Loopring : Using Smart Contracts To Exchange Digital Assets On Any Platform
Loopring is a decentralised exchange that’s building a blockchain to exchange digital assets without relying on intermediaries, whose actions we can’t control. Using smart contracts, it facilitates instant settlements on popular platforms like Ethereum, Neo and Qtum. Definitely an altcoin to keep an eye on.
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What is Loopring?Loopring is an open protocol for building decentralised exchanges. With smart contracts, it can trade digital assets between off-chain operators bringing interoperability to the blockchain space. It enables people to have control over their own crypto-assets during the whole trading process instead of giving their money to centralized platforms. https://www.youtube.com/watch?v=LmCuoi1hCiU With all of the digital assets that are being created at an unprecedented rate, there is an obvious fuse case for linking them all together. The problem is that doing this requires trusting an intermediary or centralised exchange. Philosophically this goes against the spirit of cryptocurrency. Sending copies of your ID to what is essentially a startup is a daunting prospect, and exchanges are continually hacked because to use them users have to surrender their private key. Remember the Mt Gox hack? It is the most spoken about exchange hack, but since then there have been hundreds potentially thousands of other exchanges some small others very large that have suffered the same fate. The Binance phishing scam in early 2018, Bitfinex’s 72 million in missing tokens. Even Coinbase was hacked earlier this year. Loopring is about more than just making sure you don’t lose your coins in a hacked centralised exchange. Like their Whitepaper says “With the proliferation of blockchain-based assets, the need to exchange these assets amongst counter-parties has significantly increased. As thousands of new tokens are introduced - including the tokenization of traditional assets - this need is magnified. Whether exchanging tokens for speculative trading motivations, or converting to access networks via their native utility tokens, the ability to exchange one crypto asset for another is foundational for the larger ecosystem. Indeed, there is a potential energy in assets and realizing this energy - unlocking capital - requires not only asserting ownership, which blockchains have immutably allowed for, but the ability to freely transfer and transform these assets. As such, the trustless exchange of tokens (value) is a compelling use case for blockchain technology. I think we can all agree that decentralised exchanges will play an important role in the digital asset ecosystem that is taking shape, but how does Loopring fit into this? Unlike Kyber network, Loopring is not a decentralised exchange. It is instead a modular protocol (a set of tools) for building decentralised exchanges across multiple blockchains. They offer SDK style set of smart contracts and decentralized actors.
Is Loopring A Decentralised Exchange?
Loopring is not a DEX, but a modular protocol for building DEXs on multiple blockchains. We disassemble the component parts of a traditional exchange and offer a set of public smart contracts and decentralized actors in its place. The roles in the network include wallets, relays, liquidity-sharing consortium blockchains, order book browsers, Ring-Miners, and asset tokenization services. Order Rings are the heart of trading on Loopring. It uses something called a unidirection order model. Rather than filling or partially filling the buy and sell orders on the platform, it mixes and matches multiple order on the platform. Since every order is just a exchange rate between two tokens and order rings can include up to 16 different trades in a singe order ring, there should be better liquidity than there is on most certralised exchanges This shows how Order Rings can take three different buy / sell orders and create a circular trade that fills all orders. Another interesting consequence of these types of trades is that it doesn’t require an equivalent trading pair. Trading pairs can still be executed, but these Order Ring are a unique way that Loopring can improve on liquidity. “An order-ring is valid when all component transactions can be executed at an exchange rate equal to or better than the original rate specified implicitly by the user. To verify order-ring validity, Loopring protocol smart contracts must receive order-rings from ring-miners where the product of the original exchange rates of all orders is equal to or greater than 1.” - Whitepaper This is a mathematical way of expressing the idea that no one can buy tokens for less than someone else is willing to sell them. If the exchange rate (ratio) is less than 1, this can’t logically be the case.