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Loopring is a transformative open protocol hinged on the Ethereum blockchain, purposed for the creation of decentralized crypto exchanges. Amid the daily flux of the cryptocurrency market, ranging between $50 million to $200 million in trading volumes as observed in 2020. These exchanges, managed by private firms, are entrusted with users' funds and manage buy and sell orders. Centralized exchanges, however, are marred with several challenges, hence, the advent of decentralized exchanges (DEXs). Nevertheless, DEXs are not without their drawbacks. This gap prompted Loopring to create a hybrid solution that integrates the order matching efficiency of centralized exchanges with the on-blockchain order settlement of decentralized platforms. This innovative approach led to the launch of the LRC tokens via an initial coin offering (ICO) in August 2017, while the Loopring protocol itself was first deployed on Ethereum mainnet in December 2019.
Loopring was founded by Daniel Wang and his role as the CEO of Loopring Foundation further consolidates the project's vision. Leveraging the best of both centralized and decentralized exchanges, Loopring aims to enhance liquidity, enabling swift order matching. It does this by combining the liquidity advantage of centralized exchanges with the decentralized approach that isn't as efficient in order matching due to lower liquidity levels.
The LRC, an ERC20-native token based on the Ethereum blockchain, facilitates key operations on the Loopring protocol and incentivizes the correct use of the Loopring network. The token was initially released to the public during the ICO in 2017. LRC deposits by exchange operators can be confiscated by the protocol if the exchanges are poorly operated with these confiscated funds then redistributed to users who lock up LRC. The Loopring platform is an open-source, audited, non-custodial system that enables the creation of noncustodial, order book-based exchanges on Ethereum using zero-knowledge proofs.
Loopring operates as a payment application and has been touted as the world's first Ethereum smart wallet. It is managed by a smart contract rather than a private key, integrating zero-knowledge roll-ups (ZK-Rollups) to optimize the Ethereum blockchain for decentralized finance (DeFi) applications. To bypass the slow speeds and high fees common to the Ethereum blockchain, Loopring introduces a data link layer (Layer 2, or L2) into its protocol. This allows users to instantly transfer Ethereum or ERC20 tokens to any Ethereum address, and only pay 1% of Ethereum Layer 1 fees when using Loopring Wallet. Ring miners and order rings execute orders in exchange for rewards in Loopring's operational framework.
LRC is utilized to pay fees on L2 ZK-Rollups, thus ensuring the security of the blockchain. In addition to supporting automated market makers (AMMs) and an order book exchange model, it also serves as a payment system built on the Loopring protocol. The platform authorizes protocols, manages order creation, order matching (ring mining), order verification, and processes settlement. Rewards in the form of LRC can be earned via ring mining.
Loopring effectively mitigates the inefficiencies prevalent in standalone centralized and decentralized exchanges. Loopring's DEX connects buy and sell orders directly with each other, settling the trades on a public blockchain, rather than managing user funds in custody and processing trades internally. Loopring's protocol leverages Ethereum smart contracts and zero-knowledge (ZK) circuits to create scalable, secure DEXs, and AMMs. Loopring's trading process involves users sending funds to a smart contract managed by the Loopring protocol, following which the necessary computation for trades is moved off the main Ethereum blockchain, reducing cost and increasing speed. These transactions are then settled on the Ethereum blockchain, thereby confirming their genuineness.
The Loopring protocol token, LRC, is set to modernize its token model to better suit the protocol's progress and product suite. It will incentivize beneficial behavior for the Loopring ecosystem, allow holders a say in the system, and facilitate the transition to Ethereum Layer-2 (L2). Protocol fees from Loopring will originate from transaction volume on L2 and will be distributed on the same layer. An initial protocol fee of 20% of the L2 transaction fee will be introduced. The protocol fee distribution is configurable, and will initially be distributed in a manner that includes 80% to liquidity providers, 10% to insurers, and 10% to Loopring DAO. As of now, LRC (Loopring) is ranked #102 by CoinMarketCap with market capitalization of $308,765,996 USD. The current circulating supply of LRC coins is 1,331,531,817.
Loopring's innovative technology offers several advantages, making it a prospective investment for those interested in projects built on the Ethereum blockchain, DEXs, and decentralization for data management. However, it should be noted that LRC is subject to the general volatility of cryptocurrencies and that DEXs face challenges regarding performance and structural limitations. However, the Loopring protocol is backed by a large community and continues to evolve and launch new features. By addressing the challenges of high transaction fees and low scaling rates common in the crypto space, Loopring offers potential for reshaping future DEX development.
LRC (Loopring), an innovative cryptocurrency built on the Ethereum blockchain, presents a potentially attractive investment opportunity for those interested in the intersection of decentralized exchanges (DEXs), blockchain technology, and the broader realm of decentralization. Loopring's deployment of cutting-edge technology such as zero-knowledge proofs, combined with its integration of Layer 2 scaling solutions, is another aspect that may make it an appealing investment. Its protocol enables users to instantly transfer Ethereum or ERC20 tokens at a fraction of the cost typically associated with the Ethereum blockchain. However, investors should be aware that the LRC token, like all cryptocurrencies, is subject to market volatility and potential risks inherent in the rapidly-evolving crypto and DeFi landscape. An investment in LRC should be undertaken with a comprehensive understanding of these dynamics and a carefully considered risk management strategy.