworthy companies or organizations.
- Users deposit assets (real, fiat or tokens from other chains) and get tokens issued, which can be redeemed for the deposit in the future. Loopring is not a cross-chain exchange protocol (until a suitable solution exists), but ATS enables trading of ERC20 tokens with physical assets as well as assets on other blockchains.
- Users initiate trading by placing their order via a Loopring wallet.
- Users sign with their private wallet key which is bound to one’s wallet address. It is important to stress that this does mean that the user’s funds will be transferred by this act. The reason for this is the fact that Loopring operates only as an “interface” for managing one’s funds stored in the wallet, in the manner similar to what websites or apps do when offering insights into one’s bank account.
- Placed order is communicated to the smart contracts which are created on the platform which support them (such as Ethereum, Qtum, NEO and others). Orders are also forwarded to off-chain relay nodes and matched in the best possible manner, as part of Loopring’s “order-matching-as-a-service” system. Once this is done, the orders are confirmed and prepared for execution.
- With the help of smart contracts, the funds in wallets are exchanged for the preferred currency units one wants to trade with. At the same time, the order book is managed by the off-chain nodes and its status is broadcast to ring miners.
Loopring (LRC) achieves better performance than traditional decentralized exchanges by creating a “fast lane” where transactions are aggregated and executed off-chain to avoid Ethereum’s network congestion.
This is done through the use of a Layer-2 scaling solution called zkRollups, which bundle lots of transactions together off-chain before submitting them to the Ethereum blockchain as a single transaction.
By this method, the number of transactions Loopring submits to the Ethereum network to be settled is greatly reduced, making trades on Loopring much faster and cheaper. This approach is incredibly efficient and places far less strain on the Ethereum network as well.
The “zk” in zkRollup stands for “zero-knowledge” and refers to the type of proof that Loopring must provide to verify that the off-chain transactions are accurate. A good way to think about ‘zero knowledge’ proof is that its kind of like showing someone the answer to a calculation, without revealing the equations that were used to reach it.
🤑 How much money does the project have for future development ?
- The project raised 45 million USD during ICO in Aug 2017.
- The project holds around 20% of the total LRC tokens.
- 20% of all the trading fees goes to Loopring treasury.
LRC token have a fix max supply of 1,374,513,896 tokens. These tokens have been distributed as follows:
Of the total supply, 50% of the tokens allocated to investors had no lock-up. 30% of tokens were allocated to the Loopring Foundation, with 20% earmarked for the founding team members subject to a 2-year lock-up period.
LRC has a fix supply and 10% of the trading fee paid in LRC tokens is burned. This makes LRC a deflationary token.
🧐 Indicators to watch out for
- Amount transacted:
- Transaction count:
- Unique receivers and senders:
- Twitter followers: