A look into Loopring — the protocol, products, and vision. This post is part history, part prediction, and seeks to address what Loopring is, and equally important, what it is not.
In recent conversations, I have often found myself saying: “Loopring is a bit of a different beast”, or, “Loopring doesn’t have an exact analog”.
This comes up if I am discussing DEX protocols/products, Ethereum L2s/rollups, payments, and more.
I figured it is time to put what I mean by this on paper, since knowing what a thing is — or is meant to be — is quite important in measuring its progress.
What Loopring is
- An application-specific zkRollup protocol, a relayer, an L2 non-custodial exchange, a smart wallet — but eventually it will just be Loopring, where you use, trade, grow, and store your assets.
- Aiming to become the leading user-facing financial services application in the world. Trading, investing, payments, ‘banking’. The gateway of choice for users to experience the parallel financial system of Ethereum — in all its glory and security.
What Loopring is not
- A generalizable zkRollup seeking to support arbitrary protocols or functionality deployed atop it.
- An L2 focusing on having other projects build their products atop it.
Loopring at large
It’s true that Loopring is fundamentally ‘different’ — vs other L2s, and vs other DEXes or payment platforms. It operates across the stack, consists of multiple components, and at any one time, a reference to Loopring can mean a few things. In our mind, and the mind of our community, Loopring is the collective — all of the components tied together and working in tandem. In its whole, it can be thought of as Loopring, the project. But let’s see what actually makes up Loopring, the project.
- Loopring protocol is an open source Ethereum zkRollup protocol — a layer-2 for securely scaling exchanges and payments.
- Loopring relayer is a closed source zkRollup relayer — the backend (operator) that does all the off-chain duties to make a zkRollup roll.
- Loopring exchange is a non-custodial Ethereum exchange — a highly performant (super fast, gas-free) AMM & orderbook-based exchange with 100% Ethereum security guarantees. It also acts as a payment platform.
- Loopring wallet is an Ethereum smart contract wallet — a mobile wallet app with social recovery, other security features, and with the Loopring L2 baked in. (It is the app, as well as the open source smart contracts which constitute the wallet).
You can see right away that Loopring contains multitudes, and is quite ambitious, and that we like to build things. If you’d like to dig deeper into each, here are some links:
Collectively, let’s call the above two components, the Loopring layer 2, or Loopring zkRollup. This was Ethereum’s first rollup, the v1 having been deployed on mainnet in December 2019, and the v2 is currently the leading L2 in terms of assets and users on the rollup.
Products — how most end-users actually interact with the Loopring L2: Loopring Exchange, and the Loopring mobile wallet. These products are built atop Loopring L2, and are operated by the Loopring team. [The wallet smart contracts, in addition to the mobile app, are also built by us]. The API is also a product: for programmatic users, and third-party applications that want to plug into Loopring L2.
LRC, the Loopring protocol token, sits within this complete system, used to align incentives for protocol-desired behaviour in functions of liquidity, insurance, and governance, and reaping the respective rewards. More info on v2 token model here.
From Protocol To Products
While Loopring spends time on all the above components, and the team is indeed split in three groups: protocol, relayer, product, the overarching theme is that Loopring has matured from purely a protocol, to a vertically integrated project, with our user-facing products taking a front seat in our minds. The protocol and relay advancement is ultimately to serve the product needs, serve end-user Ethereans, and more generally, delight our users. This is worth repeating:
While still investing heavily in protocol R&D and relayer improvement, Loopring is becoming increasingly focused on building our consumer products, the Loopring Exchange, and Loopring Wallet.
In this sense, to our knowledge, Loopring is completely unique vs other layer 2 projects. Other L2s (rollups) are seeking to become platforms for other protocols/projects to build on, while we are focusing on building our own products and capabilities atop our layer 2.
When most people refer to Loopring L2 these days, they are referring to the ‘canonical Loopring L2’, which is our implementation of the Loopring zkRollup protocol, and our products that live atop.
It helps to have comparisons. Other L2 creators: zkRollup projects MatterLabs and Starkware, and optimistic rollup projects Optimism and Arbitrum, have different goals. [There are other great rollup projects too.] These four projects seek to draw in other protocols or dapps to migrate or build anew on their L2. These L2s don’t build specific protocols, nor user-facing products themselves, at least not at the moment. Loopring on the other hand does not explicitly seek to have other protocols deployed or dapps built on top of us.
There is some nuance in this statement, though. For example, third party apps or projects can integrate Loopring L2, to allow functionality like instant, gas-free swaps, or transfers within their own product. This just uses our API. Or of course they can integrate Loopring to allow their users to see onto L2, displaying their balances, etc., like dashboards Zapper and Zerion have done, or accounting software Rotki has done. Loopring will be a massive hub of financial activity on Ethereum, and anyone can plug into it via API.
But they cannot build their own generalized protocol or product atop Loopring L2. Loopring is what is called an application-specific zkRollup, and our applications/functionality are orderbook exchanges, AMMs, transfers, and related operations. It cannot support arbitrary EVM functionality. That is what optimistic rollups can support (now/~imminently), and zkRollups will be able to support in future.
We are building up, not out
While we are building our products upwards, into the hands of hopefully millions of users, other people or projects can indeed build something on Loopring protocol, along the lines of exchange & payment functionality. It is open source, so anyone can use the smart contracts and ZK circuits. But the practical truth is, the relayer is a massive undertaking, and is needed to make a zkRollup run. Our relayer is closed source. We have spent years building and optimizing it for our purposes, and believe it is a strong competitive advantage.
To be clear, a closed source relayer poses exactly zero threat to users’ assets — such is the beauty of a zkRollup. Using a single relayer is secure since it is constrained to only protocol-allowed behaviour.
For someone else to build on Loopring L2, they can use/fork the protocol, and then need to:
A) Build a relayer so they can run their implementation of a Loopring zkRollup. They can be the single relayer for their L2/product, the same way we are the relayer for ours, or they can use the protocol in a relayer-agnostic format, where anyone can be the relayer servicing it. However, building a powerful, stable relayer is a tremendous task.
B) Use our relayer as a service. This means working with us to replicate an instance of our relayer, which is stood up just to service their project, being configured for their needs, etc. (Not to be confused with using our relayer within your application for our existing capabilities, such as L2 trades & transfers, which is no problem, just using our API).
You may be aware that we have previously mentioned offering our ‘relayer-as-a-service’ to other projects, which is indeed still perfectly viable. However, practically speaking, our energy is being devoted to improving the relayer to strengthen our products and user experiences, not in licensing it, or working with others to tweak it as they may need. Some projects have recently requested to discuss how they can build their products on Loopring L2, and the fact is, we simply do not have the bandwidth to prioritize that, given we are focused on improving our protocol, relayer, and products, for the sake of our current and future users.
As you probably grasp, Loopring’s future lies in building beautiful, secure, performant products.
While we currently target crypto-native users (Ethereans), everything we have done is to be able to outcompete the incumbents — the fintech giants. We built our zkRollup protocol ourselves so we can emulate their experience, without sacrificing Ethereum security at all. Loopring made it so the biggest Ethereum UX hurdle was proven possible to solve, and custodial counterparts could no longer claim that non-custodial applications offered inferior experiences.
Loopring is striving to build global, consumer-grade financial applications, and we will measure ourself against this goal. Our metrics are those of users, volume, tx count, liquidity, stickiness, downloads, and overall, delighting users.
It is a rather funny thing that all the engineering effort and heavy R&D over 3.5 years ultimately comes down to the basics: giving users a product they love to use. In the context of Loopring that meant abstracting the difficulties of using Ethereum, and keeping the critical properties.
We built the first ever zkRollup ourselves to support this goal, and we continue improving our zkRollup to support this goal. But as is becoming clear, if other providers make the cryptographic advances that seem likely, we would have no problem ‘ripping out our rollup’ layer of the stack, and upgrading the Loopring project onto a generalizable zkRollup — all in the name of products having more and improved functionality. We believe our relayer and apps would always be a differentiator in powering advanced products.
Similarly, we are even looking into incorporating optimistic rollup constructions into our stack, notably useful for the Loopring wallet, where we can deploy our actual smart wallet logic on L2, and solve remaining pain points for users.
To unleash Ethereum and put the new financial system in everyone’s pockets, we will use whatever technology is best for the job — whether we continue to build it all ourselves, or use a better alternative.
Loopring is an Ethereum zkRollup protocol for scalable, secure exchanges & payments. Loopring builds non-custodial, high-performance products atop our layer-2, including the Loopring Wallet — a mobile Ethereum smart wallet, and the Loopring Exchange — an L2 orderbook and AMM DEX. To learn more, you can sign up for our Quarterly Update or see Loopring.org.