LRC

Most recent update: [June 26, 2023]

What Is Loopring?  

Loopring can be defined as a Zero-Knowledge Rollup protocol that combines Ethereum smart contracts and Zero-Knowledge (ZK) circuits to create secure and scalable decentralized exchanges and AMMs. The zk-Rollup was the first protocol deployed on Ethereum, signaling the beginning of Layer-2. The current version of Loopring is Loopring 3.8, and it consists of a secure solution for decentralized protocols, using the Loopring relayer to a zk-Rollup run. The relayer manages the off-chain Merkle tree, creating roll-up blocks while generating zk-SNARK proofs of the validity of the roll-up blocks, published proof, and any data sent to Ethereum.  

The protocol operates as a set of smart contracts that are responsible for actions such as initiating trades and settlements. The trade and settlement orders are aggregated by a global network of users based off-chain. Loopring is free to use and can be utilized as a standardized base for decentralized applications, with its interoperability facilitating anonymous trading.  

The Loopring token is an ERC-20 token launched through an ICO (Initial Coin Offering) in 2017. The ICO was able to raise $45 million worth of ETH. However, a sizable chunk of the amount raised was returned to investors due to regulations prevalent in the Chinese market. The funds that remained with Loopring were then utilized to develop the protocol.  

Loopring has seen five significant updates since its release, and the protocol has also released its decentralized exchange in February. The DEX uses AMMs and order books.  

How Does Loopring Work?  

Apart from an exchange protocol, Loopring also features an automated execution system. The system runs on Ethereum and enables the trading of assets across exchanges, Loopring pools the orders received on the platform. It then communicates the orders off-chain through order books from several exchanges, Loopring also allows decentralized applications to implement exchange functions.  

Both centralized exchanges and decentralized exchanges can utilize Loopring, this results in a significant amount of utility across exchanges. Investors can also access a range of price options in the market and choose which price range best suits them. Loopring is also blockchain agnostic, which means it can be integrated with other platforms that also use smart contracts, smart contracts on Loopring perform several tasks such as the following: 

• Mix-Matched contracts - Are used to manage order statuses, monitor volume and prices, and enable interaction with other smart contracts.  
• Order contracts - These contracts are used to maintain order databases and any cancellations.  
• Registration contracts - These contracts manage services for exchanges that implement Loopring.  
• Stats contracts - These determine exchange volumes and prices between token pairs.  

zkRollups  

zkRollups is what allows Loopring to achieve performances that supersede traditional decentralized exchanges. It enables the platform to create dedicated “fast lanes” through which transactions are aggregated and then executed off-chain. This helps to avoid congestion on the Ethereum network. The transactions bundled off-chain are then submitted to Ethereum as a single transaction.  

Adopting this method enables Loopring to significantly reduce the number of transactions submitted to Ethereum, thus making trades carried out through Loopring significantly faster and cheaper. “Zk” stands for “zero-knowledge” and refers to the proof Loopring provides to verify off-chain transactions as accurate.  

Order Rings  

Loopring can mix and match multiple orders in a system known as an order ring. A single order ring can contain up to 16 orders, where each order can easily exchange the desired tokens without the need for any opposing order for the other pair. The process utilized by order rings can significantly increase liquidity and price discovery.  

Founders Of Loopring  

Loopring was founded by Daniel Wang, a software engineer, and entrepreneur based out of Shanghai. Wang founded the Loopring Foundation, which is behind the development of the Loopring Protocol. Wang graduated from the University of Science and Technology of China and a Master’s Degree from Arizona State University.  

Prior to Loopring, Wang has worked with several major tech companies, holding several important executive positions. Wang has been a lead software engineer at Boston Dynamics. He has also worked with Chinese e-commerce giant JD.com as the senior director of engineering, search, recommendation, and ads system, furthermore was once a senior software engineer and tech lead at Google.  

History Of LRC  

Loopring conducted an initial coin offering or ICO in 2017 and raised around $45 million through 120,000 Ether. However, prevailing regulations in China left the founding team with no choice but to return the funds raised through the ICO. As a result, around 80% of the funds were returned, with Loopring developing the protocol with the remainder of the funds.  

Loopring’s first iteration was released in 2017, and 2018 saw three different airdrops of LRN (NEO Network) and LRQ (QTUM) for Loopring token holders who had a minimum of 100 coins. Loopring’s second iteration was released a year later and included: 

• A better and more efficient ring settlement system. 
• A new fee model. 
• Additional methods to create orders.  

December 2019 saw the release of Loopring 3.0, and it became the first zkRollup decentralized exchange on the Ethereum mainnet. Loopring’s development team released the Loopring Exchange v2 in December 2020; The exchange is based on the Loopring protocol 3.6. December 2020 also saw the launch of the Loopring wallet.  

Currently, Loopring supports NFT minting, trading, and transfers directly on L2 for ERC-721 and ERC-1155 token standards, with its smart wallet deployed on Arbitrum and Ethereum.  

What Makes Loopring Unique? 

Loopring takes different elements from centralized and decentralized exchanges and creates a platform that addresses the shortcomings of both. Centralized exchanges form the backbone of crypto trading services, they are popular with users thanks to their unparalleled convenience. However there are several risks associated with centralized exchanges, one of the most significant risks is how the exchange holds user funds, because the exchange is centralized, the funds are at risk of being compromised or stolen by hackers or other malicious actors.  

Centralized exchanges are also severely lacking when it comes to transparency, price manipulation is always a possibility because trades are not settled on the blockchain and are stored on the exchange’s internal records. This also makes it possible for the exchange to utilize user funds for unauthorized purposes.  

To counter these problems faced by centralized exchanges, we have seen the emergence of decentralized exchanges. However decentralized exchanges come with their issues, such as lower efficiency and a lack of liquidity.  

Loopring incorporates the advantages of decentralized exchanges while utilizing hybrid solutions to reduce their inefficiencies (risk of hacks, lack of transparency). The platform manages all orders in a centralized manner but settles all trades on the blockchain, it can also combine up to 16 orders into circular trades, which greatly increases efficiency and enhances the liquidity of decentralized exchanges.  

How Is Loopring Secured?  

Currently, Loopring supports the Ethereum, NEO blockchains, and Qtum blockchain. The networks have their own token, the LRC token for Ethereum, the LRN token for NEO. The Qtum network token is the LRQ, each of the tokens are secured by the hash functions of their underlying blockchains. The LRC token is secured by Ethash, LRN by the NEO blockchain’s SHA256 and RIPEMD160, and Qtum’s PoSv3 algorithm secures LRQ.  

Loopring Tokenomics  

Currently, Loopring has a circulating supply of 1,328,273,642 LRC, with a max supply of 1,374,513,896 LRC. Since its launch, the protocol has burnt over 20 million LRC tokens. Any LRC token that is currently locked for operating exchange is also off the market, out of the total supply, 50% of the tokens had no lock-up period. A further 20% of the tokens were earmarked for the founding team and had a lock-up period of two years. 30% of the tokens were allocated to the Loopring Foundation, while the remainder (10%) were used to handle expenses such as auditors, contractors, etc. Additionally, 3.2% of the tokens will also be vested to the Loopring Ecosystem Advancement Fund.  

Risks Associated With Loopring  

Loopring faces stiff competition from several other Layer-2 solutions that are also trying to solve the scalability issues, high fees, and low transaction speeds of the Ethereum network. Loopring’s main competitors are the following: 

• Polygon - Polygon enables developers to deploy dApps based on Ethereum in a highly optimized way.  
• Arbitum - Arbitum offers a high degree of interoperability and enables developers to create cross-compatible decentralized applications. It also supports the sidechain aggregation of transactions.  
• Cartesi - Cartesi is a solution that is designed to address the scalability issues of the Ethereum blockchain.  
• ParaState - ParaState is considered an alternative to the Ethereum Virtual Machine and is compatible with Ethereum dApps.  
• Optimism - Optimism offers lower transaction fees and higher transaction speeds.  

References  

https://messari.io/asset/loopring/profile 

https://github.com/Loopring/protocols/blob/master/packages/loopring_v3/DESIGN.md#introduction  

https://loopring.org/resources/en_whitepaper.pdf 

Due Diligence  

Prior to listing Loopring on the VirgoCX Platform, VirgoCX performed due diligence on Loopring and determined that Loopring is unlikely to be a security or derivative under Canadian securities legislation. VirgoCX’s analysis including reviewing publicly available information on the following:  

• The creation, governance, and location of Loopring and/or its primary development team; 
• The supply, demand, maturity and liquidity of Loopring; and 

• Legal and regulatory risks associated with Loopring.  

Statutory Rights under Securities Legislation 

VirgoCX is offering Crypto Contracts on crypto assets in reliance on a prospectus exemption contained in the exemptive relief decision Re VirgoCX Inc. dated May 30, 2022 (the Decision). Please be aware that the statutory rights in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under the securities legislation of each other province and territory in Canada, do not apply in respect of the Crypto Fact Sheet to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.