Have you wondered why centralized exchanges keep getting hacked?
Well, the answer is, their fundamental design is flawed which acts like an invitation to a honey-pot for an imminent attack.
However, there’s something positive about these hacks too. You may dismiss me as crazy but it’s these hacks that are catalyzing the development of decentralized exchanges and decentralized exchange protocols.
One such project coming up with the same mindset is Loopring.
In this fundamental analysis of Loopring (LRC), we will cover:
- What Is Loopring?
- How Does Loopring Work?
- Loopring Team
- LRC Token Supply & LRC Market Cap
- Where To Buy Loopring Token (aka LRC)?
- Loopring (aka LRC) Wallets
- Loopring’s Roadmap & Conclusion
- Official Loopring resources
What Is Loopring?
Loopring is an open-source decentralized exchange protocol for exchanging ERC20 tokens and it combines the off-chain order book and on-chain settlement contracts for making successful trades.
But one thing to note is that they are not purely an exchange app. They are a protocol intended to serve as a common building block with open standards, driving interoperability among decentralized applications (DAPPs) that incorporate exchange functionality. Trades are executed by a system of Ethereum smart contracts that are publicly accessible, free to use, and that any DApp can hook into. (Source: Whitepaper)
So you see, they are more of DApp specific use cases but can be extended and used purely as an exchange DApp, if they are able to scale their infrastructure and attract volume.
Do watch this short but awesome introduction video of Loopring to understand what they are trying to do and why.
How Does Loopring Work?
Loopring has solved one of the most complicated problems of decentralized exchanges and protocols in an automated manner based on game-theory in the background. But for understanding that, I need to tell you about some of the jargons that are mentioned in the Loopring whitepaper so that you can actually understand the whole process.
Ring-matching is the most advanced order-matching technique currently available in the market. Traditionally in centralized exchanges buy and sell orders are matched simply but Loopring’s ring-matching goes many steps ahead by making a loop of matching because they are inherently connected to liquidity pools and other exchange to do so.
For example, let’s say, Tom, Dick, and Harry want to trade but have different requirements. However, when considered together in a loop or ring, they can actually satisfy each other’s need.
Let say, hypothetically, Tom wants to trade 2 GNT for 10 LRC, Dick wants to trade 20 OMG for 1.5 GNT, and Harry wants to trade 30 LRC for 40 OMG.
Via Loopring’s ring-matching technology, Tom will be able to trade with Harry, Dick will be able to trade with Tom, and Harry will be able to trade with Dick, all in a single trade.
But if you see closely, their orders will not be filled completely. That is where order-sharing comes into the picture.
Loopring’s order-sharing tech will allow incompleted orders to be ring-matched again with available parties and vice-versa. Orders can also be broken into smaller parts according to the available liquidity and best prices through order-sharing.
- Ring Miners
Ring miners are the people running the show in the background to do the ring-matching and order-sharing to properly fulfill the orders at best possible rates. And for this service of theirs, they are paid in LRC fees.
- Utility Of LRC Token
LRC is being used as a fee to pay the ring-miners and these miners are paid in two different types. One is a standard fixed fee for the trade while the other is the split-margin fee.
The standard fixed fee is pretty straightforward. For example, on a successful trade, the ring-miner will be paid 1-2% of exchange fee.
To explain split-margin, let’s say a ring-miner was able to find a better deal so both the parties would be splitting the extra margin and miner too will be incentivized fairly. For example, let us assume you want to trade 1 ETH for 10 EOS and the miner finds you a better deal, that of 1 ETH for 11 EOS. In this case, if you have set margin-split as 50%, the miner will receive 50% of the extra margin which is 50% of 1 EOS (0.5 EOS) as fees and you will also get 10.5 EOS for 1 ETH. It is a win-win situation for both the parties.
Note: This fees will be paid to respective parties in equivalent LRC tokens.
- Overall Workflow Of Loopring
When you place an order on Loopring.io from your wallet, you are actually signing with your keys and sending a command to the Loopring smart contract which is to trade your tokens when the required conditions are met.
And this event is not an actual transfer of tokens to Loopring smart contract, a commendable feature because most of the decentralized exchanges like ED or IDEX don’t provide this option. And this option actually allows you to use your funds even after placing a command of order and you can, at any time, withdraw or change your actual fund balance as they are not locked down in the order.
Simultaneously, the order details are also passed on to relayers and ring miners who do the magic of ring-matching and order-sharing at the background and submit a ring of matched orders to the Loopring smart contract when the order requirements are met.
This is how the Loopring protocol works under the hood but further improvements are in progress and they have also solved the problem of front-running which can be done by the ring-miners.
The Loopring team looks promising with real people behind it. The founder also has a short experience of running a centralized exchange back in 2014.
However, my concern is, they don’t have many blockchain experts on their team. They do have good advisors and are hiring more, in line with their plans, so it will be an interesting thing to see how they evolve.
- Daniel Wang (Founder): Former Google Tech Lead, Co-founder & VP of Yunrang Technology, Senior Engineering Director at JD.com, Co-founder & CEO of Coinport Exchange, Co-founder & VP of Hygiene Online, Senior Director & Blockchain Researcher of Zhongan Technology.
- Jay Zhou (CMO): Former E&Y, PayPal Risk Operations, SJ Consulting Founder
- Johnston Chen (COO): Former Chief Information Officer at 3NOD, Product Expert in Finance Industry
LRC Token Supply & LRC Market Cap
- Circulating Supply: 572,074,043 LRC
- Total supply: 1,374,956,262 LRC
- Ticker: LRC
Where To Buy Loopring Token (aka LRC)?
Here are some of the exchanges where you can buy LRC tokens:
- Binance: Supported pairs are LRC/BTC, LRC/ETH
- Gate.io: Supported pairs are LRC/BTC, LRC/ETH
- Ethfinex: Supported pairs are LRC/BTC, LRC/ETH, LRC/USD
- Bittrex: Supported pairs are LRC/BTC
- CoinExchange: Supported pairs are LRC/BTC, LRC/ETH
Note: Buying LRC in fiat currencies such as USD, EUR, or GBP is not currently possible.
Loopring (aka LRC) Wallets
LRC is an ERC20 token so you have plenty of options for storing your LRC tokens safely. Some of these options have been listed below and will help you keep your LRC safe.
- Mobile Wallets: Coinomi (Android), Jaxx (Android, iOS)
- Browser/Web Wallets: Jaxx (Chrome Extension)
- Desktop Wallets: Jaxx (Windows, Linux, Mac), MyEtherWallet
- Hardware Wallet: Ledger Nano S, Trezor
Loopring’s Roadmap & Conclusion
Loopring’s roadmap is pretty straightforward. I have mentioned a few of their goals below.
Focus on implementing Loopring over Ethereum.
- Support ERC223 and hybrid trading
- Official Loopring Resources
- Enhancing the overall trading experience UI and UX
- iOS and Android Apps
- Implement decentralized governance
Post these, the focus would be on:
- Implement the Loopring protocol on NEO and Qtum
- Issuance and distribution of LRx
- Zero-knowledge proofs for privacy
Before I say goodbye, I found them very to be quite advanced in terms of their decentralized protocol. They have competitors like 0x and KyberNetwork but they have their USPs such as ring-matching, relayers, shared-matching etc., that I have discussed at the start.
I can also say that at present, they look like they have left 0x behind in terms of tech-superiority but are still to catch up on research, mainly because 0x was launched earlier.
Lastly, once everyone realizes that 2018 is going to be the year of decentralization, keeping an eye on projects like Loopring will start making more sense.
Note: I am not your financial advisor and this is not a financial advice.
Update: First DEX based on Loopring protocol is now live and it looks very clean (Uone.io):
Uone.io is one of the first functioning Loopring DEX apps. Going forward, Uone.io will contribute back to the research and development of the entire Loopring ecosystem
List of DApps that use or (will use) the Loopring protocol
- MW Tech
Official Loopring resources
Some official links that will help you stay updated with Loopring’s news:
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