On April 25, Loopring founder, Daniel Wang, hosted a live chat about our zkRollup exchange on Bilibili for the Asian community. Due to limited time, we chose the following 18 questions to answer. We translate them below for our English-speaking community.
- How does Loopring Exchange prevent DeFi attacks like lendf.me? Will Loopring list imBTC, what’s your listing criteria?
Daniel: One of the main reasons why DeFi was attacked is that some projects copied the code without fully understanding the concept and details behind it. For example, Loopring smart wallet (to be released in coming months) has many references that we learned from, but the code was written by our engineers line by line. It is very dangerous to only copy other project's code, and there are many security risks in the long term. Besides, although some projects are open sourced, they may have bugs. We must be careful and realize, just because a project is open sourced does not mean they are necessarily safe.
imBTC is an attempt to bring BTC to Ethereum. Its disadvantage is that the solution is more centralized, similar to WBTC, but it is more centralized than WBTC, because WBTC has several companies to participate. We decide whether to list imBTC based on the needs of users. Regarding our listing criteria, we will consider the feedback of market demand. Of course, we will also review the code of the token and conduct an independent code review. We won’t list coins if they have incompatibility issues.
When it comes to Bitcoin, I think it is very necessary to trade Bitcoin on Ethereum, especially for DeFi. A few weeks ago we talked about a project, they took a more decentralized way to transfer bitcoin to Ethereum through a multi-signature, offline distributed storage private key scheme. We will list this token at the end of this month or early next month. I hope everyone can try this more decentralized solution. I believe this solution is much better than the existing ones. Of course, new technology has new risks and it will take time to verify.
2. Is there a plan to make Loopring Exchange compatible with existing wallets like Coinbase Wallet or Trustwallet?
Daniel: Sure, we hope that Loopring Exchange will be compatible with more and more wallets, but we hope to be compatible through a standard. We now support WalletConnect, and will later support Coinbase’s WalletLink standard. So as long as you are compatible with a standard, you can be compatible with many wallets supported by this standard. Similarly, Loopring smart wallet will also support the standard. Once it meets the standard, it will be accepted by more people, and the conversion cost will be lower.
3. Recently, Uniswap suffered losses due to hacking attacks. How can Loopring prevent such things happening? How to avoid it?
Daniel: From a technical point of view, there is no perfect solution to solve all technical problems. Uniswap and imToken itself doesn’t have a problem, but when someone put imToken on Uniswap, it caused a problem between two incompatible protocols. This is a composability issue. If Loopring operates the exchange ourselves, I believe that the probability of this problem will be quite low, because we know the technology ourselves, we will review the contract code of each token. However, if anyone without knowing the technology can operate an exchange based on Loopring Protocol, it is possible to result in incompatibility issues, so this is the risk. We need to rely on experience to avoid the risk.
If you use DeFi, you need to ask yourself whether the DeFi project has its own super administrator permissions. Most DeFi projects have permissions but you don’t know, so you think you are using DeFi, but in fact you are not using DeFi, you put trust on that platform, so I suggest not to put more than you're willing to lose into DeFi, unless you really do the due diligence.
4. How do you see the evolution of Exchanges like Binance moving towards decentralized solutions ?
Daniel: In fact, Binance also invested a lot of money in decentralized exchanges, but it didn't work. Including OkCoin, it also invested a lot of money into its own blockchain, including building an exchange on its own blockchain. We say that there must be a relative comparison of security. When we say Loopring Exchange is safe, our standard of safe is Ethereum - which means that the risk we (and our users) encounter is equal to that of Ethereum mainnet, something we view as the highest standard of security. First of all, the LRC token is issued on Ethereum, so the risk of Ethereum is the risk of the token. When you transfer the money to Loopring Exchange, your asset is still on the mainnet, and your asset is not owned and managed by others. The administrators and operators of Loopring Exchange do not have the authority to transfer your money to other users. So the security of your assets is the security of the Ethereum mainnet.
First of all, a chain initiated by a centralized exchange itself is not as safe as Ethereum. You can expect far fewer validators, and far less decentralization. In addition, the assets are managed by the centralized exchanges. At present, the best solution is a Layer 2 capacity solution like Loopring, which has the same security as the Ethereum mainnet, Loopring itself is safe, and has similar throughput and low cost as a centralized exchange. Best of both worlds.
5. After Ethereum's mainnet upgrade in the future, what impact will it have on the experience of using Loopring protocol?
Daniel: I think it will bring a very good impact. First, the throughput of Loopring protocol in Ethereum will become 200,000 transactions per second. This will be an incredible increase. If we can solve the bottleneck of relayer with 200 trades per second, increasing to 1000 or 2000 transactions per second, the performance of the exchange will improve a lot. Even if this is not possible, we can deploy 10 exchanges, and the expansion of Ethereum 2.0 gives us 100 times greater capacity. Second, the cost of each trade is also negligible; we have the lowest trade settlement cost around, and it will only get lower. Our current operating cost is also negligible, because the investment in our operations is mainly employee salaries, Amazon cloud services, office rents, etc. The gas fee paid to Ethereum per trade through Loopring Protocol is extremely low (~$100 for 1 million trades currently). The application of our technology will be very valuable.
6. Do we provide liquidity rewards?
Daniel: A few days ago we released an API document. If you are a programmer, you can connect to Loopring Exchange through our API, placing orders and making arbitrage on Loopring Exchange. Soon we will host a market making competition based on this document. The market making competition is not for ordinary users, it is for pure professional trading institutions that want to win cash rewards by connecting to our API. I expect that through the professional market making in May, the trading volume will rise, and the depth of some trading pairs will be better, or much better than now. We host the API competition to verify that the API we designed is easily usable, everyone can use it, and we can improve our API through the competition. So market making is a step-by-step by process: without our API, there cannot be a market making competition, without market making competition, there is no liquidity depth, without depth, there is no user. Therefore, it is really not easy to operate and massively grow an exchange. Technology alone is not enough. It also requires funds, rich imagination, and good relationships with professional institutions, etc.
7. Loopring is a high-quality project, but the token price is not particularly high, how to support the value of Loopring?
Daniel: Sometimes I am also confused. Some projects are bad projects, but the token price is high; some projects are really good, but the token price has always been relatively low. For example, I thought Kyber was a good project a year ago. It is a project that is really used in the Ethereum ecosystem, but it was ranked between 120 and 130 before in terms or market cap rankings. DeFi's perception requires time to improve and fundamentals matter more over the long term. The price of the token is pushed up by investors. Kyber later reached the top 100, even the top 50 or 60. What is security? Security takes time to verify. If there is no safety problem for one, two, or three years after Loopring Exchange launched, it will be safe. Loopring Exchange has been launched for two months now. If I say it is safe, you don’t believe it. It will take time to verify. Good tokens will take time to rise slowly, and bad tokens will slowly find that no one cares. If no one develops real useful technology, they will sink. So be patient, patience is a good virtue, and I am very patient in investing. I think I am quite proud that our team is one of the few teams in China that can do R&D without the effect of big environment, bull market or bear market. We have been constantly and consistently able to complete our strategic goals.
8. Are some of the trading volume of the Loopring Exchange brushed?
Daniel: Some volume is certainly not purely organic. When we hosted the trading competition before, although our API was not yet launched, some people were incentivized to trade a lot, even if that meant they traded with themselves. They did this to win LRC rewards. We also have professional market-making institutions that place orders and do some matching with users, so there are indeed some trades that are not spontaneous from users. Of course, since we settle to Ethereum, all trades actually happen, that much is for sure. But the economic intent behind them may vary.
9. How can Loopring make a profit？
Daniel: We don’t really think about how to make a profit now. What we are thinking about now is how to acquire users through a product. With a user base, we will consider how to make a profit. Often many business models are not profitable by the obvious ways they see, but also by other means.
10. How long does it take to deposit and withdraw?
Daniel: In normal circumstances, the deposit and withdrawal is within 20 minutes. In some cases, such as system upgrades, the time will be slightly longer.
11. Loopring and Wedex are both based on Loopring Protocol. Are they two exchanges?
Daniel: Wedex is operated by our former COO, Johnston Chen. My concept is a little more conservative. There are still some differences in concept between me and Johnston Chen. However, from the perspective of Loopring, any exchange building on top of Loopring Protocol inherits the same strong security guarantees, and will contribute to LRC staking and rewards. So I am happy to see more people use our protocol to bring benefits to LRC holders.
12. What's your opinion on Wedex issuing dkey?
Daniel: I don’t know dkey at all. Wedex and Loopring are two companies at the operational level. I am not clear about the operation of Wedex.
13. Do we have a capital team?
Daniel: There is no capital team behind to manipulate prices. Nor will we participate in influencing LRC token price, nor is it legal in itself.
14. How long can Loopring last?
Daniel: If there is no financing now, there will be no problem to last for at least two to three more years. Our engineers are great, very down-to-earth, and don’t think about getting rich overnight. I am determined that if Loopring can't get enough money, I will invest in my team. I am not worried about Loopring. In fact, the recent bad market environment is good for Loopring. In good times, people may invest in some bad projects, because they are less cautious and feel they are rich, because it is difficult to judge whether they are good or bad in a rising tide. Now, however, the really good projects will be highlighted under the bear market.
15. Talk about EOS
Daniel: EOS is big in China, because it fooled many people. I personally don’t think EOS is a good project, although it has a lot of money and capital, it is too centralized. It still relies on its previous capital for support.
16. Talk about LRC staking
Daniel: Loopring Exchange (and Wedex) now has trading volume, and each trade will contribute a certain percentage of the protocol fee to the LRC staking pool. If an LRC staker has staked for a period exceeding 90 days, they can claim the rewards. To reward people for staking (especially before protocol fees pick up with increased volume), the Loopring Foundation will deposit 2 million LRC as a reward for all participants around May 1st. We hope that Wedex trading volume will increase, Loopring Exchange trading volume will increase, (and more exchanges will be built) and there will be continuous cash flow as a reward to holders who stake LRC. In general, as token-economics evolve, we also remain open to adjusting the staking model to optimize benefit for LRC stakers, and to optimize the goals of the protocol itself.
17. Talk about LRN
Daniel: We have a rough plan on LRN, which is actually very simple. The first one is to find a decentralized trading platform that can use our contract on another chain. The selected time is very important and it may take some time. The second one is to transfer LRN to Ethereum through bolder ideas. In general, LRN holders will not be abandoned and I will be responsible for LRN.
18. When will Loopring launch APP?
Daniel: Our internal version will come out at the end of this month. We need to test and complete a third-party audit. We have selected a partner for the third-party audit. An Android version will be released in May, and an iOS version will be released in the second half of the year. Our dream is to build a decentralized bank based on Ethereum. You can save money, earn yield, inherit assets, invest, margin trade, etc. It will also have social network features. The core is Loopring protocol and Loopring exchange, the second is the smart wallet design, and the third is that there are still bold ideas in the future. I hope that the team makes money, and investors can make money too. There is still a distance from the goal, and continuous efforts are needed. I hope everyone can monitor and support it.
Loopring is a protocol for building high-performance, non-custodial, orderbook exchanges on Ethereum using zkRollup. You can sign up for our Monthly Update, learn more at Loopring.org, or check out a live exchange at Loopring.io.