LOOPRING - Scaling Ethereum Securely
Hey DEFI TIMES community,
we all believe that Ethereum’s future is bright. Not because of what it is today, but because of what it could become tomorrow.
There seem to be two ways to scale Ethereum in the long term: ETH 2.0 and L2 solutions.
Today we would like to introduce Loopring. Loopring uses zkRollups to enable faster and cheaper transactions.
Don’t know what zkRollups are or how they can help Ethereum scale?
Then this article is for you!
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LOOPRING - Scaling Ethereum Securely
Loopring is a zkRollup scaling solution on Ethereum: a secure layer 2, where users enjoy the complete self-custodial security of Ethereum, but can transact super fast and cheaply. Namely, it removes delays and gas cost from a user’s point of view but does not sacrifice Ethereum security in doing so.
Besides the open source protocol, Loopring also builds user-facing products atop our layer 2: a DEX that feels a CEX, and a mobile smart wallet we just released. In both cases, you feel like you are on a ‘normal’, centralized application in terms of speed and low (or no) fees, but you are on the Ethereum blockchain - global, open, and powerful.
Why does this matter?
Ethereum popularity and usage, driven mainly by DeFi throughout 2020, has surged to highs across many metrics, not least of which is actual transactions on-chain, and thus, competition for blockspace. Gas prices, reflecting that demand, have risen in-kind. “DeFi Summer” showed us triple-digit gas prices, reaching 600 gwei and beyond, the highest ever. This was a testament to Ethereum’s utility - people gladly paid those fees to the network. But sadly and rather scarily, it precluded normal, non-whales, from taking part. Paying $25 to make a trade on a DEX, or $5 to send a payment, priced out many folks who need Ethereum the most.
This is what Loopring solves: scalability, and in turn, user experience.
zkRollups: quick tech talk
I won’t get too deep into the tech, as it’s quite complex, but let’s try to get a high-level understanding of how it works. zkRollups work by placing the ‘state’ and activity off-chain, in a data structure called a Merkle tree. There, users can transact - make transfers, trades, etc., - by signing transactions using their own Ethereum address they are used to, but without paying gas for each action, since it’s off-chain. When a lot of activity has happened, say 1,000 trades, for example, something known as the operator compresses all these transactions and using cryptography known as Zero Knowledge proofs, verifiably proves that all those off-chain computations happened according to the protocol rules. By putting this ‘validity proof’ and some tidbits of data on Ethereum, a zkRollup inherits Ethereum security guarantees, but can fly much faster.
This is what the Loopring Merkle tree looks like.
For an easier analogy, let’s think of it as: instead of each user taking their own car or taxi/uber on the Ethereum highway, instead, they all get aboard a highspeed train which runs on a level above Ethereum, but is still tightly attached to it. They spend much less on their train ticket vs a full taxi ride or fuel cost for their tank, and they arrive at their destination even quicker.
So that’s about the protocol and technology. Now let’s look at the products that users can actually enjoy in this fast lane.
Loopring Exchange & Loopring Wallet
Loopring protocol was originally born (3.5 years ago) to be all about DEXs. In February of 2019, we built the Loopring Exchange, our own orderbook DEX atop our zkRollup.
The nice innovation here was that, for the first time, you are able to trade on an orderbook exchange - think Binance, Coinbase Pro, Kraken, etc. - and feel like you were indeed on one of those centralized exchanges in terms of instant settlement, no gas-fees, and a general snappy experience… but with the benefit that your funds are 100% in your control on Ethereum. No external hacks, no internal thefts from malicious teams, no seizing of funds possible.
This exchange has been running smoothly ever since. You can trade at https://v1.loopring.io right now or even trade programmatically via API. All it takes is an Ethereum address. (Please note: you must ‘enter’ the Layer 2 environment, which takes an on-chain gas fee, before everything becomes super smooth and cheap on L2).
Just this past week, we released the Loopring Wallet. This wallet distills everything we have spoken about above and puts it into your pocket in an Ethereum smart contract wallet. From this mobile wallet, you can trade on the Loopring DEX, send instant, gas-free (and actually completely free for now) transfers, and much more.
Smart contract wallets are great for the extra security and flexibility they offer users. Combine this with our zkRollup baked in natively, and you’ve got a super powerful product, in our humble opinion. Ethereum unleashed.
You can get the wallet right now from Loopring.io. It is an Android-only beta for now. (iOS in January.) This wallet can be your secure homebase, as it’s 100% non-custodial, and also your day-to-day account, where you can send or trade even 1 DAI, without gas fees being an issue.
It’s worth noting, the two products above are on different versions of the Loopring protocol. The Exchange is on the ‘old’ v3.1, while the Wallet is on the ‘new’ v3.6. V3.6 is a big upgrade, and is being rolled out gradually as I type this. One of the biggest features is support for AMMs on our zkRollup, whereas before we only supported orderbooks. So please just be aware, if you make an account on the exchange, you won’t be able to transfer assets on L2 to your wallet, and vice versa. You’ll have to go to L1 to cross that chasm. (Accounts in both versions live in different Merkle trees). Soon, we will update the Loopring Exchange web app, so that it is also on v3.6.
Thanks DEFI TIMES!
All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
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