Loopring (LRC) Explained

Loopring explained

The Ethereum blockchain currently hosts thousands of crypto, NFT, and DeFi projects that help power the digital economy. But being the preferred network for building apps and platforms comes with challenges. The blockchain presently deals with slow transaction processing speeds and hefty fees due to network congestion.  

This is where Loopring comes in. It’s a zero-knowledge proof rollup (zkRollups) that offers a low-fee, high-speed layer for trading, swapping, paying, and providing liquidity. It claims to be a “best-in-class” layer 2 protocol for building exchange and payment protocols, infrastructure, and user interfaces on Ethereum. 

LRC is the L2 protocol’s token and users’ gateway to the network and its community. It has a 24-hour trading volume of $62.5 million and a live market cap of $542.8 million. 

Tokenomics

LRC has a circulating supply of 1.3 billion tokens and a maximum supply of 1.4 billion tokens. The Loopring protocol’s smart contracts govern the issuance of LRC tokens.

The forthcoming Loopring DAO will be responsible for distributing protocol fee earnings, but they will initially be distributed to participants as follows:

  • 80% will go to liquidity providers (LPs) on Loopring AMM and order books, 50% of which will go to LRC-related liquidity.
  • 10% will go to Loopring DAO, which decides how these funds will be used and spent. The options include impermanent loss protection, grants, further liquidity incentives, and buyback and burn, among others. 
  • 10% will go to insurers or users who inject capital into a safety insurance fund. 

Use cases

The LRC token’s main use cases many. It can be used for:

Ring mining 

Ring mining is the primary way to earn LRC. As opposed to the traditional method of pairing two cryptocurrencies, the protocol mixes and matches up to 16 orders for different cryptocurrencies in a circular trade.

This method is called an “order ring” and is meant to improve the network’s liquidity. Creating order rings, broadcasting orders to other relays, and maintaining public order books create nodes on the network, which are then rewarded in LRC tokens.

Participation rewards

Users who don’t have enough LRC to lock up to operate an exchange can still participate in the network via the Loopring insurance fund. Depositing LRC into this fund will earn users a proportional share of 10% of fees. 

Ecosystem participants are rewarded for supporting and strengthening the Loopring protocol. It’s the first platform to allow users to earn and receive protocol fees on layer 2. This means that participants don’t need to enter staking contracts on L1 and pay gas fees to claim their rewards. Rewards will be sent directly to the recipient’s L2 accounts automatically at the end of every month. 

Staking

Staking a certain amount of LRC is required to operate a DEX on Loopring. A stake of 250,000 LRC is needed to launch a DEX. Staking can also be done to lower fees on that DEX. It is estimated that 2.5 million LRC is needed to lower the fee from 0.05% to 0.025%, while an extra 1 million is required to reduce it to 0%.

Moreover, anyone can stake LRC to earn a proportion of 70% of all protocol fees. When Loopring launches its DAO, users will be able to stake their LRC through the token voting tool Snapshot, allowing them to vote on parameters such as fee distribution proportions, fee percentage, and insurance fund-covered event triggers. 

Ecosystem 

The Loopring Protocol boasts a zkRollup throughput of approximately 1000x on Ethereum, which translates to a throughput of as high as 2,025 trades per second. Additionally, the zkRollup reduces the transaction fee, or cost per transaction, to as little as 1/100th the cost of Ethereum. It does all this without sacrificing the security the blockchain provides.

Loopring is also a non-custodial exchange protocol that allows anyone to build non-custodial, order book-based exchanges on Ethereum. A Loopring-powered exchange equates to a fast, gas-free “express lane” for users to trade, deposit, and withdraw Ethereum-based assets. 

Where to buy/sell LRC tokens

LRC is available across major crypto exchanges like AAX, Coinbase Pro, OKEx, and Binance. You’ll need a non-custodial wallet, be it a cold or hot wallet, to purchase and store LRC. LRC can be traded with the most popular tokens such as USDT, BTC, ETH, and BNB, among others.

Future roadmap

The Loopring Protocol has seen many upgrades and updates over the past few years as part of its commitment to eliminate the challenges associated with centralized and decentralized exchanges. More recently, it has teamed up with GameStop’s NFT marketplace, causing LRC’s price to surge by 50%. The network has also introduced Community Creator Grants to encourage participation. 

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