Today, we will discuss a phenomenal project, Loopring (LRC) that had a phenomenal run and ended up increasing its price from below Rs 40 to over Rs. 250 within a few days.
Why did it rise up so much?
Loopring rose from Rs. 30 to Rs. 284 in the first half of November, 2021. Consequently increasing its market capitalization to Rs. 300 Billion. Price predictions from multiple sources expected it to cross Rs. 500 by the end of 2021. At the time of writing, the coin is trading at Rs. 225.
The sudden rise took place after rumours about Loopring’s partnership with GameStop (GME) to launch an NFT marketplace. Previously, Loopring Foundation had announced their plans to launch an NFT marketplace but nothing was said about a partnership with GameStop. Speculators were quick to arrive at a conclusion after GameStop’s NFT job listings that detailed Web 3.0, Blockchain gaming and an NFT marketplace. Additionally, Loopring had also put up new code to its GitHub repository labelled “NFT feature”. The theory seems coherent enough to accept. That’s what led plenty of retail investors to put their money on Loopring!
What is Loopring?
Loopring is an open protocol running on Ethereum blockchain that aims to allow users to build more efficient, scalable, non-custodial decentralized exchanges. It’s platform will allow its exchanges to circumvent slow speed and high costs associated with other decentralized exchanges built on the Ethereum network. It promises to do all that while maintaining security.
The LRC Token and its value
The Loopring has its own currency called LRC. The total supply of LRC is capped at 1.395 million tokens. Additionally, 10% of fees earned are burned to decrease the total supply of LRC over time.
The token plays a very crucial role in key operations of the protocol. For instance, to operate a decentralized exchange on Loopring, a user must lock at least 250,000 LRC tokens. It’s also used for policing to ensure the proper use of the Loopring Network. If the exchanges are found to be operating poorly the protocols confiscate the locked up LRC tokens and distribute them among other users.
How does the protocol work?
The protocol will make use of a newer type of cryptography called zero-knowledge rollups (zkRollups). ZkRollups take advantage of a cryptographic method called Zero-knowledge proofs. These proofs let a program make a claim about data without actually sharing the data i.e zero-knowledge.
Usually, decentralized exchanges settle the trades on the Ethereum blockchain network, which is a slow and costly process. Using zkRollups, Loopring can offer faster settlements by moving the necessary computation to complete trades off the main Ethereum network.
First, the users submit their funds using a smart contract. Next, Loopring takes information such as the user’s account balance and order history. Then, Loopring makes rings of user’s who seek to transact. These rings fulfil the orders. The orders that remain partially unfilled in the first ring are moved to the next one. Finally, the matched orders are submitted to Ethereum blockchain.
This technique reduces the number of transactions that need to be submitted to the Ethereum network for validation, thus increasing speed and reducing the costs of these transactions.