Layer 2 technology (supporting systems) is being developed by blockchain-based project Loopring to let Ethereum expand or boost capacity before updating it 1,000 times. Furthermore, it is asserted that the scaling improvement won’t compromise the Ethereum protocol’s security.
Investors have such faith in the technology behind Loopring that the price of its LRC coin increased by 8.250 percent between May 2020 and November 2021, when it reached its greatest value ever of $3.83.
Loopring protocol
A program called Loopring is made to run on top of Ethereum’s blockchain (a layer 1, or base blockchain).
By processing portions of Ethereum transactions on its own network, Loopring aims to make the experience of using Ethereum faster. Imagine doing it to relieve traffic on the main route by building a side road.
In the Loopring ecosystem, no party has to trust others. zkRollup ensures that users always have control over their assets and offers security guarantees at the same level as Ethereum.
Most of Loopring’s activities, including trading and transfer settlement, are done outside of the Ethereum blockchain. As a result, gas usage and overall transaction costs are significantly cut to minuscule portions of what they would have been on-chain.
By batch-processing tens of thousands of requests off-chain and ensuring their accurate execution through ZKPs, Loopring provides highly scalable decentralized exchanges and payments.
How does it work?
The age verification process used by government organizations is the most typical example of ZK Proofs in action. When communicating age, you simply need to provide your birth year but not your specific birthday (which is also encrypted on a blockchain).
On Loopring, these Zero-Knowledge Proofs are referred to as SNARK (Succinct Non-Interactive Argument of Knowledge).
On the main chain, the SNARK is kept as validation proof (layer 1). ZK rollups are crucial for ensuring user privacy since smart contracts can only change the status of all layer 2 transactions after receiving proof of validation.
Fewer data must be accessible when ZK proofs are used, which reduces the quantity of transaction data as well. ZK rollups can thereby combine more transfer data into a single batch, making transactions less expensive.
As a result, the network’s processing speed is greatly increased.
Loopring order rings
A sell order for the same token inside the same trading pair must be matched by a buy order for that token on some exchanges. However, Loopring is a circular trading process that integrates and matches different orders into an ordered ring.
Each order ring can hold up to 16 orders, and they come together to form a loop where each order is free to exchange the tokens it wants without the requirement for an opposing order to complete the swap for it.
This strategy considerably increases the probability of both price discovery and improvement.
Why is it so popular?
For Bitcoin protocols that don’t want to expose superfluous information to third parties or want to rely on a central authority when a problem occurs, the zero-knowledge proof is crucial.
A specific kind of scaling mechanism called an aggregate package gathers stacks of transactions, “spins” them into a single transaction, and then executes them on the blockchain at a base layer like Ethereum.
Bundled plans enable numerous transactions to be handled simultaneously and share costs for a single transaction, which helps to lower costs and speed up processing.
Both technologies are combined in ZK rollups and people love LRC because of this.
What makes Loopring so unique?
The team behind Loopring Exchange, the first ZK rollup exchange created on Ethereum that was made available to the general public, is also the team behind the Loopring protocol. This demonstrated the protocol and its supporting technology’s feasibility.
The fact that Loopring is orderbook-based distinguishes it from other trading technologies used in the DeFi market. Trading on a Loopring-powered DEX is more similar to trading on centralized exchanges, where trading is nearly entirely orderbook-based.
Compare this to most DEXes, which rely significantly on user-generated liquidity and employ constant automated market maker (AMM) technology.
As mentioned, Loopring performs incredibly well. It can perform 200 trades or transactions per second, which is almost ten times as many as Ethereum.
Final thoughts
LRC is the native token of Loopring. LRC holders are qualified for Loopring’s VIP program, liquidity mining, and participation in governance. Since LRC is an ERC-20, it may be purchased there as well as on all significant DEXes and controlled exchanges.
Every time you complete a transaction using DEX, you must pay LRC. Exactly 80% of the funds go to liquidity providers, with the remaining 20% going to insurance firms and the decentralized autonomous structure of Loopring (DAO).
