What is Loopring? (LRC)

The Beginner’s Guide

Loopring is software that runs on Ethereum. And it is software that aims to encourage a global network of users to run a platform that enables the creation of new types of crypto-asset exchanges.

Loopring, one of the growing number of decentralized finance (DeFi) protocols. It uses multiple cryptocurrencies, including its own LRC cryptocurrency, to jointly provide this platform.

Most importantly, Loopring’s platform, the exchanges it’s built on, collects zero knowledge. Or by using a newer type of encryption called zkRollups, it claims to allow it to bypass the slow speeds and high costs associated with decentralized exchanges on Ethereum.

With zkRollups, Loopring claims their exchange can offer faster payouts for merchants. zkRollups instead of trading directly on the Ethereum blockchain. (as other decentralized exchanges do). It allows Loopring exchanges to complete important calculations elsewhere.

The idea is that this can reduce the number of transactions a Loopring exchange has to send to the Ethereum network. Thus, it is an increase in speed and a decrease in costs for traders.

How Does Loopring Work?

Loopring’s core value proposition is cutting-edge cryptography that it integrates into its platform.

As such, zkRollups are just one of the recommended ways to make the Ethereum blockchain more suitable for DeFi applications. Competing cryptographic offerings include xDai, Matic, Optimistic Rollups and Plasma.

ZkRollups are considered promising by some advocates. Because it’s a technique that allows a computer program to make a claim about data without actually sharing the data. They make use of a known form of encryption called zero-knowledge proofs.

As an example, proof of zero knowledge, of a government agency, without disclosing your exact date of birth. It can verify that you are over the age required to access a website.

Using the same technique, zkRollups combines hundreds of transfers into a single transaction. It allows fast and inexpensive transactions to occur first outside of the Ethereum blockchain.

These transactions are then resolved to verify that the off-chain transactions are correct. It is solved on the blockchain using zero-knowledge proofs.

zkRollups on Loopring

To trade on the Loopring exchange, users must send their funds to a smart contract managed by the Loopring protocol.

From there, Loopring exchanges move the computation needed to complete transactions on the main Ethereum blockchain. This includes information such as a user’s account balances and order histories.

Loopring then arranges transactions on the Ethereum blockchain to terminate transactions between users that are first matched off-chain. These processes are done in bulk to reduce cost and increase speed. Loopring claims it can handle more than 2,000 transactions per second with this technique.

Each group of transactions is then added to the Ethereum blockchain with zero-knowledge proofs that allow anyone to reconstruct transactions that take place off-chain.

This allows users to ensure that transactions are genuine and not tampered with by undesirables.

Who Created Loopring?

Loopring was founded by Daniel Wang. He is a China-based software engineer working for internet companies including Google and JD.com.

In 2017, Loopring made an initial coin offering, raising 120,000 ether worth $45 million. However, tightening regulations on such offerings in China at the time later caused Loopring to return most of its public sale funds.

According to Wang, the team returned about 80% of the funds raised. And the Loopring team continued to develop its exchange with the rest of the proceeds.

Why Does LRC Have Value?

Loopring cryptocurrency LRC is required for important transactions in the protocol.

For example, anyone wishing to operate a decentralized exchange on Loopring must lock in at least 250,000 LRC. This allows the operator to run an exchange that uses on-chain data proofs. An operator would need to stake 1 million LRC to run an exchange without this feature.

Also, the LRC helps to promote the proper use of the Loopring network. Exchange operators depositing LRC may even have deposits confiscated by the protocol if they run the exchanges poorly. These confiscated funds will then be distributed to users who choose to lock down the LRC.

Elsewhere, any user can bet on the LRC to earn some of the trading fees paid to the protocol.

About 70% of the fees are distributed to users holding LRC shares. An additional 20% is allocated to the Loopring Decentralized Autonomous Organization (DAO), which is designed to allow a pool of funds to be spent at the discretion of Loopring users in the future.

Finally, 10% of the wages are burned. This means that the total supply of LRC will decrease over time, putting pressure on its price. The total LRC supply is capped at 1,395 million tokens.

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