While the upgrade to Ethereum 2.0 may seem far from complete, there is help at hand right now. Blockchain-based project Loopring has developed Layer 2, or Companion System, technology to help Ethereum scale or increase capacity—up to 1,000 times—before upgrading. Not only that, the purported scalability improvements will not compromise the security of the Ethereum protocol.
Investors trust Loopring’s technology as the price of the LRC currency surged 8.250% between May 2020 and November 2021 to hit a new all-time high of $3.83. This article discusses everything you need to know about the Loopring protocol (LRC).
What is Loopring Protocol (LRC)?
Loopring (LRC) is an ERC20 token of the Loopring Open Protocol. The purpose of the protocol is to be a hybrid ecosystem. Among other things, it aims to facilitate centralised order-matching transactions through a decentralised on-chain order-settlement exchange.
The Loopring Protocol (LRC) was introduced in August 2017 through an Initial Coin Offering (ICO). Mainnet was deployed in December 2019.
The loop ring protocol incentivises all ecosystem participants to maintain decentralised and non-custodial transactions. To offset major on-chain transaction issues such as throughput, speed, and high transaction fees, Loopring performs all calculations off-chain and uses zero-knowledge proofs to maintain trusted transactions.
The project was founded in 2017 by former Google software engineer Daniel Wang. The main problems Loopring tries to solve are transparency, speed and security. Today, the Loopring Foundation, a non-profit organisation operating in Shanghai, is developing the project.
According to the whitepaper, Loopring is an open protocol for building a decentralised exchange protocol (DEX) on the Ethereum blockchain.
The development team plans to expand the functionality of the Loopring protocol in addition to the NEO and QTUM networks. However, the Loopring team announced that they are not focusing on NEO deployments and have discontinued QTUM deployments.
Loopring’s token (LRC) was first launched in August 2017 during an Initial Coin Offering (ICO) and raised $45 million worth of Ether (ETH). However, due to aggressive regulation in China at the time, a significant portion of the amount was returned to investors. The rest of the funds will be used to develop the Loopring protocol.
Throughout Loopring’s history, the project has been updated five times, with the latest version being Loopring 3.8. In addition, the protocol released its own decentralised exchange in February 2020, using both AMM and order book models.
The team released a new document, the Design Doc, to replace the white paper and provide updated information about the Loopring project.
LRC tokens are used for protocol pool staking and receive 70% of fee sharing. Any user can stake for a minimum of 90 days to receive their proportional share of the fees.
Exchange owners must rely on reputation and security. Exchanges with data availability have 250,000 LRC, and exchanges without data availability have 1 million LRC. When the exchange returns funds to users and closes, funds are cut. Exchanges can also deploy additional tokens to reduce maker/taker fees.
What are Loopring tokens?
The Loopring protocol allows the creation of a new LRx token for each integrated chain, where x represents the blockchain. Loopring relies on a Proof-of-Work (PoW) algorithm to validate and generate new blocks on the network. Miners are rewarded with Loopring tokens.
- LRC: The protocol is known by the Ethereum LRC token. The LRC burn rate increases the scarcity of the token by burning part of the fee from the wallet. It also burns part of the miner fees. As a result, traders holding the Loopring (LRC) cryptocurrency are entitled to lower transaction fees on the Loopring exchange.
- LRN: LRN is the Loopring token that resides on the NEO blockchain. It was distributed to LRC owners as part of several airdrops between July and November 2018.
- LRQ: LRQ is the Loopring token to be hosted on Qtum. As of January 2021, the token has not yet been released, but the process is expected to follow the same schedule and methodology as LRN.
How Does Loopring Work?
Loopring’s key value proposition is the state-of-the-art crypto technology built into its platform. Therefore, it is important to note that zkRollups are the only proposed way to make the Ethereum blockchain more suitable for DeFi applications. Competing cryptographic proposals include xDai, Matic, Optimistic Rollups and Plasma.
ZkRollups are considered promising by some proponents because they use a well-known form of cryptography called zero-knowledge proofs. This technique allows computer programs to make claims about data without actually sharing it.
Using the same technology, zkRollups bundles hundreds of transfers into a single transaction, making fast and cheap transactions possible outside of the Ethereum blockchain in the first place. These transactions are then settled on the blockchain, where zero-knowledge proofs are used to confirm off-chain transactions are correct.
zkRollups on Loopring
To start trading on a Loopring exchange, users must first send their funds to a Loopring-managed smart contract. After that, Loopring will offload the computation needed to complete the transaction from the main Ethereum blockchain. This includes information such as the user’s account balance and order history.
Loopring then settles transactions on the Ethereum blockchain to complete transactions between users, first matched off-chain. These transactions are performed in batches to reduce costs and increase speed. Loopring claims to execute over 2,000 transactions per second using this technique.
Each batch of transactions is added to the Ethereum blockchain with zero-knowledge proof, allowing anyone to reconstruct transactions that happened off-chain. This will enable users to ensure that the transaction is genuine and has not been tampered with by anyone.
Advantages of Loopring Protocol
- Security: The Loopring Protocol was designed to eliminate risk by depositing assets on a centralised exchange, thereby returning control of assets to traders.
- Transparency: Using the Loopring protocol, tokens remain in the user’s blockchain address while trading and transactions are processed. Tokens stay on the user’s blockchain address throughout the transaction/transaction life cycle. Loopring will also prevent situations where users are locked out by allowing users to transfer tokens after an order is placed and process an automatic adjustment of order amounts during settlements.
- Liquidity: Loopring plans to stimulate competition and break up existing market share differences by becoming an open-source solution that encourages broader participation. It allows any company to become an independent decentralised exchange using the Loopring software and have the option to join the DEX network to share its liquidity with other participants.
Where to Buy LRC Tokens
The token is available on several crypto exchanges and brokerages. The exchange includes Binance, Coinbase, KuCoin, Gate.io and Huobi.
Loopring (LRC) Competitors
Loopring’s main competitors are cryptocurrency exchanges such as Coinbase, Webull, and eToro. These options can provide quick deals but may not be secure. DEXs like UniSwap and SushiSwap might be safe, but they might not be the most efficient way to buy cryptocurrencies.
Loopring hopes to solve the problem of both exchanges. It offers fast transactions through the security of blockchain technology. However, this may not be the fastest way for investors to get hold of cryptocurrencies, and it doesn’t have as many users as other exchanges. Nevertheless, if it finds a way to facilitate transactions faster and get more users, it has the potential to become one of the largest decentralised cryptocurrency exchanges.