21TH October 2019
Guest: Matt Finestone — Director of Business Development, Loopering
Q — With the uprising and adoption of BEP2 standard, slowly most of the ERC20 tokens are migrating to BEP2 and listed on Binance DEX. What is your take on this? Will Ethererum based DEX exist in long run considering the network constraints of Ethererum network?
A — Yes, so I liked this question because I mostly disagree with it’s assumptions :).
Certainly, Binance is an awesome company, and we have deep respect with them, and good relations. But I do not see a massive migration from ERC20 to BEP2. It is happening slightly, but not in bulk. And where it is happening, it is because those projects don’t ‘need’, or ‘value’ what Ethereum offers — which is a MUCH larger degree of decentralization, and thus, censorship resistance. For a truly censorship resistant system, Ethereum is the best smart contract platform. Binance DEX is only run by a handful of nodes for now, so theoretically can be ‘pressured’ more easily by governments, large companies, etc. Ethereum cannot be. So we believe the most viable GLOBAL DEXs will be built on Ethereum.
Q — In Loopring project, Whats the average settlement cost is required for each trades Including Blockchain transaction fees ?
A — I like this question because most people talk about the scalability problem with DEXs in relation to low throughput (small # of settlements per second), but in reality, that ALSO means HIGH cost per settlement…so solving scalability means solving both. So, assuming ETH price where it is today (~$180 and Gas price of 6 gwei), the OLD versions of Loopring (v1 and v2) would cost ~$0.33 per trade…which is much too high, especially for professional traders: Market Makers, HFTs, Algo traders…with v3, a settlement per trade using those same assumptions would be $0.0015. A huge improvement as you can see
For more info on that, you can see this recent thread from last week https://twitter.com/loopringorg/status/1181705288191238145?s=20
Q — What is Totle like approach to Creating a contract that aggregates Kyber, 0x, Uniswap orders INTO Loopring. Have LRC be the dex aggregator?
A — We like Totle a lot, and will be integrated with them. But they fundamentally wish to solve a different problem than us. It is complementary, not a substitute. Totle is great for a ‘simple swap’ functionality, where a retail trader wants to do a single trade at a good price…which is kind of like Kyber & Uniswap for example, just aggregated. Loopring wants to present the ORDERBOOK experience, where traders can see the full orderbook, and make trades / follow strategies, not a single simple swap. You can say we want to emulate the Binance or Bittrex experience, but with 100% Ethereum security guarantees.
Q — Any limitations to the orders people can execute? Is it only limit orders or will there be functionality for market orders and possibly even margin?Have you considered communal pooled liquidity similar to Uniswap to bootstrap 1.a community 2. liquidity?
A — There will be no limitations. As mentioned just above, we want to emulate the professional, full-service, orderbook exchange experience. That means having all those features, but with perfect security guarantees. So Limit orders, Market orders for sure are possible right now with Loopring, and so is Margin. For example, Dolomite.io is the leading DEX built on Loopring (built on Loopring v2.3, not v3 because v3 is still being audited :). Dolomite already has Market, Limit, and as of THIS week, will have margin! All from the safety of your own wallet, and without KYC (for non-US people).
Dolomite is a great place to trade ETH/DAI, and also as of this week, LRC/ETH
We love the communal pooled liquidity model, but it does not translate as easily to Orderbook exchanges (i.e. how can you do this on an orderbook? you can’t).
Q — As I see, Dolomite is the current major dex on loopring; Question is why dex requires KYC with over four tiers? Word decentralization means nothing centralized like email, etc. Can developers create full dex exchange on loopring no email nothing?
A — Haha I guess this is a fitting questions given we were just speaking about them! Dolomite.io is its own business — they simply use the Loopring protocol to build upon. While Loopring does NOT concern itself with KYC because we are just a set of tools/smart contracts/infrastructure, Dolomite is a US company, and so has its own business considerations. They must follow the laws in their jurisdiction to avoid trouble. So that means, they enforce US citizens to KYC themselves. All non-US citizens can use it without KYC, which is great. What’s interesting is that at first they made ALL users do KYC, but then the legal opinion shifted to being more relaxed :). That said, even for US citizens, they have a nice tiered-system, where you can trade with just an email up to ~$X, then if you want to go to unlimited $, you need to provide more info.
But yes, in summary, Loopring itself is what we refer to as “unopinionated” on the regulatory landscape…we just provide the protoco
Q — What feature that make Loopring Faster , secure and scalable than other blockchain platform ? What are the feature that Loopring provide to their user ?
A — What allows us to be faster and more scalable is the use of Zero Knowledge Proofs — an awesome cryptographic tool that means we can do things OFF chain (OFF Ethereum) while still ensuring everything happens according to the rules. Specifically, we use zkSNARKs. It is a great technology that more and more teams will be using throughout all of crypto.
You can learn more about how zkSNARKs (+ Ethereum) makes this all possible in this blog post: https://medium.com/loopring-protocol/loopring-3-0-overview-from-a-to-zksnarks-2c542e6c07b0
Q — Many exchanges already in market so why you decide to create loopering? What is difference between loopering and similar type projects?
A — This was not a recent decision necessarily, we have been doing this since July 2017 ☺️. But prior versions simply weren’t scalable enough. v3 solves this.
And yes, many exchanges…because this has been a money maker
The speculation of the space means people love trading. Exchanges are the biggest beneficiaries
I expect more and more exchanges to start competing, but for some clear winners to emerge, maybe in a regional fashion. That’s why Loopring as a protocol stands to benefit — with several DEXs above built on us.
Q — As i understand, Loopring uses Ethereum just as a storage. Computations goes offchain. A question in this regard. Why Ethereum? Could Loopring’s tech be implemented on other blockchains as well?
A — Good understanding! Indeed, we move basically ALL computation off-chain, which makes it scalable by not needing to use the slow/expensive blockchain. However, what’s great about the zkSNARKs is that even though computation is OFF chain, it is still done in a VERIFIABLE way. This is called verifiable computation. Ethereum can still VERIFY with 100% certainty that what happened off-chain is according to the rules. Which is so exciting :). And yes, some data is indeed stored on Ethereum — for even MORE security. Something called On-Chain Data Availability…definitely read the above article to learn more about that. And you are right — Loopring can be deployed on other blockchains — they just need to be able to support our smart contracts, and have the zkSNARK ‘primitives’ or capabilities. Other blockchain platforms have indeed reached out to us wanting us to deploy on their chain. We are open to it, but a big prerequisite is do they have a ‘thriving token economy’ atop their chain? For the most part the answer is still no.
Q — In 2017, There are mixed opinions that your project was not good when started so what have you done to keep your project successful and survived till now? And what have you do to attract ‘stubborn’ users to invest to your project?
A — We just work hard and dont mind the haters :). I actually think there was a lot of hype around our project in 2017….maybe even too much. Now, we are happy to just focus on building useful tech!
Q — Loopring currently provides non-custodial, order book-based decentralized exchanges on Ethereum blockchain in future do plan to provide all these services to other scalable blockchain’s, or you will only support ethereum?
A — I’ve answered just above, please have a look there. For now, it’s all about Ethereum, in our opinion. Certainly we want BTC liquidity on our DEXs, for which we will look at the most viable options. For now, we are part of the WBTC group (Wrapped Bitcoin) which puts BTC in an ERC20 wrapper. It’s not a perfect solution, but many in the DeFi space use it
Q. 0x too provide to build p2p and great decentralized exchange then what’s the difference in loopring? Why is loopring strongly compared to other dex creation projects?
A — 0x is indeed our closest peer/competitor in terms of architecture. i.e., orderbook exchanges, not just simple swaps. There are subtle differences — we are much more focused IMO. We want to do one thing amazingly well: build non-custodial, high performing orderbook exchanges. They have a bit more on their plate, such as contarct fillable liquidity for simple swaps. Which is commendable, but we want to focus. They have a bigger team so maybe can handle more. We are the leading team doing what we do best: scalable orderbook exchanges :)
We also have developed great expertise in ZKPs, something we take pride in. They work with ZKPs too, but until recently, they did that with a partner, not in house. I could be wrong. Generally, we really want them to succeed. Centralized exchanges are the common enemy for now :)
Q — Do you think Ethereum is the best smart contract platform and compliments to built Loopring technology & if yes how?
A — Yes, Ethereum is the centre of gravity for all this stuff right now…by a big margin. I answered above a bit more about this, so I won’t repeat, but happy to get into with you afterwards :)
Q — What important Role does ZKP play in Loopring v3 if you could describe briefly please?
A — ZKPs I also describe above, but it is indeed a HUGE part of v3. Half our team have effectively become ZKP experts…it’s a fascintaing field. For now, it provides scalability (higher throughput, lower cost), but its benefits actually go beyond! We can use it for privacy (which is how pioneers like ZCash achieve privacy
But there are some aspects that if we use it for privacy, it actually makes the scalability side LESS efficient. With advancements to the field, we will be able to use it for both scalability and privacy, but for now, just the former
Q — What is the LRC token used for? What gives it value? Why is it necessary and why should one invest in it?
A — LRC has new uses in Loopring v3, which are very exciting, and quite different than previously.
1. It is used for DEXs to provide EXTRA security to their users. Even though security (non-custodianship) is provided by virtue of Ethereum and ZKPs, there is actually a very subtle technical component which could make a DEX less secure…so, to fight that, DEX owners/operators need to STAKE LRC to provide this extra security
It basically happens that there is a time slot, in between from when a DEX matches a trade, commits the block to Ethereum, and creates the zkSNARK proof…in this time slot, the staked LRC means there will be no funny business / rule breaking, because if the DEX does so, they will be SLASHED
So I like to say that LRC provides ECONOMIC SECURTY GUARANTEES for a small period of time, until the CRYPTOGRAPHIC SECURITY GUARANTEE is ready.
2. Any user can stake their LRC to receive 70% of the network’s protocol fee
So the more volume flowing through ANY Loopring DEX, the more protocol fee, and the more benefit for the LRC stakers
Q — How robust are you to handle 21st century volume of transactions Your metamorphosis is a laudable one, how have you been able to survive this longest bear market and continue building and developing cos many projects have died out
A — Thanks. We stay alive because we truly want to…we aren’t leaving / exiting any time soon. Everyone on the team massively believes in the goal, and we wont quit. We also don’t waste much money on marketing right now. Not that it’s always a waste, it’s certainly important, but our team is 95% engineers, and so we want to build useful tech…not just talk about it. For example, this AMA is only one of a few we do — because we like this channel/community.
Q — Loopring launched LRC, LRN . I want to know loopring will issue more LRX protocol in future or not.
A — No, there will not be more LR’x’ in future. At least that is not the plan. 2 years ago, it was a different time, we were more ‘bright eyed’ and naive :). We thought deploying on every viable smart contract platform was the way to go. Looking back, that was a misstep. Issuing LRN (which was like LRC but on NEO, for those that don’t know), took away some focus from us, and now, NEO is not exactly a viable platform to build on.
It may one day become one, but there is not thriving token economy on top
We are not necessarily leaving LRN in the dust, we’d love to ‘salvage’ or redeem it, some way or another.
But our focus is 99.9% on building Loopring v3 to be the best solution in the game
Which we honestly do believe it is And it uses LRC, nothing else.
When we do go cross-chain, that may be through other ways, like using Cosmos, other technical designs. It won’t be deploying the protocol itself to many other bespoke chains
Q — Currently we can’t use Loopring to buy things from stores, but when is it possible in the future that retailers, companies and businesses might be more willing to accept loopring as a legitimate currency for purchases?
A — We’re not really thinking that LRC will be a medium of exchange like that. It is for different purposes (staking, please see above). MoE currencies are best left for BTC, and imo, ETH
Q — What drove Loopring team for the need to include a protocol fee? Technical, economic considerations? Can you explain please?
A — Good question. A protocol fee will help fund the protocol — forever into the future hopefully. This doesn’t go to the team, it will go to LEAF, the Loopring Ecosystem Advancement Fund. But only 20% of it will go to LEAF, and as you say 70% to the stakers themselves, and 10% burned (which is basically a reward as well, but going to all LRC HOLDERS, not just stakers, by reducing supply)
Those parameters (70/20/10) are subject to change…it will be configurable by LRC holders themselves
This is just where we are starting it
Q — What will you do if you FAIL in your Roadmap OR in your Whitepaper? And in what way you will be back on Track?
A — If we fail, it can be for multiple reasons…depending on which, we can course correct. We are very adaptable, already on v3 of our architecture, which is signifiacntly different than when we started >2 years ago. We are flexible, not stubborn at all
We;ve been working on v3 for 1 year. In that time, several of our engineers have become leading ZKP practicioners!
We keep our eye out for the best solutions, but remain focused — we dont want to try things just because it’s the cool new thing. We only want to use proven tech, which ZKPs are (been around since the 1980s actually
Q — What do you think about the growth of price? Is LRC has the potential to give the expected returns to its investors?
A — We are very aligned with all LRC holders, the team holds lots, and actually hasn’t even received the bulk yet! It is locked up and only began vesting monthly last month, for the next 24 months! So we are in it with everyone else for the long haul. We are bullish on LRC prospects within Loopring v3, but of course, we don’t know what the market will do, and you should not consider this financial advice at all, as they say :). We just want to build useful tech for the crypto ecosystem, and we believe price will follow. it is not a guarantee though
Q — What is loopering 3.0 and What is the meaning of “zkRollup” and “OCDA”? We can see uncountable amount of Hacking & Leaking News today in this Cryptocurrency Space. How you ensure that the assets of your Users are Safe and Secure?
A — So these are the more technical terms :). zkRollup is the name of the construction when you use ZKPs (zero knowledge proofs) and some extra data, and place both those things on-chain….Vitalik is actually the one who came up with this architecture, and the name
To me, Rollup makes sense if you think of it in the business sense
A business rollup is when some company or investor buys/merges many smaller companies in the same industry to create one larger company.
In our context, zkRollup is similar because it takes many ‘small’ transactions (state updates in a DEX, like trades, deposits, withdrawls, etc)…and then batches them together, into ONE ‘larger’ transaction, which is then proven in a ZKP, and then submitted on chain
So you are rolling up all these “intermediate” state updates, then submitting them in bulk to the chain.
OCDA means On Chain Data Availability….which is a component of the rollup.
It basically provides extra security, because it relies on the assumption that Ethereum will ALWAYS be available, which is an assumption we’re comfortable with
As opposed to OFF chain data availability
which would rely on some 3rd party (or consortium of 3rd parties) to keep some of the data
That 3rd party can be pressured by a government to shut down, etc (in the most extreme case). Something we are not willing to sacrifice
In fact, for example, if we relaxed the constraint of OCDA, we could increase throughput from 1400 trades/sec, to >10,000 trades/sec
But with a big security sacrifice. Not our style
Keep in mind we are getting to 1400/sec from ONLY 2/sec currently with other DEXs. So that improvement is more than enough for now
Q. Loopring wants to provide the infrastructure for people to build decentralized cryptocurrency exchanges. So why not Loopring build your own exchange platform? Do you intend to do it in the future?
ANSWER — Good question. For now we only want to support others. Such as dolomite.io, and soon, other DEXs who will launch on v3. Maybe one day we will launch our own, but we must be careful: we don’t want to compete with the DEXs building on top of us…or they may say, “wait, you are the creators of this, and will just try and advantage yourself…we can’t trust you
Of course we can still build one, and prove that all is neutral. Everything is open source.
One day we may build our own DEX, but not right now.
Q — Loopring says that it ensures that even if all servers of exchanges were compromised, you will, at worst, only lose a couple of Ether that you use as transaction fees}…We still see many hack incidents on exchanges…So why dont every other exchange use such technology and How can u say that Loopring is such a Secure protocol?
ANSWER — Yes indeed, can NEVER lose your funds. That is our foremost principle. You can only lose some small amount of gas in a tx fee.
The reason this technology isn’t ubiquitous across all exchanges is because historically DEXs are slow, expensive, bad UX, and low liquidity. That’s why v3 aims to solve all these problems. Which, quite frankly, we have solved the scaling problem already, 3rd party audits are almost done :).
When it is clear that this technology works, it will become the standard, in our opinion.
Q. Do you have any thoughts or opinions on Loopring’s influence in the dxDAO? Do they have any planned proposals? Will loopring leverage their community when voting in dxDAO?
ANSWER — Hey Zhang. Good question. We were really excited by dxDAO, and still are. It’s been a super interesting experiment in governance, and in community ownership of software protocols. We do own ~10% of the reputation in the DAO, and want to be more active. It’s just our bandwidth is really overwhelmed! These things take time :). Our first proposal was to actually give some of our reputation away — to make the distribution more ‘flat’
We have a few more proposals up our sleeves. One problem with DAOs is that people can become quite apathetic if they don’t have enough skin in the game, so we want to get more people involved. Right now there are 399 reputation holders.
We do plan on giving the dxDAO powers in the eventual Loopring governance system (LoopringDAO), and vice versa, giving our reputation to LoopringDAO, so our community can influence the dxDAO
Q. How Indian community support is important for Looping ?
ANSWER — I’d love to get the support of the Indian community. What an amazing market that is! I think having somewhat of a regional strategy would make sense, i.e., having an Indian team build a DEX above Loopring v3, with us giving them technical support, etc. That’s the beauty of this — a DEX has never been easier to start/maintain. But that doesn’t mean it is child’s play. It is a big BUSINESS effort. Since Loopring handles the tech, security, etc…we need builders have the business skills to compete: marketing, compliance, user acquisition, etc. If anyone in here is SERIOUS about building an unhackable exchange serving the Indian community, please do reach out.
QUESTION — Do you have any partnerships with other projects to focus in the near future? How many person working with you r project? Whats your next project?
ANSWER -We have a strong partner in China who is currently working building the frontend/operating the first v3 DEX. They will be called WEDEX. Besides them, there are 3–4 other projects who want to build a v3 DEX. Of course, we may not even know how many projects are out there with plans to build on us…it is all open source
But in reality, most teams like to let us know their intention to build on us, because they want some technical support, or to use Lightcone relayer
Besides that, Dolomite.io is currently the leading DEX built on us (v2.3)
Q. With the v3 scaling solution I`m even more optimistic about LRCs future! How many tx/s would be roughly necessary to cope with volumes of some of the bigger exchanges?
ANSWER -Good question. I’ll start by answering this a slightly different way: currently, the leading DEX protocols (Uniswap, Kyber) do about ~10–13k transactions per WEEK. Loopring can do ~50 million per day!!
So as far as DEXs, we have huge room before it is an issue
But, to be fair, as I mentioned before, Uniswap is a different trader type than what we want…they satisfy simple swaps…we want to satisfy true traders. So you’re right that a better comparison is to legacy centralized exchanges like Binance, OKEx
That said, they do not share the data about how many trades they process.
We can infer, but it is a rough estimate. I actually want to dig deeper on that this month
All in all, we are confident that 1400 trades/ sec, whic is what Loopring v3 can do with 100% security, is MORE than enough for likely a year to come
Q. What is your progressive plan to ensure that project Network remains relevant & valuable in the next 5 years, in terms of adoption and use-cases ?
ANSWER -Never stop developing and learning is our motto. In the past year, we went from being zkSNARK noobs, to being one of the leading teams deploying them
We will continue doing this with whatever tools come up — that are proven
Also, even though we are SUPER focused on the DEX use case, technically, the Loopring v3 construction can work just as well as a generalized payment solution!
i. e., there is technically no difference between saying: trade 100 tokenA for 2 tokenB in the DEX, or saying, send 100 tokenA from UserX to Users
So it can be used for fast, cheap payments on Ethereum
but there is lots of competition there, so we remain focused for now.