Loopring (LRC) is the token powering the Loopring protocol. This layer 2 Ethereum solution enables fast and scalable decentralized applications (DApps) on top of the most famous smart contract network.
So, how does the Loopring cryptocurrency work, and what is the Loopring protocol?
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Loopring (LRC) history
Loopring aims to reduce the need for centralized exchanges and grant traders access to global crypto liquidity.
The project was founded by Daniel Wang, a former Google software engineer, in 2017. The main issues Loopring is trying to solve are transparency, speed, and security. Today, the Loopring Foundation, a non-profit organization operating from Shanghai, is developing the project.
According to the whitepaper, Loopring is an open protocol for building a decentralized exchange protocol (DEX) on the Ethereum blockchain.
The development team had plans to extend the Loopring functionalities on top of NEO and QTUM networks. However, the Loopring team announced that they are not focusing on NEO deployment and QTUM deployment has stopped.
Loopring’s token, LRC, was first launched during an initial coin offering (ICO) in August 2017 and raised $45 million worth of ethereum (ETH). However, a great part of the amount was returned to the investors due to China’s active regulations at the time. The rest of the funds were used for developing the Loopring protocol.
Throughout the history of Loopring, the project has been updated five times, and the latest version is Loopring 3.8.The protocol released its own decentralized exchange, which uses both AMM and order-book models, in February 2020.
The team released a new document, Design Doc, to substitute the whitepaper and offers updated information about the Loopring project.
What is Loopring (LRC)?
Loopring (LRC) is an ERC20 token for the Loopring open protocol. The purpose of the protocol is to become a hybrid ecosystem. Among other things, it aims to facilitate centralized order-matching exchanges with decentralized on-chain order settlement exchanges.
Loopring (LRC) launched through an initial coin offering (ICO) in August 2017. December of 2019 saw the deployment of the mainnet.
Loopring seeks to offer rewards to all participants of the ecosystem to perpetuate the decentralized and non-custodial exchange. To offset the main issues with on-chain exchanges, such as throughput, speed, and high transaction fees, Loopring performs all computation off-chain and leverages zero-knowledge proofs to retain trustless trading.
Loopring is a Zero-Knowledge Rollup (zk-Rollup) protocol. It combines Ethereum smart contracts and Zero-Knowledge (ZK) circuits to build secure and scalable DEXes and AMMs. The zk-Rollup was the first protocol deployed on the Ethereum network, and it marked the beginning of the layer 2 scaling (L2) era.
The latest version deployed is Loopring 3.8 constitutes a performant and secure solution for decentralized protocols. The protocol uses the Loopring relayer to a zk-Rollup run.
The Loopring relayer manages the off-chain Merkle tree, creates roll-up blocks, generates zk-SNARK proofs of the validity of the rollup block, published proof, and data to the Ethereum network and more.
Moreover, the Loopring protocol allows anyone to build and run their own zk-Rollups and products. The Loopring relayer is servicing the Loopring Layer 2. That’s how developers and users can use the Loopring relayer API for high-speed transactions on Ethereum without paying gas fees.
What is zk-Rollup?
A Zero-knowledge rollup (zk-Rollup) is a bundle of off-chain transfers which generates a cryptographic proof, commonly known as SNARK (succinct non-interactive argument of knowledge).
The SNARK is the validity proof and is posted on the network’s mainnet, which is layer 1.
The zk-Rollup is a smart contract that updates the state of all transactions on layer 2, the off-chain component. The state can only be updated by providing validity proof.
Zk-Rollups can be optimized to reduce transaction size. For instance, accounts are represented by indexes, not by addresses.
The main advantages of using the zk-Rollups system for recording transactions are:
- Fast transactions: The state is verified instantly after the proofs are sent to the mainnet.
- Secure and decentralized: Data needed to restore the state is stored on layer 1.
How does Loopring work?
The protocol relies on the ring miners to fulfill the necessary tasks. Ring miners together with order rings help execute orders in exchange for rewards. Miners receive rewards paid as feed by traders or the margins for an order:
- Order fee: Traders can set the maximum LRC tokens that goes to the miner
- Split-margins: Traders can determine the claimable margin for a specific order, leaving the miner to choose the fees and the margins
The Loopring exchange: making transactions cheap and fast
The Loopring Layer 2 app is a non-custodial exchange that supports both automated market maker (AMM) and order-book exchange model. It also has a payment platform built on the Loopring protocol. This trading platform allows users to cross-exchange many digital assets. The Loopring DEX offers secure trading at high speed and with no transaction fees.
The Loopring protocol allows batching the orders received and communicating them off-chain to various exchanges. Both centralized and decentralized exchanges can use the Loopring platform, which is convenient for traders too, who can easily check the prices for their digital assets across the market. This also creates liquidity across the many Ethereum exchanges. Often called an “agnostic” platform, Loopring can be easily integrated with any smart contract platform.
All trades are grouped in blocks that are stored off-chain in the Merkle tree. Any change in the state of the tree can be verified on-chain by generating a ZK proof using a circuit. The operator is responsible for creating and committing blocks to the Merkle tree.
The Loopring exchange platform can perform the following tasks:
- Authorize protocol
- Create orders
- Mix and match orders (ring mining)
- Order verification and settlement
The Loopring L2 supports Ethereum wallets (MetaMask or any wallet supported on WalletConnect).
There are quite a few layer 2 solutions trying to fix the scalability and transaction speed, and high fees of the Ethereum network (layer 1).
Loopring’s main competitors are:
- Polygon, formerly known as Matic, is a platform enabling developers to deploy Ethereum-based DApps, in a more optimized way. Polygon solutions are highly scalable.
- Cartesi is a scaling solution for Ethereum that addresses the issues of scalability, high transaction fees, and compatibility issues.
- Arbitrum offers interoperability with the Ethereum network and enables Solidity developers to build cross-compatible DApps. It offers support for sidechain aggregation of transactions (rollup technology).
- Backed by Polkadot, ParaState, is an alternative to the Ethereum Virtual Machine and offers complete compatibility with Ethereum DApps.
- Optimism is a scaling solution that offers improved transaction speed and lower fees. It allows off-chain UIs and wallets.
- xDAI Side Chain is a scaling solution for Ethereum, which allows transaction processing on a side chain, which improves speed and reduces fees.
Loopring roadmap and development
Loopring released the first version of the protocol in December 2017.
In 2018, there were three airdrops of LRN (for NEO network) and LRQ (for QTUM network) tokens for Loopring (LRC) holders who had a minimum of 100 coins.
The second version of the protocol was released exactly a year after the first version. The upgrade included a more efficient ring settlement, additional ways to create orders, and a new fee model.
In December 2019, Loopring 3.0 was released. This was the first zk-Rollup decentralized exchange protocol on the Ethereum mainnet.
In December 2020, the team launched Loopring Exchange v2, based on the Loopring protocol 3.6. This period also saw the launch of the Loopring Wallet.
As of Q3 of 2021, Loopring supports NFT minting, trading, and transfers directly on L2 for both ERC721 and ERC1155 token standards. Loopring Smart Wallet is deployed on Ethereum and Arbitrum.
The following are some of the prominent partnerships:
- Blockchain at Berkeley (2018)
- O3 wallet, the leading NEP5 wallet provider in the NEO ecosystem (2018)
- Possibly, GameStop (r/gme), to develop an NFT marketplace.
In November 2021, online forums started to talk about the rumored partnership with GameStop, which made the Loopring price surge to an all-time high of $3.83.
What is Loopring (LRC) token?
The Loopring protocol allows creating a new LRx token for each integrated chain, where x represents the blockchain. The protocol is most known for the Ethereum LRC token.
Loopring relies on a proof-of-work (PoW) algorithm to verify and generate new blocks on the network. Miners get rewards in the form of Loopring tokens.
The LRC burn rate increases the token’s scarcity by burning a portion of the fees that comes from the wallets. It also burns a portion of miners’ fees. Traders that stake Loopring (LRC) crypto are entitled to lower transaction fees on the Loopring exchange.
The token is available on Binance, Coinbase, KuCoin, Gate.io, and Huobi.
Loopring (LRC) price prediction
At the beginning of November 2021, the Loopring cryptocurrency surged to over 180% in value. The unexpected rise is seen as the market’s reaction to the GameStop partnership rumor. At the time of writing, the partnership is not confirmed.
However, Loopring can be a profitable investment. Considering the protocol’s constant developments and updates, the LRC token might be a good long-term investment.
How to stake Loopring (LRC)?
There are three types of loopring (LRC) staking:
- Protocol pool staking (global): Anyone can stake LRC to earn 70% of the Loopring protocol fees. There is no minimum amount, but the tokens must be staked for at least 90 days.
- Exchange owner staking: The exchange owner must stake LRC to ensure the safety and reputation of the DEX. The minimum amount is 250,000 LRC, but it can go up to 1 million LRC, depending on the exchange type. The exchange owner has to keep the LRC staked for the entire duration of the exchange on the protocol.
- Exchange protocol fee reduction staking: The exchange owner pays the protocol fees for orders, but traders must pay transaction fees for each trade. Traders pay the trading fees in the same token as the transaction, but it can be lowered when the trader is staking Loopring (LRC).
Protocol pool staking is under development and is unavailable, but it will soon be available with the release of the DAO and insurance funds.
However, Loopring supporters can provide liquidity for the Loopring Exchange to any of the LRC pools and earn rewards from the protocol fees.
Liquidity providers (LPs) can earn 0.2% from the trading fees of the pool to which they provide liquidity.
To become LPs, users need to deposit one of the trading pairs listed under Pools, on the Liquidity Exchange. For instance, if a user wants to deposit the LRC-ETH pair, the deposit should consist of $1000 worth of ether (ETH) and $1000 worth of loopring (LRC).
Providing liquidity to a liquidity pool doesn’t require any gas or other fees.
Liquidity providers receive LP tokens to represent their deposited liquidity. For the LRC-ETH pair, the token is LP-LRC-ETH, which is visible in the account balance, like other assets.
The Loopring wallet is the first smart wallet, self-custodial, app with layer 2 scaling. It enables users to trade tokens on the Loopring Exchange, become liquidity providers, and send gas-free payments.
Unlike other crypto wallets, the Loopring wallet doesn’t require a seed phrase for recovery. Instead, it enables the user to choose people and hardware of trust to guard and recover the wallet. To keep the Loopring wallet secure, more than half of the trust guardians must be trustworthy.
Should you buy Loopring (LRC)?
It’s always important to remember that cryptocurrency investments are risky and can lead to loss. However, Loopring protocol has a strong and active community. Also, the team works constantly on releasing new features on the Loopring ecosystem, while it also focuses on new partnerships.
Active cryptocurrency projects, such as Loopring protocol, deserve at least an analysis. As it is an active project with great plans for the future, Loopring (LRC) could be a good investment.
How to buy Loopring?
Loopring (LRC) can be bought using the most popular cryptocurrency exchanges, such as Binance or Coinbase.
We’ll list the steps for buying Loopring (LRC) on Binance.
Step 1. Get a Binance account
Firstly, if you do not have a Binance account, you will need to sign up for an account.
Go to Binance > Register Now > Select your country > Enter the details required for the account (email or mobile).
After your Binance account has been confirmed, you will be able to sign in.
To enable credit and debit card purchases on Binance, you need to complete the Identity verification process.
Go to User Account (top right) > Identification. Here you can see the current verification level for your account.
Step 2. Buy Loopring (LRC) token using credit or debit card
Secondly, after your Binance account is verified, you can buy LRC using your credit or debit card.
To purchase cryptocurrency on Binance, go to Buy Crypto (top left) > Credit/Debit Card.
Because you cannot purchase Looping (LRC) directly, and you will need to buy one of the available cryptocurrencies. We will buy bitcoin (BTC) and then trade it for Looping (LRC).
Search for BTC in the field box and then enter the desired amount.
Click Continue and then add your card as a payment method. Continue with the purchase.
Step 3. Exchange BTC with Loopring (LRC)
Thirdly, to complete the process and finally buy loopring (LRC), you have two options. You can either convert the crypto you bought at step 2 into Loopring coin or trade it on the markets tab.
If you are a beginner and want to make no mistake, we recommend converting.
Go to Trade > Convert.
Here you will need to choose what crypto to convert and in what you want to convert it. Firstly, you will need to choose the crypto you bought at step 3 and, then, the amount you want to convert. In our case, we will choose BTC.
For the second field, click on the dropdown and search for LRC.
After you are all set, click Preview Conversion to get the exact amount of LRC tokens you will get in exchange for the BTC. Click Convert when you are ready to convert and buy Loopring (LRC) tokens.
Due to the volatile nature of cryptocurrencies, the preview price will expire every six seconds, and you will need to refresh to view the new price.
And that’s it; you are now a proud investor and holder of LRC.
Is Loopring protocol the future of Ethereum DEXs?
Now we have answered the questions, what Loopring (LRC) is and how it powers the entire Loopring protocol ecosystem. If you’re looking to make for a new investment opportunity, you should always check the project’s latest developments.
The Loopring protocol has never stopped evolving and deploying new features. The community is constantly growing, and new partnerships are awaited by the entire crypto space.
After all, it’s worth remembering that for a network struggling with high transaction fees and low scaling perspectives, such as Ethereum, the Loopring protocol can change the way future decentralized exchanges are developed.