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What Is Loopring (LRC) Protocol, And How Does It Work?

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Loopring token, popularly known as Loopring crypto, powers the Loopring protocol. It is a two-layer Ethereum solution, allowing investors to use the smart contract network and make quick decentralized applications (DApps). Learn more about the Loopring cryptocurrency in this guide.

Loopring (LRC) History

Loopring was designed to reduce centralized exchanges. Investors can use it to access crypto liquidity around the globe. Daniel Wang, who used to work as a software engineer for Google, founded this token in 2017.

The aim was to develop a cryptocurrency that solves speed, security, and transparency. The Loopring Foundation based in Shangai is still developing this project even today.

Whitepaper describes Loopring as an open protocol operating on the Ethereum blockchain, where traders can build a decentralized exchange protocol (DEX).

Initially, when the currency was developed, the goal was to make it functional on NEO and QTUM networks. However, recently the team behind it announced that they are no longer deploying this currency on these networks.

The first launching of the LRC, Loopring’s token, was in August 2017 during an initial coin offering. The team raised about 45 million dollars of Ethereum. However, because China had active regulations during that time, a large amount of money was given to the investors. The remaining funds financed the development of the Loopring protocol.

Today, there have been more than five updates on this project, and the current version is Loopring 3.8. In February 2020, the Loopring protocol released its version of the decentralized exchange. Investors on this platform can use AMM and order book models.

Later on, there was a Design Doc document released to replace the whitepaper. Users can check this document to get updates on the Loopring project.

What Is Loopring (LRC)?

It is a token for the Loopring open protocol. Since this protocol aims to build a hybrid system, traders can exchange centralized order matching with decentralized on-chain order settlement.

Loopring’s (LRC) coin offering, the ICO, was first launched in August 2017. But, it wasn’t until December 2019 that its deployment began. The token brings all participants in the ecosystem to participate in exchanges of decentralized and non-custodial types.

Loopring solves the issues of speed and high transaction charges experienced on on-chain exchanges by performing off-chain computation and leveraging proofs to help build a trustworthy trading network.

What Is The Loopring Protocol?

It is a Zero-Knowledge Rollup (zk-Rollup) protocol combining smart contracts on Ethereum and Zero-Knowledge circuits. The result is a platform that can build DEXes and AMMs securely and scalable.

When the zero-knowledge was deployed on the Ethereum network, it started the layer 2 scaling era. From then on, various deployments have taken place that expanded this era. The latest Loopring version, 3.8, offers a secure and high-performing solution for decentralized protocols. The version uses the Loopring relayer to a Zero-Knowledge roll-up run.

This relayer manages Merkel tree off-chain. Thus, creating roll-up blocks that generate the roll-up validity proof, published proof, and Ethereum network data, among others. It also services the Loopring Layer 2. As such, individuals can use the relayer’s API to perform Ethereum transactions that require high speed while avoiding the high fees associated with these transactions. Traders on this protocol can open and run their zk-Rollups and products.

What Is ZK-Rollup?

Also known as Zero-Knowledge Rollup, zk-Rollup is a bundle that helps generate cryptographic proofs for transfers that happen off-chain. These proofs are also called Succinct Non-Interactive Argument of Knowledge (SNARK).

SNARK shows the validity of the transfer and is usually posted on layer 1 that is the network’s mainnet. The zk-Rollup gives updates on transactions happening on layer 2, that is, the off-chain component. This state is updated once the validity proof is verified.

Individuals can optimize these roll-ups to minimize the size of the transactions. For example, instead of representing accounts by addresses, one can use indexes to represent them. Many investors use the zk-rollups for recording transactions as it offers various benefits, including:

  • Quick transactions: Once the mainnet gets the proofs, the state is instantly verified, and a transaction can be completed.
  • Security and decentralization: The data used for restoring the state is stored in a secure layer 1.

How Does Loopring Work?

Ring miners on this protocol perform all the necessary tasks, including order execution. In turn, they are given rewards for their efforts. These rewards can be fees from traders or an order margin.

There are order fees on this protocol determined by traders who can set the maximum tokens that a miner can get. There are also split margins that are simply margins that can be claimed in a particular order. As such, the miner has the freedom to choose the fees and margins.

Another integral part of this protocol is the Loopring exchange that enables fast and cheap transactions. The protocol’s layer 2 app facilitates exchanges on automated market marker and order book exchange. The layer also has its payment platform supported on the Loopring protocol.

Individuals can thus exchange various digital assets on this platform. Additionally, there’s the Loopring DEX that allows secure, reliable and speedy transactions at zero costs.

A trader on Loopring protocol receives an order, batches it, and communicates it off-chain to several different exchanges. The protocol supports both centralized and decentralized exchanges that simplify things for traders. They can quickly determine the price of their digital assets on the cryptocurrency market. Plus, allowing these two exchanges creates liquidity across various exchanges on the Ethereum platform.

Some people refer to the Loopring protocol as an “agnostic” platform that can easily integrate with smart contracts platforms. The protocol groups traders in blocks, which are stored in the Merkle tree off-chain. If this tree changes, even slightly, a ZK proof is generated on-chain using a circuit to verify it. Again, note that only operators can create and commit blocks to this tree.

Individuals can use this exchange platform for various tasks like order creation, ring mining is also known as mixing and matching orders, verifying orders and settlement, and protocol authorization. Ethereum wallets like MetaMask and those supported on WalletConnect are also supported on Loopring’s layer 2.

What Are Loopring’s Competitors?

Although Ethereum layer 1 offers great features to traders, the transaction fees are expensive, and it still has scalability and compatibility issues. As such, many layer 2 solutions like Loopring are trying to fix these shortcomings.

Loopring has various competitors like;

  • Polygon-which was initially called Matic. Developers on this platform can deploy Ethereum based DApps in an optimized manner. The platform offers very scalable solutions.
  • Cartel- this scaling solution was designed to address Ethereum’s scalability challenges, compatibility issues, and high rates for transactions.
  • XDAi Side Chain– it’s also another Ethereum scaling solution. Individuals can use it to process side-chain transactions at better transaction speeds and low fees.
  • Arbitrum– developers here can interoperate with the Ethereum network. Plus, they can build DApps compatible with each other. It supports the roll-up technology, also known as the transactions side-chain.
  • Parastate– if you don’t want to use the Ethereum Virtual Machine, you can use Parastate that’s Polakdot-backed. It is completely compatible with DApps developed on Ethereum.
  • Optimism– developers on this scaling solution can enjoy better transaction speed and fees. It supports both wallets and off-chain UIs.

Loopring Roadmap And Development

The first Loopring version was released in December 2017. Then in 2018, three airdrops LPN tokens were released for Neo and LRQ networks. But they were only for LRC holders with at least 100 coins.

In December 2018, the second version was released, which was an upgrade. It came with a better ring settlement, improved ways for order creation, and a new fee structure.

Loopring 3.0 was then released in December 2019. It was the first protocol to allow zk-rollup decentralized exchanges on the Ethereum mainnet. Later in December 2020, this version was upgraded to 3.6, and the team launched the Loopring Wallet.

Traders can today trade, mine NFT, and transfer directly on layer 2. Plus, its smart wallet is on Ethereum and Arbitrum. Also, note that the protocol has made various partnerships, including Blockchain at Berkel, O3 wallet, etc.

What Is Loopring Token, And How Do You Stake It?

Individuals on the Loopring platform can create an LRx token for each integrated chain, where x is the blockchain. LRC is Loopring’s token. Note that this protocol generates new blocks using the proof of work. Miners are then rewarded with Loopring tokens.

Loopring (LRC) burns a portion of wallet fees, making the token scarcer. It also burns a part of a miner’s fee. Those using this cryptocurrency can enjoy low transaction fees on the Loopring exchange. You can get this token on Huobi, Gate.io, Coninabase, and Binance.

Loopring (LRC) staking happens in three ways:

  • Protocol Pool Staking: It happens globally, and individuals can earn 70% of the protocol fees by staking LRC. While there’s no minimum amount, you must stake your tokens for not less than 90 days.
  • Exchange Owner Staking: Staking is essential to ensure that the DEX is safe and reputable. The exchange owner can stake a minimum of 250,000 LRC. However, this price can increase to 1 million, depending on the type of exchange. You must keep your token staked until the exchange protocol duration lapses.
  • Exchange Protocol Fee Reduction Staking- order fees and transactions fees for each trade are paid by the exchange owner and trader, respectively. Traders pay the same amount as the transaction, but this fee can reduce if they decide to stake LRC.

At the moment, the platform doesn’t allow pool staking. However, developers promise its availability soon, along with DAO and insurance funds.

Loopring Wallet

It is a smart wallet in the form of an app, that comes with layer 2 scaling. It supports token trading on the Loopring Exchange, and users can become liquidity providers such that they send gas payments for free.

The wallet recovers without a seed phrase. A user only needs to choose trustworthy people and hardware to recover their wallet. At least half of the trust guardians need to be trustworthy for the security of this wallet.

Should I Invest in LRC?

Always remember that investing in cryptocurrency is risky, and you might suffer losses. But, Loopring protocol is backed by a strong and supportive community. Plus, the developing team is continuously releasing new features on the protocol’s ecosystem and forming new partnerships.

However, before buying this cryptocurrency, do some analysis. All in all, it is a promising project and looks like a good investment.

How To Loopring Token On Binance

You can buy this token on Binance or Coinbase. Here are the purchasing steps on Binance:

Create A Binance Account

Visit Binance, register now, choose your country and provide the needed details. Wait for Binance to confirm your account, then sign in. Enable credit or debit card purchases if you need them by completing the identity verification process, that is, visit the user account, then identification.

Purchase The Token Using A Credit Or Debit Card

On the left of the Binance dashboard, go to buy crypto, then credit/debit card. But note that individuals can’t buy LRC directly. Therefore, you need to buy any currency available and trade it for LRC. You can buy BTC, for instance.

Exchange BTC With LRC

You can then convert the cryptocurrency you purchased to the Loopring coin or trade it using the market tab. Converting is best for beginners. Simply go to trade, then convert the crypto you bought and the amount. In this case, it is BTC.

Then, you’ll need to choose the crypto to convert into, which is LRC. Once everything is set, you can click Preview Conversion to know how many LRC tokens you’ll get. If you are satisfied, click convert and buy LRC tokens.

Bear in mind that since cryptocurrencies are generally volatile, the preview amount expires every 6 seconds. As such, you will need to keep refreshing to check the new price.

But generally, these steps are how you become an LRC investor and holder.

Is Loopring Protocol The Future Of DEXs?

Now that you already know about the Loopring protocol and Loopring LRC, you may be ready to invest. Buy, we advise that you check the recent developments on this entire ecosystem first.

The protocol has always been evolving, and the team is constantly deploying new features. Plus, the community is rapidly growing, and new partnerships are being formed.

Ethereum, on the other hand, although popular, features high transaction fees and scaling issues. Therefore, many experts foresee the Loopring protocol changing the future of the development of decentralized exchanges.

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