For those of you who’ve been following me for quite some time, you’re probably well aware that 1: I’m a sucker for new ways to earn money (crypto) online, 2: I’m obsessed with finding undervalued crypto gems, and 3: I’ve become quite the fan of Loopring (LRC).
That said, I decided to compose an article that hits all three of my obsessions right on the head – I wrote an everything-you-need-to-know piece on earning my favorite undervalued crypto, Loopring (LRC), online through staking.
Oh and another reason I’m bringing this LRC staking piece to you now is because LRC got integrated into p0x… so don’t be shy with those LRC tips ;)
Now before we dig into the technical details of Loopring (LRC) staking, I want to discuss how crypto tokens allow people to capture value in the new internet of value.
Back in the days, we did not have the opportunity to become shareholders of one of the Internet Protocol Suites. But just imagine if you could have back then owned a piece of HTTP or TCP/IP, you would be insanely stupid rich today.
Literally everyone uses the internet “A HELL OF A LOT” these days and those ‘hypothetical’ internet shares would be in very high demand right now and worth so much.
But guess what?
Back then and still to this day, you could not and cannot own a piece of the internet's protocol layer. Instead, you can only invest in the application layer (ie. Amazon, Facebook, Netflix, Google, YouTube). While many of these companies (applications) have turned out to be great investments, they still are nothing compared to the value that the internet as a whole provides.
That said, wouldn’t it be great to invest in something at the protocol level?
You’re damn right it would be, and you can do just that with the advent of blockchain technology and cryptocurrencies.
With blockchain and crypto, you can invest in more than just the application layer. You can invest directly in the protocol layer, which has tremendous demand potential and can send the protocol’s corresponding crypto token price through the roof.
Investing at the Protocol Layer - Enter Loopring (LRC)
For those of you who don’t know about Loopring (LRC), here’s a quick TL;DR:
Loopring is a non-custodial order book-based exchange protocol in which scalable decentralized exchanges (DEXes) can be built on. The protocol utilizes zero-knowledge (zk) technology and a proprietary zkRollup DEX design that proves itself to work as the fastest DEX protocol out there.
The Loopring V3.0 protocol which only just launched in November 2019, provides throughput that’s on par with centralized exchanges and can settle up to 2025 trades per second with transactions costing as low as $0.003 per trade on the Loopring Exchange.
So basically, Loopring is a badass revolutionary DEX protocol that has the potential to become one of the most valuable protocols in the world when non-custodial DEXes become the standard for trading digital assets.
That said, it might be worth investing in Loopring’s protocol token LRC to take advantage of the benefits it offers through staking and its lucrative tokenomics.
What Exactly is Staking in the First Place?
Most people (outside of crypto) think the only way to make money in crypto is to do so by investing or trading, “buy low, sell high”.
However, there are other ways of making money in crypto that is much easier and far less stressful, and it’s done through staking.
Cryptocurrency staking is a way of generating a passive income to holders of coins, regardless of the current market highs and lows. It’s like receiving stock dividends, but instead of receiving fiat dividends for holding stock in a company, you receive crypto rewards for holding a blockchain’s native crypto.
Staking involves the process of allocating or “locking up” your crypto funds in a cryptocurrency wallet to support the operations of a blockchain network. In doing this, you receive rewards for contributing to the operations of the blockchain network.
For some networks, staking rewards are determined as a fixed percentage inflation rate, while others are determined as a fixed percentage of protocol fees. Loopring (LRC) staking follows the latter.
Loopring (LRC) Staking
A community member has released the first user interface for LRC staking, and it looks like Loopring will use it as its own native go-to staking interface.
First LRC Staking Dapp (stake.o2b.dev)
With the launch of Loopring 3.0, the protocol aimed to solve two of the main obstacles holding back non-custodial crypto trading: scalability and settlement cost. Loopring managed to achieve these goals while inheriting the security guarantees of Ethereum thanks to its use of Zero-Knowledge Proofs (zkSNARKs) and clever protocol design.
That said, Loopring 3.0 enables the creation of fast, cheap, and secure decentralized exchanges.
But that’s not all; to further enhance Loopring’s DEX trading experience, LRC staking was introduced to:
1. Incentivize traders and increases DEX liquidity (LRC stakers earn rewards from DEX trading protocol fees)
2. Further enhance DEX security (exchange owners need to stake LRC for economic security & reputation.)
3. Further reduce DEX trading fees (exchange owners, market makers, and high-frequency traders can stake LRC to reduce protocol fees)
That said, LRC staking plays a big role in Loopring 3.0.
Let’s dig into it more below.
Why Would an Average Joe Investor Want to Stake LRC?
LRC is the native cryptocurrency of the Loopring DEX protocol and as mentioned above, investing at the protocol layer can be incredibly lucrative if that protocol is successful.
In regards to Loopring, its revolutionary DEX protocol has tremendous potential to become a raging success. The rise of digital assets is upon us and the emerging DEX landscape is growing in popularity.
Total value (USD) locked in Loopring (source)
As you can see from the chart above, Loopring is exploding in growth, and the best part about all of this is:
Anyone can capture the value of the emerging DEX landscape by not only investing-in and holding LRC, but staking it to earn rewards as well.
Stake LRC - Earn Rewards
When you stake LRC, you get to earn part of 70% of the protocol fees of all exchanges built on top of Loopring.
Anyone can participate in the staking of LRC and there are no staking amount minimums. Users simply stake whatever amount they can and receive a reward that’s proportional to the amount staked, and how long it is staked.
The minimum amount of time tokens need to be staked for is at least 90 days.
Protocol fee pool distribution
- 70% to LRC stakers
- 20% to the yet-to-launch Loopring DAO
- 10% burned
Overall, Loopring LRC staking is a great way for any average Joe investor to earn passive income in the form of LRC tokens. And if they want to benefit, even more, stakers can continuously grow their LRC investment by adding their newly earned LRC to their stake and benefit from compound growth.
In addition to regular investors staking LRC to earn rewards, staking LRC has more benefits for other types of people as well, which I discuss in detail below.
Who Else Would Want to Stake LRC?
Loopring.io exchange interface
Apart from you and I benefiting from staking LRC via rewards, exchange owners benefit from staking as well, but in a different way.
Exchange Owners Stake LRC for:
- Economic Security & Reputation (aka service-level guarantees)
- Reduction in DEX protocol fees (aka reduced trading fees)
1. Economic Security & Reputation
DEXes powered by Loopring are required to stake LRC for reputation & extra safety.
The minimum amount of LRC to be staked when creating a Loopring-powered DEX is ~250,000 LRC for an exchange with data-availability, and ~1,000,000 LRC for an exchange without data-availability. To further increase the DEXes reputation, the exchange owner can add to this stake at any time they want.
As for how long DEXes must stake LRC, the funds are only withdrawable when the exchange is shut down correctly, returning user staked funds safely to users (more on this below). If not shut down correctly, the exchange's staked LRC will not be returned.
The point of this type of staking is to ensure that exchange owners have something to lose if they violate Loopring’s protocol rules and it ensures that Loopring DEXes operate with optimal behaviors. (Note, the Loopring protocol is non-custodial no matter what.)
2. Reduction in DEX protocol fees
Loopring exchange owners are responsible for paying the Loopring DEX protocol fees for all orders to settle. These protocol fees are initially set at 0.050% for taker orders, and 0.025% for maker orders.
However, these protocol fees can be lowered with LRC staking from:
- Taker: 0.050% - > 0.025% with 2,500,000 LRC staked
- Maker: 0.025% - 0.0% with 1,000,000 LRC staked
To lower these protocol fees, the exchange owner can either; stake LRC themselves (on top of their already staked LRC for security & reputation), and/or let anyone else stake LRC including market makers, and high-frequency traders.
As for how long this LRC needs to be staked to reduce protocol fees, there is no duration specified by the Loopring protocol, it is up to the exchange’s custom contract.
Loopring LRC staking plays a critical role in the Loopring 3.0 DEX protocol as LRC is staked to reap rewards, secure exchanges, and reduce fees.
This heavy token utilization is extremely lucrative to LRC token holders as it will increase LRC demand in addition to ensuring the proper, secure, and liquid functioning of the Loopring protocol itself.
LRC staking enables the average Joe investor to earn passive income without worrying about the volatile ups and downs in crypto and it provides the LRC token with a strong value proposition that extends long into the future.
All in all, I haven’t been this excited about a cryptocurrency development for quite some time and I can’t wait to start earning passive LRC income through staking.
What do you think about Loopring LRC staking? Could Loopring (LRC) turn out to be the best staking coin of 2020 and beyond? Let me know what you think in the comment section below.