LOOPRING: THE UPSTART EXCHANGE OF 2018

Cryptocurrency enjoyed a banner year in 2017, but the party could come to a screeching halt in 2018. Cryptocurrency has a massive exchange problem. Exchanges have universally struggled to cope with user demand. Fees are creeping up, and support tickets are going unanswered. Many exchanges have shuttered their doors all together. Others are dealing with accusations of fraud. But there’s hope on the horizon, as decentralized exchanges and protocols have rose to save the day. We’ve got all the details on one of the hottest new exchange ideas of 2018: Loopring.

Loopring had a big ICO so they have some money to spend right now on development. You can see Loopring’s current token price (LRC) on coinmarketcap here. So what is Loopring?

Let’s rewind. Bitcoin kicked off 2017 at around $1000 a coin. It peaked at just under $18,000 a coin. That’s a healthy 1800% return on investment. Many smaller coins saw even more drastic jumps. Compared to the single digits you might get from a stock or bond, and you can see why investors are flocking en masse to cryptocurrency.

Cryptocurrencies are obtained in many different ways. However, one of the most common methods for token acquisition is to buy them on exchanges. Exchanges are websites that function like a stock exchange. You swap fiat currency, like dollars or euros, for Bitcoins or Ethereum. You can also exchange crypto for crypto. For example, Bitcoin (BTC) for Loopring (LRC). For a time, exchanges worked fine. Different exchanges offered different coins. Fees were low and trades were fast.

All that changed when staggering amounts of investors jumped onto exchanges, practically overnight. Coinbase, the most popular exchange, has 13 million users. That’s three million more than Charles Schwab, a major online broker. Coinbase was racking up an astounding million new users a month.

Exchanges have shriveled under the volume. Coinbase crashes and freezes. Poloniex endures strings of complaints about unresolved support tickets. Bittrex users have been unable to withdraw funds. Binance, an exchange established just months ago, had to temporarily close their doors to new investors altogether. Bitfinex also had to close its doors to new users. Exchanges simply can’t handle the volume they’re seeing, and investors are suffering.

It’s unfair to totally blame exchanges – it’s tough to imagine any business in the world scaling up fast enough to handle this explosive growth. But investors are desperately searching for a better option. Support tickets on major exchanges frequently go ignored. Users complain issues take months to be addressed, if ever. Fees are rocketing up. Exchanges have made it extremely difficult to withdraw funds. It all adds up to a very messy situation. But there’s a potential solution on the horizon: decentralized exchanges and protocols.

Decentralized exchanges and exchange protocols (like Loopring) are an attempt to solve the problem of exchanges, the same way cryptocurrency solves the problems of banks. Bitcoin was founded as a decentralized electronic P2P cash, eliminating the need, risk, and inconvenience of a central bank. Decentralized exchanges and protocols were created for the same reason. Trading can take place on the blockchain through smart contracts. This could be safer, faster, cheaper, and easier than going through exchanges. Say hello to Loopring.

The Solution to Your Exchange Woes

Loopring is a decentralized token exchange protocol. It’s not an exchange, but it’s code that links together exchanges and allows for trading between them, managed by smart contracts. Investors new to crypto may have heard of Ethereum, a huge player in the crypto world and one of the coins offered on Coinbase. Ethereum introduced to crypto the implementation of smart contracts: automated programs that perform actions when conditions are fulfilled. For example, a smart contract could take funds from one investor, and release a purchased item to another when they’re received. Smart contracts are the heart of Loopring.

Loopring has the potential to rock the trading world. Imagine you wanted to buy some Apple stock. What if you could simultaneously check every exchange in the world, find the best place (or places) to buy, and make the transaction in complete safety? That’s what Loopring brings to the crypto world. Loopring automatically checks multiple exchanges for various prices when making a trade, and executes it accordingly. You can even split up a trade and purposefully buy from multiple exchanges, at the same time.

The implications of this are massive. Loopring will have significantly improved liquidity over any exchange out there. Investors can feel secure in the knowledge that their tokens don’t leave the blockchain and aren’t transferred until the order is submitted. On normal exchanges, you have to toss your tokens into harm’s way to make an exchange. Exchanges can be hacked by scammers and are a pain to use these days anyway. Open orders can linger for hours unfulfilled.

Not so on Loopring. Smart contracts execute the orders, which will work with all ERC 20 tokens eventually. ERC 20 tokens are tokens created with the Ethereum system. Per the FAQ on the Loopring website, the team eventually plans to expand to all blockchains.

Nuts and Bolts

The Loopring ecosystem is split into five parts that mirror a traditional exchange without the centralization or the risks. And oh, there are risks with exchanges. Just ask investors of Mt.Gox, who lost 850,000 Bitcoins in a hack in 2014. That’s a few billion at today’s prices. Or check in with the folks at Bitfinex, who lost a cool $72 million of people’s hard-earned cash. Exchanges have beefed up security, but they’re still giant floating targets for every hacker in the world. That’s why the Loopring team constructed the protocol through smart contracts and blockchain.

The Wallet is where things start. Users hold tokens here and can send them to the Loopring network. Ring Miners are the next group involved. When an order comes through, they determine the most efficient way to fill it. It might be filling the whole order through GDAX. Or it could be splitting it three ways between Poloniex, Bittrex, and Binance. The process is conducted off-chain and involves a lot of computing.

The miners submit orders which are checked by the Loopring Protocol Smart Contracts. Smart contracts manage the whole process: taking orders, sending coins, monitoring order books, and keeping trade history up to date. The public order books and trade history are maintained by the Relays.

Lastly, not strictly part of Loopring, are Asset Tokenization Services. These are independent parties that sign on to trade assets not directly available on Loopring. Investors can deposit fiat with these services and get LRC tokens, Loopring’s token. We’ll get into this in more detail later.

We’ve discussed how smart contracts are the heart of Loopring, but the team actually employs four main types of contracts. Mix-Matched Contracts ensure the status of each order on the loop, interacting with other smart contracts while calculating price and volume. Order Contracts maintain the order database, while also handling canceled orders. Registration Contracts work with exchanges that that accepted Loopring. And Stats Contracts crunch the exchange volume and price between two tokens.

It’s not hard to see all the ways Loopring improves on conventional exchanges, but we’ll recap them anyway. On a regular exchange, your tokens are out of your hands, stuck on an unreliable website that’s vulnerable to hacking, fraud and system failures. With Loopring, they’ll never leave the safety of your wallet until the trade executes. If an exchange goes belly-up and out of business, there’s no guarantee you can get your tokens out in time.This is another problem Loopring dodges.

As well, many newer exchanges struggle with adequate liquidity. Small up-and-coming exchanges might be fast to use, but they don’t have the trading volume investors look for. Slippage makes trading smaller coins impractical to the point of being impossible. By linking exchanges together, Loopring alleviates this too.

The Team and The Token

Even the best ideas are worthless without a great team. Fortunately, Loopring has assembled a solid group of developers and advisors with vast financial and technical experience.

Founder Daniel Wang has heaps of experience, working at Google, launching an exchange, and founding multiple companies. Although Coinport, the exchange he created, is now closed, it’s a huge feather in his cap to have relevant prior crypto experience. CMO Jay Zhou comes from PayPal, one of the biggest conventional P2P payment companies. The rest of the team brings a wide variety of banking and technology experience, from Google, the Bank of China, and Coinport, among others.

There’s a lot to like in the advisor crew as well. Xuefeng Li is CTO of Zhongan Tech, an angel investor with experience in token exchange and regulation. Da Hongfei is the founder of NEO, the #12 coin on CoinMarketCap by market capitalization. NEO is often called “Chinese Ethereum.” Hitters Xu founded Bitcoin Startup camp, and Nebula Blockchain. The website lists a wide variety of experienced advisors there to lend a hand to the Loopring team.

Decentralized exchanges and protocols aren’t a new idea. Bancor, 0x, OpenLedger and BitShares are a few on the market now. These projects all have their merits, but in late 2016, the Loopring team surveyed the market and decided things could be better. The team was particularly inspired by 0x, a P2P ERC 20 token exchange, but thought there was room for improvement. Feeling that 0x did not adequately protect miners or have a clear competition mechanism between different exchanges, Loopring was born.

Bitcoin’s market share is sliding. New coins are popping up left and right, and the Loopring team forsees a world where multiple cryptocurrencies are in use. Exchanges are only going to get more valuable, and a protocol that easily and quickly flits between multiple exchanges is a game changer. But it’s not just a protocol. Loopring just released a token that’s been shooting up with a few uses of its own.

The Loopring token is called LRC, and it functions similarly to Ethereum’s gas and Binance’s BNB. Gas is what makes the Ethereum crypto ecosystem go. It’s like electricity. Gas reflects the internal price required to do something within the Ethereum ecosystem. It protects from DDOS attacks, because a prospective attacker would have to spend a hefty amount of money trying to crash the system. LRC fills a somewhat similar role for Loopring, while offering a few bonuses of its own.

Binance’s coin BNB lets users make trades on the exchange in BNB, rather than in Bitcoin or Ethereum. They get a 50% discount on trading fees, and holders of BNB profit. LRC can be paid to the exchange as a transaction fee, and LRC holders can vote on matters of importance. Because of the ring structure of Loopring, orders aren’t necessarily filled first-come first-serve. However, if you pay more LRC when making a trade, there’s a greater incentive for someone to rubberstamp your transaction and receive the LRC tokens.

A Few Things to Watch

The sky is the limit for Loopring, but in the short term, the ground is a whole lot closer. Loopring still faces stiff competition in the decentralized exchange space. Companies like 0x are significantly more established. Projects like Bancor launched with huge ICOs, drawing tremendous attention. It’s an uphill battle for the team to publicize the token. The mainly Chinese-based team will have to drum up some more attention in North America.

Some users simply question whether a decentralized exchange protocol of this scale is feasible. It’s an ambitious project with no precedent to draw on. The team has some crypto experience, which is rare in the blockchain world, but it’s still a tall task.

A technical challenge the whitepaper covered was what they called “Ring Filch.” An attacker could track unconfirmed rings and broadcast on multiple rings with the same digital signature, which would disrupt trading. To prevent this, Loopring provides miners a two-step process to secure their rings. This is all hypothetical at this stage, as the exchange has yet to be unveiled.

Timeline

2018 is shaping up to be a big year for Loopring. The team got LRC listed on hitBTC and Bter.com in the waning months of 2017. More exchanges are on the way in 2018. In February, the team’s open-source ring-mining software will be released. Investors and enthusiasts can pick it over and analyze it. In April 2018, the LRC wallet will be released, and sometime in 2018, the Loopring platform itself will hopefully launch.

Loopring has stepped up the buzz, with an active twitter account and a small but passionate Reddit sub. Some have complained the team could be more responsive on slack, but it’s understandable that they’re focused on the technical nitty-gritty at this stage of the game. Partnerships with NEO, QTUM, and EOS have also been announced. There’s no launch date set yet for Loopring, but investors will be keeping a close eye on it with more exchanges fouling up daily.

Conclusion

Loopring has the potential to rock the crypto world. Many believe it’s currently one of the most undervalued cryptos in the decentralized exchange space. With an experienced team and novel ideas and technology, loopring has the potential to unseat not only its competitors, but exchanges as a whole. With a huge 2018 lined up, Loopring is a project to watch.