What is Looping and how does it work – A comprehensive guide

I thought this information would be useful for people wondering about what Loopring is as a project. Personally, I feel like we need more projects in this space to help deal with the gas fees that's associated with the eth network and Loopring aims to provide a layer 2 solution. All credits goes to u/macro__B for compiling the information below


What is Loopring? Loopring is an Ethereum (Layer-2) zk-rollup protocol. This Layer-2 protocol is what powers the applications built on top of it, allowing them to enjoy the security + stability of Ethereum (Layer-1) but with much faster speeds (near instant swaps/transfers) + much lower fees (no gas!)

What is built on top of Loopring zk-rollup protocol? There are two main products built on top of the Loopring protocol:

1) Loopring Exchange (web DEX) – swaps, orderbooks, AMMs, transfers – https://app.loopring.io/ – connect w/ Metamask, Ledger, or any other wallet w/ WalletConnect 2) Loopring Smart Wallet (mobile) – smart contract wallet (mobile app) that has the Loopring Exchange baked in – https://loopring.io/ – providing users with the best mobile security for their crypto assets – no easy to lose pass phrases – extra protections like Social Recovery (guardians) – daily limits / ability to lock wallet if lost/stolen NOTE\ – The Loopring Smart Wallet is not required to access the gas-free savings of Loopring L2 – this can be done with any wallet (like Metamask) directly connecting to the Web App –> https://app.loopring.io/

Learn more about the Loopring basics 1) On what Loopring is and isn't: https://medium.com/loopring-protocol/on-what-loopring-is-and-isnt-cdc81b96502c 2) The difference between Layer-2's + the Future of Layer-2 scaling: https://medium.com/loopring-protocol/loopring-cto-steve-what-is-the-real-future-of-layer-2-networks-7257934212e4

What is the Loopring token (LRC) The Loopring token (LRC) is the native token of the Loopring protocol and is the core utility + governance token of the Loopring ecosystem.

Currently, the LRC token can be used to pay fees on Loopring L2 and is also used to incentivize behavior that is beneficial for the Loopring ecosystem. Fees paid to the Loopring Exchange are shared + can be earned by liquidity providers, insurers (coming soon!), and DAO members/stakers (coming soon!).

We also distribute rewards to LRC token holders if they participate in our layer-2 liquidity mining programs. In the future, the LRC token will become the core of the Loopring DAO, enabling token holders to become governors of the protocol + earn fees generated by the protocol for doing so.

Read more about the current LRC tokenomics (v2) here: https://medium.com/loopring-protocol/lrc-tokenomics-v2-1e6fd99e9e9c

What's coming next for Loopring? 1) 2021/Q3 Update + Q4 Roadmap: https://medium.com/loopring-protocol/loopring-quarterly-update-2021-q3-bd083d94ca17 2) Latest News – Loopring now supports NFTs on L2: https://medium.com/loopring-protocol/loopring-now-supports-nfts-on-l2-29174a343d0d 3) More Recent News: https://medium.com/loopring-protocol

​ COMMON QUESTIONS:

1

How does Loopring Layer-2 compare to other L2s? Loopring Layer-2 is an "application specific" zkRollup L2 that is built directly on top of Ethereum – using Ethereum for it's security + stability — this makes Loopring unique in a few different ways:

1) Loopring is a "true L2" – not a sidechain – "true L2s" derive their security directly from Ethereum – if anything every happened to Loopring – your funds are always safe + withdrawable back to Ethereum – examples of "true L2s": Loopring, Optimism, Arbitrum, zkSync, Starkware, Polygon Hermez

  • "sidechains" derive their security from their own set of validators, meaning that funds on sidechains do not have the same security guarantees from Ethereum
  • examples of "sidechains": xDai , Polygon/Matic PoS

2) Loopring is "application specific" – not "general purpose" – "application specific" means that Loopring is building all of the apps / products ourselves on top of the Loopring protocol – “general purpose” L2s are the opposite, where they just build the protocol + other apps build on top – Arbitrum, Optimism are examples of general purpose L2s

*\One MAJOR advantage of being *application specific is that we can optimize our L1 footprint to the extreme as opposed to other Layer2's.

This means Loopring L2 is much more scalable, faster + less expensive to use than other general purpose Ethereum L2s.

Check out side-by-side cost comparisons for yourself: https://l2fees.info/

3) Loopring is a zkRollup The two main types of Ethereum L2s: – zkRollups (Starkware, zkSync) – Optimistic Rollups (Optimism, Arbitrum)

In general, zkRollups are thought to be the future of Ethereum scaling as they rely on math (zk proofs) exclusively to submit proofs to Ethereum L1 – no waiting periods are required to withdraw funds

This is different to Optimistic Rollups, which rely on game theory to prove to Ethereum L1 nothing fishy is happening – which requires a 1 week waiting period to withdraw funds

Read more about zkRollups vs. others from Vitalik here: https://vitalik.ca/general/2021/01/05/rollup.html Read more about Loopring vs. other L2s from Loopring CTO Steve here: https://medium.com/loopring-protocol/loopring-cto-steve-what-is-the-real-future-of-layer-2-networks-7257934212e4

2

Can I stake LRC / What can I do with my LRC? If you haven’t already, please read (at the top) “What is Loopring token (LRC)” to understand the basics behind LRC.

LRC is the native token of the Loopring protocol + ecosystem and can be used to pay fees on the Loopring Exchange or can be used productively within the ecosystem to earn a share of the protocol fees/rewards

Currently, there is no direct staking option for LRC (although this is coming soon with the release of the DAO + insurance funds!) However, you can use LRC to provide liquidity on the Loopring Exchange (https://exchange.loopring.io/) in any of the LRC pools (ie. LRC/ETH) to be rewarded with a share of the protocol fees collected on a monthly basis.

For guides/tutorials on how to do this, check out: https://medium.com/loopring-protocol/guide-how-to-use-the-l2-loopring-exchange-d67b6b8127f0 or: https://youtu.be/u_rzR0APENQ

In the future, we plan to release an insurance fund, where LRC holders will be able to directly stake their LRC into the insurance contract to earn a share of protocol fees on a monthly basis as well.

On top of this, we also have a forthcoming DAO, which users will also be able to stake their LRC into, which will also entitle them to earn a share of monthly protocol fees as well as the ability to vote on + govern the direction of the protocol / proposals.

Stay tuned for more on this in 2022.

Read more about the current LRC tokenomics (v2) here: https://medium.com/loopring-protocol/lrc-tokenomics-v2-1e6fd99e9e9c

3

What are the costs/fees associated with Loopring?

Check out this link for more info on Loopring fees: https://loopring.io/#/embed/wallet_fees_en

Compare costs across Loopring vs. other L2s: https://l2fees.info/

Detailed answer Just as there are with Centralized Exchanges (CEXs) like Binance or Coinbase, there are costs incurred to deposit onto / withdraw off of the decentralized Loopring Exchange (DEX) as well as you are still using Ethereum L1 when depositing + withdrawing.

The big difference is, with Loopring, you don't have to trust a centralized 3rd party with your funds ever. Loopring Exchange is completely self-custodial as it is built on the 2nd layer of Ethereum.

Once you are deposited onto Loopring Layer-2, that's when you get to enjoy the low-cost, near instant trades and transfers of L2 – all the while having the peace of mind of being secured by Ethereum

You can check out a direct comparison of Loopring L2 vs. other L2s / Ethereum here as well: https://l2fees.info/

4

Why does the Loopring Smart Wallet cost money?

Short answer Security is top of mind with every product we build

When you deploy a Loopring Smart Wallet (w/ Social Recovery) currently, you are deploying your very own personalized smart contract on Ethereum Layer-1, which incurs dynamic gas-costs on Ethereum.

This smart contract is used to protect your funds + give you many advanced features like Social Recovery, lock protection, daily limits + more that you can't get with normal crypto wallets.

(more details about features below)

Read why Vitalik believes Smart Wallets w/ Social Recovery are the future here: https://vitalik.ca/general/2021/01/11/recovery.html

Detailed answer The Loopring Smart Wallet is not your regular crypto wallet. It is a highly secure, highly advanced crypto wallet with many features and protections built in to protect you and your funds.

When you deploy a Loopring Smart Wallet (w/ Social Recovery) currently, you are deploying your very own personalized smart contract on Ethereum Layer-1, which incurs dynamic gas-costs on Ethereum. Currently, it costs around ~700k gas to deploy a smart contract on Ethereum L1, which is where the cost of the wallet comes in. This fee is paid to Ethereum miners + is not collected by Loopring.

This smart contract is used to protect your funds + give you many advanced features like Social Recovery, lock protection, daily limits + more that you can't get with normal crypto wallets.

Nobody wants their funds/wallet lost or stolen, but if they are , you need to have peace of mind knowing you have protections.

"dumb wallets" – like MetaMask + most others have easy to lose/steal/hack secret phrases

hardware wallets – are also a single point of failure

If we are going to onboard the masses into crypto, we need to offer users the same sort of protections + peace of mind they get when they deposit their money at a bank.

With Loopring Smart Wallet, you get many advanced features + protections including: * Social Recovery – guardians can recover your wallet if it is lost or stolen * Lock your Wallet – in case it is lost, stolen or hacked * Whitelisted Addresses + Daily Limits – sleep well at night knowing that if your wallet is lost/stolen or hacked, funds can only be sent to addresses you have approved * No easy-to-lose secret pass-phrases

Read more on why Vitalik agrees that Smart Wallets w/ Social Recovery are the future here: https://vitalik.ca/general/2021/01/11/recovery.html

5

How do I remove tokens from the old (v1) Staking contract? The old staking UI/UX from v1 is now long deprecated, so the only way to remove LRC tokens from the old contract is to now directly interact with the staking contract itself on Ethereum L1 via Etherscan.

We put out an official announcement back in January ('21) about this with instructions here: https://medium.com/loopring-protocol/loopring-to-distribute-all-remaining-v1-staking-rewards-on-l2-8208ea5bdc48

Here is the official staking contract you will need to interact with: https://etherscan.io/address/stakingpool.lrctoken.eth#writeContract

Here are instructions on how interact with this contract to unstake by scrolling down to the "How to Unstake" section near the bottom: https://medium.com/loopring-protocol/lrc-staking-and-claiming-instructions-91fd80e1af98

6

Are my funds safe when I am using Loopring L2? Yes, Loopring is a non-custodial Layer2 solution built directly on top of Ethereum.

This means you always have the same security guarantees you get when interacting with Ethereum L1 (unlike with sidechain scaling solutions). Your funds are always fully in your control (self-custody) + secured by Ethereum

In the worst case scenario, where Loopring went down / wasn't responding, there is a built in "Force Withdraw" mechanism, which allows users to submit an on-chain withdrawal directly to Ethereum to retrieve their funds back to their L1 wallet.

See more here:

Users are also able to trustlessly exit Loopring L2 by submitting a merkle proof of funds directly on Ethereum L1 if the Loopring front-end was also down or unavailable.

You can read more about risks + compare Loopring vs. other L2s here: https://l2beat.com/?view=risk

7

Do I need a Loopring Smart Wallet to access Loopring L2? No, a (mobile) Loopring Smart Wallet is not required to access the gas-free savings of Loopring Layer2 (zkRollup protocol)

Any user with an Ethereum wallet (like MetaMask or many others) can connect their wallet directly to our Web App to access + deposit their funds to Layer2 to start enjoying the increased speeds and drastically reduced costs of L2

Connect your wallet here –> https://app.loopring.io/

The Loopring Smart Wallet is a smart contract based wallet with incredible security for your funds + many other benefits that you can read about by checking out –> common-questions #4 (above) – but is not required

For users that prefer a mobile experience but may not need the full functionality of an Ethereum L1 + Loopring L2 wallet (that the Loopring Smart Wallet offers) – our upcoming "Counterfactual Wallet" feature will give users a full Loopring L2 experience at zero cost

More details will be released on this shortly – for now you can read more about this as well as other things upcoming for Loopring in our Q3 report: https://medium.com/loopring-protocol/loopring-quarterly-update-2021-q3-bd083d94ca17

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