In early February, China Daily USA conducted an interview with our founder, Daniel Wang. Daniel shared his views on the development and future of the Loopring Protocol and DEX in general. You will be able to see all the Q&A on China Daily’s print edition for this coming weekend. And here are the transcripts.
China Daily: Tell us a little about yourself and your background.
Daniel Wang: I used to work for Google as a Senior Software Engineer, working on their search backend and their ads platform. Later, I joined JD.com as a Senior Director of Engineering, leading a team working on their search engine, recommendation system, and ads platform. After that, I joined Zhongan technology working on their blockchain related research. In the middle, I co-founded three companies including a centralized exchange for crypto currencies. Right now I’m working on Loopring — this is my second crypto project.
CD: Please comment on the current cryptocurrency market and trends.
Wang: Right now the cryptocurrency market is a little bit over 360 billion dollars; it was over 500 billion dollars last week. We can see it is still in its infancy and fluctuates based on policy and regulation changes, right now. I don’t think we have yet to unlock the potential of blockchain technology; but, a lot of people have imagined the impact that blockchain technology can have over our lifestyle, and the related business models.
CD: What is Loopring and what need does it fill?
Wang: Loopring is a protocol for building decentralized exchanges. It’s not a platform, it’s not a product — it’s a set of data standards and rules encoded into smart contracts and a set of software built around the protocol. With the protocol, you can build decentralized exchanges — you can build your own decentralized exchange or you can join our network of decentralized exchanges. You can even build your own network of decentralized exchanges and manage the network as a manager. So, basically, Loopring wants to build a trading model that enables people to trade in a decentralized way, securely and anonymously. We truly believe that’s the core of the next generation of exchanges for cryptocurrencies and tokens.
CD: What are LRC tokens used for? How are they created?
Wang: LRC is Loopring’s protocol token on Ethereum. It’s pre-mined — the max supply is about 1.3 billion tokens. Right now about 40% is in circulation. Basically, the Loopring token is used to pay for matching fees as well as decentralized governance. It’s the fuel, or the gas, for our protocol. It’s very necessary to incentivize different roles in the ecosystem with the token so people will join us.
CD: Who is behind Loopring? (Team and Advisors)
Wang: I wrote the white paper and I also coded the majority of the smart contracts. We currently have almost 20 engineers behind the project. We also have four non-engineering people. We are mainly a team of engineers, and we are really technically focused. Right now we are still hiring people so if you are interested please find our email address on our website and send your resumes.
CD: Can you provide a roadmap for what you hope to accomplish in the next few months? In the next 12 months?
Wang: A couple weeks ago we released our roadmap for 2018. We are going to deploy the Loopring protocol on top of NEO, a public blockchain originating from China. We also want to deploy Loopring on top of the Qtum blockchain. But, the most important thing is that we are going to deliver a very user-friendly web-based app as well as an iOS app so that normal people can understand how to use Loopring; they will be able to use the Loopring wallet to trade cryptocurrencies easily. That’s the most important part. We also want to roll out a new version, 1.1, even a second new version 1.2 of the protocol to support incentivizing wallets. Right now we only incentivize miners to get all the trading fees but in the future we hope 20%, or even 25% of the trading fees are sent to wallet developers. So that wallets will also have a very solid cash flow.
CD: Tell us which blockchains you support and which ones you plan to tackle next.
Wang: Right now we support Ethereum and this year we are going to support NEO and Qtum. In the future we will deploy Loopring on top of the biggest 5 or even 10 blockchains. It really depends on which ones come to the market and which ones get adopted by more ICOs or projects. As long as the blockchain has a lot of tokens and there is a demand for exchanging those tokens, we are going to deploy Loopring on top of that blockchain.
CD: Tell us about the LRN and LRQ tokens, how they will be sold and how the airdrops will work for current LRC token holders.
Wang: LRN stands for Loopring token on NEO and LRQ stands for Loopring token on Qtum. 30 % of these tokens are going to be privately sold to investors, and 60% of them are going to be airdropped to the LRC token holders. The remaining 10% are going to be kept for our core developers and our LEAF fund (Loopring Ecosystem Advancement Fund). We are only going to sell tokens privately — we will not be holding an ICO for these tokens.
CD: Where does cross-blockchain support fit into the Loopring vision, if at all?
Wang: Cross-chain protocol is really something we want to build but it’s quite difficult at the moment. I don’t think there is any cross-chain trading protocol that has this level of trading automation enabled or order matching enabled. We have partnered with Professor Alessandro Chiesa from UC Berkeley in the hopes of working together to come up with something in the future.
CD: Do you consider decentralized exchanges like 0x, Kyber and Blocknet to be competitors?
Wang: From a certain perspective, of course. All these decentralized exchanges or protocols kind of compete with each other. But, right now, we are all working hard to compete with centralized exchanges. I think there is a lot of room for even more decentralized protocols or exchanges. At the moment, we are not in a competing mode; we are working together. We will try to work together with 0x, Kyber, and with other decentralized exchanges. We want to make sure that decentralized exchanges will take the market cap from the centralized exchanges.
CD: How does Loopring distinguish itself from them? What are Loopring’s advantages over them?
Wang: Firstly, Loopring is a protocol, not a platform. We are not building decentralized exchange per se, we are building the tools to enable other people to build a decentralized exchange. Essentially, we have this offline order sharing and online trade settlement. That means we can bypass the problem of the current blockchain’s throughput issues. You don’t have to put your orders on chain, you only put the trade itself on chain. We also have ring-matching which means that for each trade you can put more than two orders (up to ten orders), and do a circular transfer of values. That will improve liquidity and also improve price. Certainly, we have built in liquidity sharing, meaning that when you download our software and run the relay, you will be a part of our relay network and share liquidity with other relays. That is very important, it’s very different from 0x and other protocols. With the relays connected to each other, we are building a consortium blockchain. Loopring is the first solution that involves a consortium blockchain as well as public blockchain technologies. Lastly, Loopring is blockchain agnostic. It means that we can deploy Loopring on top of many blockchains. That maximizes chances of the holders of our tokens to win. I think Loopring has a very strong technology solution, and we are making good progress, so please follow us on Twitter!
CD: Do you think that centralized exchanges will ever implement the Loopring protocol, or would that be detrimental to their business model?
Wang: I think that centralized exchanges are going to adopt the Loopring protocol eventually; but, not now because they currently have this huge cash flow. They are not incentivized to do anything decentralized. I think that is something that’s going to happen in the future, not in a couple of years. Smaller exchanges are much more willing to talk to us to try to adopt Loopring protocol to build a competitive advantage over those existing giant exchanges. The Loopring protocol is mainly designed for wallets, so we want to make sure that people can trade directly from their wallets using their private keys to sign their orders. So, we are talking to more wallets instead of exchanges.
CD: Have you spoken with hardware wallet providers like Ledger and Trezor to implement Loopring? Have you spoken with any other wallet providers?
Wang: The Loopring Wallet is a web-based wallet — it manages users’ private keys. We do have plan to support both Ledger and Trezor this year. They both have web-based API’s, they have solid documentation — we can just integrate both much like what MyEtherWallet did. So, it’s not a problem for us. But, if we want to look for more advanced support, we are going to talk directly to them later this year.
CD: We see how Loopring can eliminate the need for centralized exchanges for trading one cryptocurrency for another, but can Loopring ever be useful for purchasing crypto with fiat? (and selling crypto for fiat?) How would that work?
Wang: Loopring is designed for token exchange. It’s not going to support fiat money directly. But with the introduction of tokenization services, people can deposit their fiat money to into a tokenization service and the tokenization service is going to issue some kind of token to them. That kind of token is a crypto token. They can use that crypto token to trade with other crypto tokens. It’s just like how the USDT works — USDT is not fiat money, but, it is a 1:1 exchangeable token for U.S. dollars. We believe in the future that tokenization services will be regulated so they should be more trustworthy than they are at present.
CD: What are the greatest challenges for Loopring moving forward?
Wang: I think the biggest challenge is user education — a lot of people don’t really know how to manage their private keys or their wallets. It is really hard for them to understand that if they lost their password, their key files, their money would be gone. For those people, we still think that centralized exchanges are going to be a better platform for trading cryptocurrencies. It really will take a lot of learning to understand how to manage their own money. Although it is perfectly safe, it also means that you have to take full responsibility to manage your own assets.
CD: Greatest opportunities?
Wang: Well, a lot of institutes — a lot of international business traders — want to trade without trusting any centralized exchanges. For these kind of token-to-token exchanges, Loopring or protocols like Loopring, are going to take a lot of the market share. In the future, international trading and anonymous trading, are going to use Loopring as well. Maybe these traders can hire some professionals to manage their own crypto-assets. Security is more important than usability for them.
CD: Where should LRC token holders go to keep up with the latest Loopring developments and make sure they don’t miss important announcements about airdrops, newly supported blockchains and other developments?
Wang: To get the latest updates, I suggest that people follow us on Twitter. We also have a Medium publication where we publish our bi-weekly report. In that report you can see what happened during the last two weeks with our development and marketing teams. So, I strongly suggest you follow us on Twitter and then follow us on Medium as well.
CD: Is there anything else you would like to tell our audience before we let you go?
Wang: We have just solved a problem, a really important issue in decentralized exchanges that is called front-running. Meaning that you can take advantage of other people’s solutions and just submit a solution to the blockchain before the real problem solver gets their solution mined into a block. We call our solution dual authoring — it’s a patented technology that is going to be released in our new protocol version 1.2. It’s may build up a big advantage for us, so we are really looking forward to the release of that new feature.
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