Loopring (LRC) has been gaining quite a bit of traction recently.
This is because of the ever pressing need for Decentralised exchanges and the benefits that these are supposed to bring cryptocurrency users. Lower fees, safer exchanges and more transparency are just a few of the reasons that many projects are trying to develop DEX solutions.
However, is Loopring the solution and should you consider it?
In this review of Loopring we will take a deep dive on the project including the technology, the team members and competition. We will also take a look at the long term prospects for LRC tokens in a increasingly volatile and skeptical community.
Loopring is an Ethereum based decentralized exchange protocol that is being created to allow users to exchange assets across various exchanges. Loopring isn’t a decentralized exchange by itself, but instead will facilitate decentralized exchanging using order matching and ring-sharing technologies.
So, rather than simply standing as another decentralized exchange, Loopring seeks to pool orders from as many exchanges as possible, and then fill these orders by matching them with the order books of all the exchanges that participate in the Loopring network.
Loopring will allow both decentralized and centralized exchanges to take part in the Loopring network, giving all exchanges access to increased liquidity from across a number of blockchains. It will also give investors access to the best possible pricing without needing to cross check several different exchanges.
Best of all, Loopring is blockchain agnostic, and this means that any platform that has smart contracts implemented will be able to integrate with Loopring. So far Ethereum and NEO have been integrated, and there are plans to integrate additional platforms.
One benefit to using Loopring for traders is that they never have to make a deposit to the platform in order to make trades. Unlike other exchanges, both centralized and decentralized, where funds need to be deposited before trading, with Loopring any funds remain in the user wallet and are not locked by orders.
This system gives users full control over their funds and orders, and allows an order to be increased, trimmed, or even cancelled at any time before it is executed. It’s even possible to move funds entirely from your wallet before an order is executed. The order would of course never execute if you did this, as the ring miners would be alerted to the lack of funds when matching the orders.
Let’s have a closer look at how orders work with Loopring, and give you more details regarding the ring miners and off-chain relays.
When users are ready to place a trade it’s done through the loopring.io wallet, and is signed with the users private key. The order is then relayed to the Loopring network smart contracts as well as the off-chain relay nodes.
The smart contracts ensure that the funds in your wallet are exchanged properly for the coins you’re trading, while the off-chain nodes maintain the order book and broadcast it to the ring miners.
The ring miners have the responsibility to ensure that orders can be filled until the order actually are filled, or cancelled. Ring miners are compensated for performing this service either with a fee in LRC or a split margin on the amount of the order.
This system ensures that miners are paid fairly for their service, and gives them an incentive to find the best rate for traders, since they can increase their margin if they find a better exchange rate. It also theoretically reduces any arbitrage opportunities since the protocol should always have the best trade value.
Once the miner completes an order ring the Loopring smart contract checks to make sure the order can be filled. As long as everything checks out on both sides of the trade the smart contract transfers the appropriate coins to each side of the trade. This swap is an atomic swap and occurs directly from wallet to wallet.
These two functions differentiate Loopring from other decentralized exchange platforms such as OpenLedger, Waves, IDEX and Stellar. The order ring facilitates the process of ring-matching, which is the method used to fulfill orders by stringing them together. It also allows for order sharing when an order cannot be completed with a single trade. This order sharing will split orders into partials if necessary until the full original order amount is finally filled.
To better illustrate how this works, consider a group of traders placing orders on the Loopring network. Bob, Sarah and Earl are all looking to place trades. Bob wants to trade 2 OMG for 10 ARK, Sarah wants to trade 21 EOS for 1.5 OMG, and Earl wants to trade 20 ARK for 40 EOS. Ring-matching technology would form these three orders into a single order ring, and fill each of the orders. Once the smart contracts on Loopring approve the orders everyone would receive the coins they are looking to get.
Now, you might be thinking that everyone didn’t really receive the coins they’re looking for because Bob got his 10 ARK< but still has 0.5 OMG left and Earl hasn’t filled his order of 10 ARK for 19 EOS. Sarah is the only trader who had her order completely filled. Not to worry, the leftovers will all be processed by the order sharing system once more and added to another order ring until the partial orders are completely filled.
Daniel Wang is the founder and CEO of Loopring. He previously ran Coin Port, a centralized exchange, in 2014. During that time he was attempting to solve the problems posed by centralized exchanges, but came to the conclusion that the problems couldn’t be solved as they were inherent in the centralized exchange model.
This led to the conceptualization and eventual creation of Loopring. He was also the co-founder and vice-president on Yunrang Technology in the past, and also held a position as a Google Tech Lead.
The CMO of Loopring is Jay Zhou, who previously worked in the Risk Operation Unit at Paypal, and was also previously employed by Ernst & Young. In addition, he was one of the principal founders of SJ Consulting.
The third member of the core team in Johnston Chen, the COO who previously worked as the CIO at 3NOD.
Loopring released a 2018 roadmap at the conclusion of 2017 and they have been making progress towards achieving the goals set out in that document. Items such as releasing the Loopr wallets and mobile wallets have been completed. Loopring has also begun implementing other blockchains, with NEO being added mid-year. This is the beginning of cross-chain trading on Loopring.
There remain some milestones that have yet to be met, for example support for ERC223 and trading between ERC2230 and ERC20 tokens. They are also working on moving towards decentralized governance.
One improvement going on behind the scenes is the improvement of the ring-mining algorithms. As the rings are refined to include more than three orders it allows for greater liquidity, smaller price spreads, and a better functioning market overall.
With Loopring entering the sphere of centralized and decentralized exchanges it may look as if the competition for them will be fierce. However, if you take a deeper consideration you’ll see that rather than being a competitor to the exchanges, Loopring looks to become a partner with all the exchanges by providing them with something they all need – liquidity.
On the surface it seems as if 0x is aiming for the same goal as Loopring, but there is a key difference between the two. Where 0x allows anyone to run a node as a decentralized exchange, and all order are processed off-chain, but settled on-chain, 0x only gets its liquidity from exchanges established on the 0x platform. This is a huge difference from Loopring, where liquidity comes from any exchange that connects to the Loopring network.
There are some other competitors such as Kyber Network, Blocknet and Bancor. With Kyber Network and Bancor there are liquidity pools and order matching that ensures trades are met across smart contracts, and Blocknet works in a similar fashion solely with order matching. There is not a competitor that can offer the ring orders that are created by ring matching on the Loopring protocol.
Like every other asset in the cryptocurrency ecosystem, Loopring’s LRC token has taken a huge hit in 2018. After reaching an all-time high of $2.19 on January 9 price fell, bounced in April, and has fallen steadily since. As of the beginning of October 2018 it is trading at $0.098.
The same is true of the LRN token that was created for the NEO blockchain. After reaching a high of $3.32 just after its release in May 2018, the LRN token has fallen to $0.055 as of October.
Loopring LRC is listed on quite a few exchanges, but the greatest volume is on Bithumb, followed by DragonEX. You can also purchase LRC on the Binance Exchange. This will mean that you will have to first buy another cryptocurrency from a fiat gateway before you can purchase them.
The NEO Loopring LRN is only listed on a couple exchanges, with almost all of the volume on Gate.io. Both LRC and LRN can be purchased with ETH and USDT, and LRC can also be purchased with BTC.
Because LRC is an ERC20 token it can be stored in any ERC20 compliant wallet such as MyEtherWallet or MyCrypto. Alternatively you can head over to the Loopring website and download the official wallet.
The fact that Loopring is offering a decentralized exchange protocol that will allow any exchange to participate is a major difference and an advantage for Loopring. There’s no competition to beat out the established centralized exchanges or the rising decentralized exchanges.
Instead Loopring seeks to join with all exchanges and provide increased liquidity across the entire cryptocurrency market. In addition to increasing liquidity it also has the potential to do away with arbitrage in cryptocurrency markets thanks to the lowest order price matching that’s part of its protocol.
The use of ring-matching and ring orders distinguish Loopring from other decentralized exchanges, and as they continue to refine ring-matching we could see an even greater increase in market liquidity as three or more orders are paired. Additionally, Loopring’s order sharing model is an improvement over traditional order matching, allowing for more flexible buying and selling.
Perhaps one of the greatest strengths is the blockchain agnostic flexibility that Loopring can take advantage of. As long as a blockchain includes smart contracts it can use the Loopring network, allowing orders to be filled through several different avenues.
With Loopring adding liquidity and leveling the playing field decentralized exchanges should be able to see increased adoption, and Loopring itself will benefit from additional exchanges joining its network.
Featured Image via Fotolia & LoopRing
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