Decentralized exchanges have appeared as a dominant solution for most users who like to keep their transactions secure. These exchanges eliminate the need for a centralized authority. However, these exchanges aren’t popular enough among regular traders because their performance is affected by the platform they’re running on.
Loopring is an Ethereum-based protocol dedicated to fixing this problem by providing 1,000 times faster transaction speed than its parent platform (Ethereum). Loopring came into the limelight when its price surged significantly in November 2021.
What is Loopring?
Loopring is a protocol dedicated to supporting faster and cheaper trading solutions on Ethereum without compromising security. It brings a set of tools for developers who want to build decentralized exchanges on Ethereum.
Unlike other decentralized exchanges, Loopring is an order book-based decentralized exchange due to which it doesn’t have to rely on user-generated liquidity. Loopring exchange can process around 200 trades per second.
Loopring offers a set of solutions for its users.
- Loopring Exchange – It’s a unique kind of decentralized exchange built using the Loopring protocol. It maintains an order book like standard centralized exchanges while providing an excellent level of security.
- Loopring Protocol – Loopring introduces a zkRollup protocol for developers who want to build decentralized exchanges on Ethereum.
- Loopring Wallet – Users can store their assets in the Loopring wallet so they may easily access their funds whenever needed.
- Loopring Relayer – Loopring Relayer handles the functions that are required to successfully run the Loopring protocol.
Important Features of Loopring
Loopring enables users to develop automated market makers and decentralized exchanges by combining zero-knowledge (ZK) circuits and Ethereum smart contracts. The users can build ZK-Rollups with the help of Loopring Protocol.
ZK-Rollups collect data from different resources without sharing any identifying information. The entire process is supported by zero-knowledge proofs, a famous type of cryptography. Thus, it supports trades outside the Ethereum network. It ensures the accuracy of off-chain transactions with the help of zero-knowledge proofs.
Many traditional websites also use a zero-knowledge proof mechanism for verifying information. For example, government agencies use this mechanism to verify whether a user is above 18 or not without asking them about their exact birth date. Loopring incorporates this mechanism to complete a huge number of transactions instantly.
Loopring Brief History
Daniel Wang, a former Google software engineer, launched Loopring in 2017. The Loopring team raised 120,000 Ether tokens (around $45 million) during an initial coin offering in 2017. However, the team had to return a huge amount of funds to the investors due to strict regulations by the Chinese government.
Wang said that the team had to return around 80% of the funds to the investors. Still, the team kept working on the project with the remaining amount. And they successfully launched the project.
The network started offering 1000 times better efficiency when it transitioned from Loopring 2.0 to Loopring 3.0 in December 2019. The network also integrated oracles by partnering with Bitcoin.
In February 2020, the Loopring team launched its own decentralized exchange that supports both Automated Market Maker and order book trading.
How Does Loopring Work?
As it’s mentioned, Loopring uses zkRollups for executing trades. It’s considered more suitable than other cryptography proposals including Matic, xDai, Plasma, and Optimistic Rollups.
Loopring is a layer-2 platform that uses zkRollups for processing transactions outside the Ethereum network. The rollups are similar to carpools which can process a huge number of transactions with a reasonable transaction fee.
zkRollups on Loopring
The users need to transfer their assets to one of the Loopring smart contracts if they want to trade crypto pairs on the Loopring exchange. The Loopring exchange maintains information about order history and the user’s account balance.
The Loopring exchange initially collects the details of trades between users and then updates the information on the Ethereum blockchain. Thus, it offers fast transaction speed with a reasonable trading fee. With this method, Loopring can process around 2,000 transactions per second.
Order Rings
On most exchanges, the users exchange a crypto token for a particular crypto token. It means if a user is placing a buy order in the MATIC/ETH pair, there needs to be a buyer for ETH within the same pair to complete this transaction. But Loopring has introduced a circular trading system, called order ring, that consists of multiple orders.
There are approximately 16 orders in each order ring. In this system, the users can easily get their desired tokens without having to wait for a buyer within the same pair.
Loopring Tokenomics
LRC is the native token of Loopring that can be used for the transfer of value within the network. LRC is also used for paying trading fees. With a circulating supply of 1.33 billion tokens, LRC has a market cap of $473.4 million.
It has a maximum supply of 1.37 billion tokens that will be used to manage inflation. LRC ranks among the 100 best cryptocurrencies in terms of market cap.
Conclusion
Loopring is an Ethereum-based project that enables users to build decentralized exchanges on its platform. It provides support for automated market maker and order book trading. The network uses zkRollups to safely complete transactions outside the Ethereum blockchain. The details about the transactions are updated on Ethereum later on.
Loopring also has its own decentralized exchange that uses order rings to provide fast trading solutions to users. If you need more information about how Loopring works, feel free to get in touch with us.
