What Is Loopring?
Loopring is a decentralized exchange (DEX) protocol that can be deployed by cryptocurrency and other digital asset exchanges. Rather than locking assets in an exchange wallet or smart contract, they remain in the user’s wallet. Trade orders from multiple exchanges are pooled into smart contracts, which are then matched by Loopring’s ring miners.
Ring miners process orders in exchange for either a margin split (explained below) or payment in LRC, the Loopring Protocol Cryptocurrency token for Ethereum, LRQ for Qtum, or LRN for NEO. As of December 1, 2018, the Loopring protocol has been deployed on Ethereum, NEO, and Qtum.
Decentralized exchanges are the wave of the future, and there are a lot of players vying for the transactions fees associated with enabling fast cryptocurrency trades. Projects like 0X and Waves have different technical architectures but similar goals.
But governments like the U.S. aren’t happy with the move to decentralized trading. The Securities and Exchange Commission recently hit EtherDelta founder Zachary Coburn with a $400,000 fine, showing its inclination to target these exchanges. And Loopring’s founding team of Daniel Wang, Jay Zhou, and Johnston Chen of the Loopring Foundation are based in China, where blockchain
The LRC token had to successfully pass the Howey Test to be listed on Bittrex, though. As governments move toward regulation, Loopring is in a high-profile position. Whether that’s a good or bad thing is something we need to determine.
Let’s start by examining LRC, LRQ, and LRN, the three proprietary cryptocurrency tokens so far used by the Loopring protocol.
LRx Cryptocurrency Summary
Each blockchain Loopring integrates with creates a new cryptocurrency token. These tokens are airdropped to LRC hodlers, giving incentive to hodl these tokens. Loopring tokens use an “LRx” naming designation, in which the final letter corresponds to which blockchain it resides on.
As of December 1, 2018, there are three cryptocurrency tokens used by Loopring: LRC (ERC-20 on Ethereum), LRN (NEP-5 on NEO), and LRQ (Qtum). This is done to facilitate decentralized trades between tokens on these networks off chain. Here’s a breakdown of each currency’s history so far:
LRC – The Loopring ICO was held from August 1-16, 2017. It raised approximately $45,000,0000 worth of ETH, some of which was refunded back to Chinese investors in September 2017 to comply with China’s ICO regulations.
As of December 1, 2018, the circulating supply of Loopring’s Ethereum tokens is 788,984,491 out of 1,374,955,752 LRC. The peak price so far was $2.09 on January 9, 2018.
Mining LRC is somewhat similar to Proof-of-Work in which processing and validating trades earns a fee of either LRC or a margin split of the trade. For example, if a trade order is for 50 EOS in exchange for 1 ETH, and a match is found for 60 EOS, the remaining 10 EOS would be divided 50/50 between the ETH trader and processor.
Over $450,000 worth of LRC is traded on a daily basis. Cryptocurrency exchanges that accept LRC include Bithumb, Binance, DragonEX, Gate.io, OKEx, COinbit, and Bittrex. Its trading pairs include ETH, BTC, and USDT.
As an ERC-20 token, LRC can be stored in any ERC20-compatible wallet, including MyEtherWallet cryptocurrency wallet and the Ledger Nano S hardware wallet.
Loopring also released a Minimum Viable Product (MVP) wallet called Loopr, which is still being developed and should support all current and future LRx cryptocurrencies. Loopr is currently in its third beta phase.
LRN – Loopring’s NEO token was distributed to LRC hodlers over a series of airdrops from July 5, 2018 through November 5, 2018. Each airdrop was for 20 percent of the total supply, for a total of 60 percent being airdropped to users. Here’s the supply breakdown for each LRx airdrop moving forward:
- 60 percent airdrops
- 5 percent LEAF fund
- 5 percent Loopring core development
- 30 percent sold to accredited investors, with unsold reverting to LEAF fund.
The total LRN supply of 113,602,931 is premined, and it was distributed to LRC hodlers at a rate of 2 LRN per 100 LRC during each airdrop.
As of December 1, 2018, the peak price of LRN was $3.10 on May 5, 2018. Approximately $250,000 worth of LRN is traded on a daily basis. Gate.io hosts the majority of this trading, with ETH and USDT as trading pairs. LRN is also listed on cex, syex.io, and idax.
As an NEP-5 token, LRN can be stored in any NEP5-compatible wallet, including Infinito Wallet, Ledger’s hardware wallets, and the Neon Wallet, in addition to Loopr.
LRQ – As of December 1, 2018, the supply of LRQ has not yet been released, but the Loopring Foundation promises it’ll follow the same path as LRN and other future LRx token drops. The minimum requirement is 100 LRC being held in a wallet not locked by a smart contract.
The wallet address must be bound through MEW’s interface to receive the airdrop. It’s a pretty technical process but worthwhile as the project expands to more blockchains.
How Loopring Decentralizes Cryptocurrency Exchanges
Unlike other exchange technology, decentralized or not, Loopring’s protocol doesn’t require a funds deposit. In this manner, it works more like a debit transaction from your bank account, in which funds are technically only authorized until the transaction is finalized and settled later.
Binding your wallet address to Loopring requires the use of your private wallet key. There’s a lot of confusion in online forums regarding this, and it’s important to understand that binding your address to the Loopring network through MEW doesn’t lock or transfer your funds.
It simply acts as another interface to interact with your wallet funds, like a mobile app and website view into your bank account. The funds don’t leave your bank account when you view your balance on different platforms, and Loopring binding is the same.
You then initiate trades through the new UI, which creates a smart contract on the mainnet (Ethereum, NEO, Qtum, etc.) and Order Rings on off-chain relay nodes on the Loopring network. Orders are then matched either in-full or partially, verified, and settled when the smart contract executes the funds exchange.
Ring Nodes are run by miners processing Order Rings for rewards described in the above section. Setting up a Ring Node requires a high level of technical ability, familiarity with GitHub, and a lot of SSD space and CPU cores to process as the network grows.
The Foundation also patented a Dual Authoring solution to prevent front-running in early 2018.
Not only is Loopring a solid technical project, but the team is actively working on partnerships. It also has a blockchain incubator and fund in the form of the Loopring Ecosystem Advancement Fund (LEAF).
Loopring isn’t a decentralized cryptocurrency exchange itself, but the Loopring Foundation is developing and maintaining a decentralized exchange platform. Loopring connects other blockchains to initiate P2P exchanges without any middlemen. The project’s success hinges on these key features.
- Loopring currently has three cryptocurrency tokens: LRC (Ethereum), LRN (NEO), and LRQ (Qtum). Each is used to enable trades without locking cryptocurrency balances.
- Ring Miners match, verify, and settle trades via Order Rings stored on smart contracts. LRx tokens are used in the backend as intermediaries to make the trades technically possible.
- Loopring pulls trade data from as many exchanges as possible to match buy and sell orders and enable faster, cheaper peer-to-peer trades.
With these pieces in place, Loopring is well-positioned for cryptocurrency success. Of course, it all hinges on global governments easing restrictions on decentralized exchanges. Even if they don’t, the underlying technology could be utilized by authorized exchanges, giving Loopring a lot of room to spread its wings.
The author is not currently invested in any coin, token, or asset mentioned in this article.