Loopring Pay. DeFi Solution? Not Quite Yet.
In recent weeks, ETH gas prices have gone through the roof. Much of it is due to the De-Fi trading meme, which more often than not means gambling on shitcoin pump and dumps on Uniswap. No, it really isn’t anything revolutionary on the sense of financial tech. At least, not yet. And sure, it’s cool that you can trade and swap funds without a custodian or centralized exchange. Like, this is all cool, but when a single transaction costs $50 and you’re trying to profit off a pump and dumb shitcoin (which again, is the driving force of most of these fees. That, and outright scams), then suddenly this De-Fi meme isn’t all that its pumped up to be.
Much of this is due to ETH’s failure to scale. Reddit even hosted a contest to fix it. No fix is in store until ETH 2.0 rolls out. When is that? Expect a long wait.
There’s a few different ideas that have come out to fix the high gas fee problem. One of those is Loopring Pay. Loopring (LRC) uses ZKrollups. Wtf is that? Think of it as a layer-2 fix.
Compared to how a computer would work, there is layer 1: physical and layer 2: data. Physical being the wiring in, say, a laptop connected to a router. Data would be the Ethernet packets sent to and from the ends of that wiring. A layer 2 on ETH, then, is a system that acts over the original block and smart contracts of the ETH network. This is just a really ELI5 explanation.
LRC claims to offer a free way to make simple transactions over the ETH network. But, this is really only half true.
In order to do so, you need to sign and register an account on the LRC platform. Doing so requires a gas fee.
Sending assets to your registered account also requires a gas fee.
Sending those assets from your account to the LRC exchange also requires a gas fee.
So, you do have to pay.
The registration fee (even if LRC doesn’t call it that, that IS what it is) is about $15-$20 depending on gas fees that day. Add in further fees for assets, and you’re looking at an expensive operation to even get to the point of transferring assets over LRC. But, if you’re just trying to jump between ETH and USDT, sure, this can be a very helpful process.
But, well, lets look at Vitalik’s tweet here:
This is only partially correct.
And let’s look at this post by LRC:
“You can send ETH and ERC20 tokens instantly, for free, and with the same 100% Ethereum security guarantees Loopring always upholds.”
“So users can send payments to each other instantly and for free. Free means free — no fees and no gas. And of course, it is a zkRollup, so it inherits the complete self-custodial security guarantees of Ethereum.”
Not free. But more than anything, what LRC doesn’t tell you is that the only ERC20 tokens you can send on loopring are tokens they’ve listed on their exchange.
The service is NOT a catchall for transferring ERC20 tokens for free to anyone with a registered account. It is only for tokens that have been listed on the LRC exchange. This, to me, is a huge distinction, and one that LRC decidedly doesn’t make.
They advertise free transfers (or close to free) but don’t specify that those transfers are only to registered accounts with approved ERC20 tokens.
As such, LRC is not (yet) a solution to the gas problem. It could be a great way to avoid fees if you want to trade ETH against a stable coin. But it is NOT a means to make free transactions. It isn’t a replacement for Uniswap if you’re trying to play with pump-n-dump DeFi shitcoins.
And until the, LRC is only a very specific niche solution. If they can get to the level of Uniswap, then they could take #1 on the DeFi market. But until then, they’re a niche at most, and even a little dishonest at worse.