May 23, 2022


What Is Loopring And How Will It Impact Ethereum?

Ethereum (ethereum to INR) was seen as the future of cryptocurrency due to its upcoming upgrade Ethereum 2.0. That was until investors and users started incurring high transaction costs and a restricted amount of transactions per second.

To counter this, the blockchain-based project came up with loopring to enable ethereum to scale its operations by as much as 1000x without affecting the security of Ethereum. Loopring seems so promising to investors that the LRC currency price skyrocketed by 8250% in the past year and a half.

So what exactly is the loopring protocol?

Loopring’s software runs on top of Ethereum’s blockchain and aims to speed up Ethereum’s user experience by processing its components on its own network, to relieve the burden and congestion that Ethereum is currently facing.

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Loopring’s creators say that this enables the protocol to achieve throughput 1,000 times that of Ethereum, with peaks of 2,025 transactions per second. Unlike Ethereum’s exorbitant costs, Loopring transactions cost less than a penny, countering both the issues of transaction costs and number of transactions.

Other blockchains, such as Avalanche and Solana, that promise to be quicker and cheaper than Ethereum, are characterized as layer 1 blockchains, as opposed to Loopring. This simply implies that they are autonomous blockchains with their own validators. Loopring’s token powers an eponymous decentralized exchange that allows you to trade Ethereum tokens like USDC, AAVE, and ETH for a fraction of the cost of decentralized Ethereum blockchain services like Uniswap. Loopring’s daily volume was $13 million as of December 22, 2021, according to reports whereas Uniswap, the most prominent decentralized exchange (DEX), had a daily volume of $1.3 billion. It is yet to be seen if loopring will impact other cryptocurrencies like Ripple (XRP to INR) , MANA, Uniswap, etc that are based on Ethereum’s blockchain.

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Key Features Of Loopring

The key features of Loopring will help understand it better. Here they are:

  • Loopring achieves high throughput and cheap cost via the use of zkRollups.
  • Zk is an abbreviation for “zero-knowledge proofs,” which is a means of processing transactions in a discreet manner. It enables validating transactions without offering proof.
  • Zero-knowledge proofs are essential for bitcoin protocols that do not wish to release unnecessary information to third parties or rely on a central entity in the event of a failure.
  • Rollups are a method of reducing costs and boosting speeds by processing numerous transactions at once and splitting the cost of a single transaction.
  • They are a scaling mechanism that gathers batches of transactions, then “rolls” them into a single transaction.
  • ZkRollups combines these two technologies, making it the most secure scaling method in the industry. They allow users to access their assets under any conditions, making them appropriate for applications requiring trustlessness, such as decentralized exchanges or lenders.
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Loopring Has Its Own Token and Here Are The Details

The Loopring network is powered by the Loopring utility token, also known as LRC. It was established in 2017 and is largely responsible for powering Loopring’s decentralized exchange. Each time users execute a transaction on the DEX, they must pay in LRC. Approximately 80% of the funds are distributed to liquidity providers, with the remaining distributed to insurers and Loopring’s decentralized autonomous organization (DAO).

Driving Factors Of Loopring’s Price

LRC, like every cryptocurrency, is extremely volatile. There are various factors that have acted as the driving force of LRC. LRC exploded towards the end of October 2021, jumping from $0.38 to all-time highs of $3.70 in a matter of days. This was attributed to several reasons.

  • Speculations that GameStop, the video game company which saw a social media fueled spike, would utilize Loopring to develop a marketplace for selling non-fungible tokens (NFT) — blockchain-based art. This drove up the price of LRC substantially.
  • Some experts believe LRC’s price is linked to the success of Ethereum and competing scaling systems and layer 1 blockchains. Some believe that if Ethereum scales itself, the necessity for scaling would be eliminated, however Ethereum’s co-founder, Vitalik Buterin, believes that the two breakthroughs will complement one another.
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With Loopring, the face of cryptocurrency could see some major changes and it will be highly beneficial for ethereum’s ecosystem as well.


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