Loopring is a decentralized exchange protocol and cryptocurrency built on the Ethereum blockchain. It was first announced on August 6, 2017.
In September 2020, Looping became the first decentralized exchange to integrate Band Protocol’s cross-chain oracles.
Loopring is a decentralized exchange protocol and an “automated execution system” built on Ethereum that allows its users to trade assets across exchanges. It isn’t a decentralized exchange, it facilitates a decentralized environment exchanging through ring-sharing and order matching.
Loopring pools all orders sent to its network and fill orders through the order books of multiple exchanges. Decentralized and centralized exchanges alike will be able to implement
Loopring, giving the exchanges access to cross-blockchain and cross-exchange liquidity. This also gives investors access to the best prices available on the broader market. Loopring is blockchain agnostic, meaning that any platform that uses smart contracts (e.g., NEO, Ethereum, Qtum) can integrate with Loopring.
In September 2020, Looping became the first decentralized exchange to integrate Band Protocol’s cross-chain oracles. In a press release shared with CryptoSlate, the company said that the cross-chain data oracles will be used to provide high-speed fiat price feeds for all crypto assets supported on Loopring’s zkRollup DEX.
Loopring’s custom oracles built using Band Protocol will utilize verified data from more than a dozen industry-leading sources, including CryptoCompare, CoinGecko, Binance, Coinbase Pro, Huobi Global, OKEx, Kraken, Bitfinex, and FTX, as well as premium currency exchange rates from AlphaVantage, Fixer, 1Forge, Open Exchange Rate, and XE.com.
When using Loopring, traders never have to deposit funds into an exchange to begin trading. Funds always remain in user wallets and are never locked by orders. This gives the user complete autonomy over their funds while trading. One can cancel, trim, or increase an order before it is executed.
Placing an Order
When one is ready to make a trade they can submit an order through the loopring.iowallet, signing off on it with a private key. This order would then be sent to both smart contracts on the Loopring network and a series of off-chain relay nodes. The smart contract ensures that the funds in the wallet will be exchanged for the traded coins, while the off-chain relays are responsible for maintaining an order book and broadcasting said orders to ring-miners.
Ring-miners make sure that orders can be filled (or partially filled) through order rings until the desired trades are completed for all parties involved. In compensation for this service, ring miners can receive a fee in LRC (Loopring’s token) or a split margin on the final purchasing amount of an order.
For example, if a user wanted to trade 1 ETH for 10 NEO but the ring miner found a trade for 11 NEO, he could split part of this margin with a user, or he could choose to take the LRC fee specified when the order was sent.
This ensures that miners are paid fairly for finding the best exchange rates for traders, and it allows traders to get the biggest bang for their buck.
Settling a Trade
Once an ordered ring is completed, Loopring’s smart contracts evaluate the orders to make sure that they can be fulfilled. If everything checks out, the smart contracts transfer coins to their respective recipients. This process is atomic and takes place wallet-to-wallet.
Order Rings and Order Sharing separate Loopring from other decentralized exchange platforms. An order ring allows for ring-matching, a process by which a series of trades are strung together to fulfill each other’s orders. In addition, if an order cannot be completed with a single trade, order sharing allows this order to be split into partial orders until the original order amount is completely filled.
Loopring was founded in June 2017, and until November 2020, the team released four major versions of the Loopring protocol.
Loopring 1.0 introduced the Ring-Matching concept – in one trade, two or more orders can circularly swap crypto assets in the form of rings. This feature is unique and brings the potential for improved price discovery and higher trading volume. The project name Loopring is derived from this feature. With 1.0, orders are managed and matched off-chain. The protocol’s smart contracts verify order signatures, trading prices, and settlement amounts on-chain and perform token transfers for each order accordingly.
Loopring 1.5 introduced another unique feature called Dual Authoring to prevent front-running. Each order has a randomly generated Dual Author key-pair – the public key is part of the order. The private key, however, is not part of the order but is sent to the relayer so that the relayer can and must use it to sign rings that include the order. Dual Authoring effectively prevents pending settlements and their orders from being stolen by middlemen in the Ethereum network, as only the legitimate relayer has access to the orders’ Dual Author private keys.
With the 2.0 release, Loopring no longer required traders to pay relayers LRC, Loopring’s utility token, as the trading fee. The trading fees can be paid using any ERC-20 tokens that relayers specify. Relayers only have to use a percentage, known as the burn rate, of their fee income to buy LRC to burn. Different tokens have varying burn rates, and the burn rates for LRC and WETH are the lowest, which makes paying in LRC and Ether the most cost-efficient. This feature also enables decentralized exchanges to use own their platform token as fee token.
The 3.0 release provides much higher performance than previous versions without a tradeoff in security. There are, however, some tradeoffs in other aspects. For example, orders are no longer shareable among multiple exchanges and have to be matched by a dedicated relayer. Also, crypto assets have to be deposited into a smart contract before they’re available for orders. One benefit of these tradeoffs is that the new user experience is more comparable to centralized exchanges, with familiar user flow.
Loopring 3.0 also supports multiple upgradability options. As an owner, a user can decide whether their decentralized exchange (DEX) can upgrade to new compatible versions in the future, and if so, whether the upgrade should be fully automated or manually. In either case, the upgrade process is entirely transparent to end-users.
Loopring 3.0 can settle up to 2,025 trades per second while guaranteeing the same level of security as the underlying Ethereum blockchain. This is made possible by using a construction called zkRollup, and a feature called On-Chain Data Availability, or OCDA. If OCDA is disabled, Loopring throughput becomes as high as 16,400 trades per second, but security reduces to that of the consortium which maintains said data. For context, prior versions of Loopring can settle only 2 or 3 trades per second.
Loopring 3.6 is a zkRollup layer-2 scalability solution for Ether and ERC20 transfer, order-book trading, and Automated Market Maker (AMM) swap. The AMM support is new in 3.6. The Loopring team plans to launch 3.6 on Goerli in late November and on Ethereum mainnet in late December 2020.
In September 2020, the Loopring team set the bug bounty to reward people who identify bugs in Loopring 3.6.0, a pre-release of Loopring protocol 3.6. The bounty ends on November 30, 2020; rewards will be paid before December 10.
In June 2020, Loopring released a new payment product called Loopring Pay. Built on top of Loopring v3.0, an ETH Layer 2 scaling protocol using zkRollup, Loopring Pay allows users to send ETH and ERC20 tokens at a fee of only $0.00006 USD per transaction.
From the user’s point of view, Loopring Pay initially works similarly to PayPal. Since all transactions are done via Loopring’s zkRollups, this means that users must be on the zkRollup to send or receive these payments. Registration is done via the Loopring.io website and ensures that the user’s Ethereum address is tied to a “slot” (account ID) in the off-chain account system (Merkle tree).
On November 24, 2020, the Loopring team released a beta version of Loopring Wallet, the first Ethereum smart wallet with zkRollup scaling baked in. zkRollup gives users complete Ethereum layer-1 security guarantees and a massive scalability boost: 1000x higher throughput, and 1000x lower fees. The mobile app version is already available for Android, while iOS users would get access to it in early 2021.
The wallet allows users to trade on the same orderbooks that are present on Loopring Exchange. It also allows users to send transfers instantly and for free, using Loopring Pay. Transfers can be sent to any of the existing 7400+ users on Loopring’s L2.
LRC is the Ethereum-based cryptocurrency token of Loopring. All LRC holders can stake LRC to earn part of the protocol fees paid by all exchanges built on top of Loopring. 70% of the protocol fees are rewarded to stakers, 20% will be used to fund the Loopring DAO, and the remaining 10% will be burned. LRC staked is locked up for a minimum of 90 days. Besides protocol fees, LRC stakers also earn the LRC that is levied from DEX owners as spin-up costs and from slashes for misbehavior.
On May 7, 2019, the team behind Loopring migrated LRC from version 1.0 to version 2.0. The new LRC token remained ERC20 compliant and started to support a “burn” function that was used by the Loopring Protocol and the Oedax auction protocol to burn LRC as the protocols are being used. The total LRC supply decreases over time to reflect these burns.
Serving as its head, Loopring founder Daniel Wang used to run a centralized exchange called Coin Port back in 2014. Wang stated:
“At that time trying to solve the problems of centralized exchanges, and then I realized that it’s not possible. Those problems are inherent to the centralized exchange model.”
Thus, he began conceptualizing what would become Loopring. In the past, he’s also held a position as a Google Tech Lead and was a co-founder and VP of Yunrang Technology.
Loopring’s CMO, Jay Zhou, was formerly employed by Ernst & Young, helped found SJ Consulting, and used to work in PayPal’s Risk Operations unit.
Johnston Chen, the project’s COO, has worked as the chief information officer at 3NOD.