Hey PH community,
For the recent few days, I've been delving into one of the most interesting crypto projects I know, which is Loopring.
I believe it is a project that deserves to be a subject of an in-depth review which I'm going to make right now.
Loopring project review [Part 1]
Contents:
1 What is Loopring?
2 What is "The Better Than CEX guarantee"?
3 What is LRC token and where is its use?
4 How does Loopring work?
5 The team behind the project
1 What is Loopring?
Perhaps, the most common idea about Loopring is that it is a nice decentralized exchange (DEX).
While it's correct that Loopring offers a DEX among its services, Loopring in itself is NOT a DEX.
In fact, it is a protocol that allows anyone to easily create their own DEX without going through the hassle of coding everything from the ground up.
The goal of the project is to be the foundation of a new era of DEXs which will be faster, offer more liquidity, and provide best security of user funds compared to centralized exchanges.
However, unlike most other DEXs, those built on Loopring are characterized by order books. This is important to note because most Ethereum-based DEXs like UniSwap are automated market makers that means they use the ratio between assets in each pool to determine their price.
You could say that DEXs built on Loopring protocol look like regular centralized exchanges (CEX) while offering a far higher level of security.
Another thing, the Loopring protocol is "Blockchain agnostic" meaning it is not only tied down to the Ethereum blockchain, but it can also be deployed to other chains such as NEO or QTUM.
Since its 2017 release, Loopring made great leaps in development, and with upgrading to Loopring 3.0 earlier this year, it has become possible to execute over 2000 transactions per second at an Ethereum gas cost as little as 1 cent per trade.
2 What is "The Better Than CEX guarantee"?
Loopring protocol seeks to provide decentralized exchanges with better guarantees than centralized exchanges, or what so-called "The Better Than CEX guarantee".
In order to achieve that, Loopring protocol imposes severe rules on DEX owners to ensure that they will keep acting honestly with their users, and with upgrading to Loopring 3.0, users will stay in control of their funds without having to trust any entity.
Let's imagine the following scenario:
You decided to use a Loopring-based DEX, then you deposited some funds to the DEX you're trading on, and after you've done trading you decided that it's the time to withdraw your funds...
When you make a request to withdraw your funds back to your wallet, the DEX must fulfill this request within 15 minutes. If the DEX fails to return your funds back within this period, ALL other functions on the DEX will stop working except for withdrawal requests.
Moreover, if the DEX has still not moved your funds back to your wallet within 24 hours, you will be able to go in and manually transfer your funds.
This system is specifically designed by the protocol to ensure that whatever happens to the DEX, users will always have a way to recover their funds.
source3 What is LRC token and where is its use?
LRC is an ERC-20 token that is built on top of Ethereum and it's the native token in the Loopring ecosystem.
According to Coingecko, there are currently 1,188,503,730 LRC tokens in circulating supply with a max supply of 1,374,513,896. There is no inflation, in fact, it is deflationary due to some scenarios in which LRC tokens are burned.
Loopring had an ICO back in August 2017 during which they sold about 50% of the total supply at a price of roughly $ 0.07
Although the epic crash of 2018, LRC seems to have recovered quite nicely hovering around $0.20
LRC token is mainly used for staking in the Loopring protocol.
In fact, there are actually three types of stakes on Loopring:
- To run a DEX: As mentioned anyone is welcome to run their own DEX on Loopring, and if you want to do so, you have to stake at least 250,000 LRC tokens. DEX owners cannot withdraw their stakes until they have safely shut down their DEX and returned ALL user funds. If the DEX owner fails to return users' funds or goes rogue, their entire stake will be slashed and BURNED. This is all to ensure that they have a lot skin in the game to keep them on their best behavior. And because there is such a big penalty, I don't think there is any DEX owner on Loopring that would voluntarily allow their DEX to fail.
- To lower fees on the DEX: this type is open to all traders on the exchange and will reduce The exchange fees to 0.025% for takers and 0% for makers. The required amount for this type of staking is 3.5 million LRC tokens which costs almost 700 thousand USD.
- To get a cut of all trading fees on the Loopring protocol: Anyone can participate in this staking, and the cut of trading fees received by these stakers is 70%. However, tokens need to be staked for at least 90 days before they are mature enough to claim rewards.
And in case you are wondering about the remaining 30%, 20% will go to the Loopring DAO, and 10% are burned.
source
4 How does Loopring work?
Well, To understand the underlying technology behind Loopring, there two terms I have to explain : zkRollup and Merkle Tree .
In a nutshell, zkRollup involves grouping multiple transactions (4000 transactions) off-chain and submitting them as a single transaction on Etheruem Blockchain. This will make the Loopering network communicate with Etheruem Blockchain more rarely and with extremely lighter loads, which will, in turn, lead to more speed and efficiency.
Merkle Tree is a record of everything going on in the Loopring protocol.
When using a Loopring-based DEX, your data will be stored on three levels of the Merkle Tree. The top level contains your ETH address, the second level contains your balances, and the third level contains the trades you are currently making in the DEX. All this information will continuously be sent as snapshots to the Ethereum Blockchain using zkRollup
This will ensure that If the DEX owner acts dishonestly or fails to return users' funds, users will have a way to manually recover their funds from the smart contract to their wallets using the last Merkle Tree snapshot which was sent to the Ethereum Blockchain.
5 The team behind the project:
Loopring has been around since August 2017 and was founded by Daniel Wang who was a former senior software engineer at Google and the co-founder of Coinport Exchange.
The CMO position is filled by Jay Zhou who had previous experience in the cross-border payments industry after working at PayPal and Ernst&Young.
The team also includes some notable names like Steve SUO (CTO), Hoss MA, and Brecht Devons.
The foundation which develops Loopring is a non-profit registered in British Virgin Islands but the actual team operates in China and contains about 20 developers and programmers.
What do you guys think about what I've mentioned?
I'm really keen to know your opinions and thoughts.
See you in the next part of the review 😉
