"Another day, another gas price hike."
Gas heatmap and prices available on: https://www.gasnow.org/
You'd think headlines like this would be a thing of the past by now. In age of technology and the financial revolution we all believed that expensive transaction fees were a things of the past. After all, it was those evil banks that all take a cut of your funds when you transfer or exchanged currencies. Sadly however, at least for the time being, these fees aren't going anywhere so it is important for us to look at alternative solutions until ETH2.0 really kicks into gear and brings down those transaction fees by speeding up performance.
In this article we're going to take a look at one of the flagship Layer 2 solutions on the market (and previous Publish0x tipping token) Loopring. If you've not looked into or used Loopring before I urge you to take a second look today. My hope is that this brief summary tour can help to serve as an entry level overview of the functionality currently available on Loopring. There is a reason that the LRC token has come on leaps and bounds this year, this is the first serious DeFi solution that hopes to combat rising gas prices and return the revolution back to the people.
The goal of this article isn't to go into too much detail about how to set up and get connected to Loopring suffice to say though that you journey would start here:
If as a result of looking into this you fancy giving the platform a go I highly recommend that you only do this when the gas prices have come down a little more (unless you have plenty of ETH to burn). It is true that the Layer 2 solutions discussed below have considerably lower transaction cost, however, in order to sign up to Loopring you will initially need to spend some ETH for the Layer 1 contract portion of the process, as well as for deposits.
Once set up and logged into your wallet each subsequent connection to Loopring is performed by using the 'Unlock' feature in the wallet action bar (top right of the exchange). This will sign a contract to confirm you're ready to crack on with some Layer 2 speedy transaction goodness. It is also where you can report bugs, reach out for support, and perform basic account actions.
The exchange itself consists of a number of options in the top navigation bar these functionalities represent a one-stop shop of everything folks need for getting started with trading on Loopring, as well as some earning options. We'll take a sneak peek into each section below in a bit more detail.
The cornerstone of the decentralized financial markets on ETH are the swapping solutions. You don't have to look far to see just how far UniSwap has come and the monster amount of funds traded there on a daily basis to see the demand is definitely there for these. As such the initial landing page default to this solution on Loopring.
In terms of comparability we're looking at a 0.25% fee for trading with 0.15% of this going to the liquidly providers, on Uniswap I believe this is 0.3% trading fee but all goes to the pair liquidity providers. As for available pairs there are actually a lot of options already, with some of the biggest DeFi names already having trading pairs on Loopring (including but not limited to):
- many more...
For the swapping portion of the platform to work there have to be individuals willing to put down liquidity down in order to allow for others to trade those specific pairs. As we'll see later this is incentivized as well by LRC mining, in addition to the trade fees earned.
You can see above there are three main screens for the liquidity pools. The main pool selection screen with breakdown of the pool stats, followed by the 'ADD' and 'REMOVE' liquidity sections. The process is nearly a mirror image of that provided by UniSwap so if you're familiar with that platform you will feel at home here. Interestingly, I was planning on doing this for the article, however, that 0.033 ETH exit charge did stop me for going ahead, it would have been more than half the value of the liquidity I am able to provide with my current Layer 2 balance and likely would end up costing me more money than I would earn. I can only speculate as to why this is charged but it does seem a little steep to me (currently >$50).
Moving away form the traditional quick swap solution we also have access to the full trading platform on Loopring. If you remember this was the backbone of the V1 of Loopring and started well but showed low volume to begin with.
There are still not a lot of pairs for trading on the Loopring DEX. Most are USDC/USDT/DAI pairs with ETH/LRC pairs in there for goo measure, but these also come with an incentivized orderbook program, described later. As for the trading fees they start off at an okay level (0.2%) though it is possible to reduce this as far as 0.06% if you stack LRC on the account or have high trading volume. See full details of this below:
In addition to the trade section there is also an order history section so you can see clearly what trades you've opened/completed (none for me currently) as well as a breakdown of the fees/prices executed etc.
Moving on from the trading features there is also a solid overview section for our wallets. This includes both the Layer 1 and Layer 2 balances as well as the total estimated USD/ETH values (yes I have some HEX tokens.....no I didn't buy this rubbish!).
Rather than just balance information this section also provides a sub-navigation bar that allows us access to details on AMM transactions, transfers/deposit histories as well as some of the reward programs. From this page we can also deposit from Layer 1 into Layer 2 as well a withdraw. Note however, Layer 1 deposits are still subject to normal ETH fees so probably best to time this well.
Worth noting as well that if you use Zapper.fi you can view your Loopring Layer 2 balances in the 'deposits' section.
AMM / Liquidity Mining
As mentioned earlier Loopring have incentivized a bunch of key liquidity pairs by offering a farming program similar to those seen commonly on Layer 2. The total for this round is 1000,000 LRC tokens to be distributed to providers of liquidity in some of the key pools, including:
As you can see from the image above there are also similar programs for some of the other pairs as well, most notable the DPI-ETH pool awarding providers with INDEX cooperative tokens.
In addition to these we can also start to get an idea of the 24hr volume seen on the platform (which is >12M for LRC-ETH) along with the estimated APY ranging from anywhere between 149.79% to 1.66%. This means there are definitely opportunities out there for earning on idle crypto if you're willing to move assets to this Layer.
Finally, as you'll see the last section of the navigation bar relates to the Order Book Mining program. This is another incentivized program where market makers can earn extra LRC for adding liquidity to the stablecoin orderbooks on the exchange and helping to maintain balance and volume on the exchange's books.
If you'd like to learn more about this check out the following articles:
So having taken a good look at the Loopring V2 solution we can see that it has placed itself nicely as an all encompassing platform where traders and earns can do what they do best outside of the extremely prohibitive gas fees we are experiencing on Layer 1. Before sounding too bullish on this though I do think there are a couple of sticking points. Firstly the smaller players will have to contend with considerable cost moving tokens onto Layer 2 in the first place. Secondly, the trading fees on the exchange offered by Loopring are not yet comparable with centralized exchanges fees or those see on other chains like the BSC.
There has been a surge in activity in recent months for other platforms to move to Layer 2 solutions which should hopefully drive adoption. One of the things I noticed back with V1 of this platform is that is passed by reasonably quietly while everyone keeps shouting about how the gas prices are intolerable. The problem seems to be getting folks to make the switch. It is better for us in the long run if we do, but as we lose access to the rest of the DeFi market when moving to Loopring's solution it does mean you need to be sure that it where you want your funds to be.
You can see I'm a little torn between loving what Loopring V2 offers us (a way out of the gas problems) but also being uneasy about whether it really gives us everything we need once we get there. Personally I'll probably dabble a little longer with it but not overly commit until we see a shift in the masses. In the meantime, however, if you enjoyed this article and want to learn more about Loopring's DEX check out the FAQ here:
Additionally if you plan on signing up please feel free to use my referral link: exchange.loopring.io/invite/13238
Thank you very much for reading the article, hope you enjoyed it! Good Luck y'all!