Just one year ago, I knew little about blockchain technology, and I didn’t think that I needed to know much about it. My knowledge of blockchain consisted only of a vague understanding of bitcoin and cryptocurrency as a whole. After I was accepted as an intern at Loopring a while back, I was pushed to go beyond my technical comfort zone and explore the blockchain environment.
Right away, I was given study material to help build my base understanding of Loopring and the blockchain technology that it is based on. After starting at Loopring, I have been given even greater opportunity to learn. While my understanding of blockchain is still new, it has improved considerably since my first day at the company.
In this post, I would like to pass on to you what I have learned about blockchain technology, how Loopring fits into the blockchain space, and how Loopring develops it’s blockchain protocol.
Blockchain’s key advantage is its decentralized method of record keeping. This is accomplished with the use of key cryptography, distributed networks, and a protocol. First, users are identified with a combination of a public key and a private key. These keys combine to form what is known as a digital signature, which is used to prove ownership. This keeps the blockchain secure. Next, the blockchain operates on what is known as a distributed network. Rather than using a centralized database, the system distributes the database to each user in the system. This keeps the blockchain decentralized. Lastly, each user in the blockchain system adheres to a specific program, called a protocol. This keeps the blockchain consistent. These three components, along with other relevant information about a transaction, are compiled to create a block which is broadcasted to the network. The blocks in the network are then linked, or chained, together, hence the term blockchain.
With blockchain, you can accomplish powerful things. It’s most notably used as a distributed ledger for bitcoin and other cryptocurrencies. But there are other useful business applications. For example, Walmart and IBM are experimenting with using the technology in order to create a more secure and traceable supply chain record.
Ethereum applies the blockchain concept more generally, decentralizing the process of computing in general. Using the Ethereum platform, developers can program the functionality of any given transaction using what is known as a smart contract. With multiple smart contracts, developers can create entirely decentralized applications, known as dApps.
Loopring builds upon the Ethereum blockchain in order to provide a decentralized method of exchanging digital assets. In the market of decentralized assets such as cryptocurrencies, trading often occurs from a centralized source. This use of central exchanges creates concerns for the security, transparency, and liquidity of the exchange, as you have to trust a third party with storing you assets temporarily. Loopring aims to address these concerns by providing a protocol for decentralized exchanges. As of now, Loopring has already staked $55 million into DEX style smart contracts. By decentralizing exchanges, users keep their assets up until the point where the trade occurs. Additionally, the Loopring protocol uses techniques such as ring matching, dual authoring, and zkSNARK proofs in order to ensure it’s exchanges are truly secure, liquid, and transparent.
Ring matching is Loopring’s method of matching multiple orders together. Once an exchange order is placed, the protocol will match you with another order in the network to complete the exchange. Through what is known as an order ring, the protocol can match up to 16 orders in a circular transfer of assets. Compared to the single asset transactions of traditional exchanges, assets are much more liquid, as users are more likely to get the price they want for their assets.
Dual authoring is Loopring’s patented method of authorizing orders. The dual authoring system splits up authorization into two different levels, one for settlement and one for mining. For each order, a unique public and private key will be generated for use in authorization. These keys will be used for verification by miners, but the private key will not be shared in the transaction on chain. The process is designed to combat the prevalent issue of front-running, where orders are stolen from the pending order pool. By keeping transaction private keys on a need to know basis, dual authoring allows the protocol to maintain security while still allowing orders to be sharable.
ZkSNARKs are a type of zero-knowledge proof that Loopring is implementing in their protocol’s 3.0 version. ZkSNARKs use quadratic equations to verify a transaction without revealing the underlying information of the transaction. With the use of zkSNARKs, less data will need to be stored on the blockchain. Not only will this lead to very significant improvements in transaction throughput and price, as less data to store means more room in each individual block, it will also improve transaction security, as sensitive information can be kept offline.
Solidity is the primary language used to develop Ethereum smart contracts, and is used heavily in the implementation of the Loopring protocol. I’ve begun to learn the language by creating beginner smart contracts and tests.
The Next Steps
Since starting my internship at Loopring, I’ve done a lot of research on the company, the market it surrounds, and the technology it uses. Overall, I have learned a lot since I started working at Loopring. While there is still more for me to learn, I would like to start converting my knowledge into experience soon. Be it assisting in development, communications, or teaching, I believe there are plenty of ways I can help out here at Loopring. With more experience, I can really push myself to become much more proficient in blockchain than I ever thought I could be.
And if you’d like to continue to learn about Loopring and it’s development, there’s plenty of ways to do so. The Medium page has been one of the most helpful resources for me in my learning, especially for highlighting features of the protocol. There’s also a lot of helpful information on the website such as the protocol’s whitepaper and additional technical information. And be sure to follow the subreddit to keep up with news on the organization.
Thank you for reading, I wish you luck in your future blockchain endeavors!
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