Centralized Exchanges circumvent the purpose of Cryptosphere, which is premised on a decentralised system. For a trustless system built on the spirit of individual control to rely on a third party for transactions is fallacious. The status quo has often left a sour taste in the mouth of quite several people in the ecosystem. Cases in point are hackers breaching security to steal digital assets, and exchange owners absconding with the customers’ funds.
But there are some tradeoffs when it comes to using Decentralised Exchanges (DEX) in its current state. They are mostly slow, less widespread, lower liquidity, security concerns in the absence of Smart Contract auditing, among others. However, the situation is now evolving, and increasingly the Peer-to-Peer model that is fit for this space is gathering steam. Even some prominent centralised exchanges are decentralising to ensure the safekeeping of funds, transparency and inclusion.
Loopring Enhances DEX
Loopring (LRC) is a Decentralised Exchange and a payment protocol built on top of the Loopring Protocol and deployed on the Ethereum Blockchain. It is the premier Zero-Knowledge Proof (ZKP) DEX in the Cryptocurrency Exchange domain.
With the introduction of a new mechanism called the zkRollup, which was a recommendation by Ethereum co-founder Vitalik Buterin, the opportunity is endless. The project has initiated an era where everyone in the Blockchain space can use DEX without compromising anything. The level of security is similar to the underlying Ethereum Blockchain when the On-Chain Data Availability (OCDA) feature is on. Though throughput goes up to 16,400 trades per second, and security decreases to the level which controls that data when OCDA is off.
Trading on the exchange is trustless, and traders have no requirements to place any trust in anyone. Refreshingly, the builders believe being trustless will become the new standard of trustworthiness.
Characteristic of a Dex, Loopring underpins the non-custodial trading of ETH and all ERC20 tokens, bringing to realisation the adage, “Not your keys, not your coins.” The infrastructure achieves this through an audited Smart Contracts to handle assets for trading. Moreover, traders can trade with MetaMask as well as multiple WalletConnect-compatible wallets on the exchange. The headaches with KYC that withhold financial privacy and anonymity is nothing to worry about when using the LRC DEX.
Loopring has the capacity of completing more than 2,000 trades per second at a negligible cost of $0.0001. The Loopring v3 utilises zkRollup and Smart Contracts without impairing Ethereum security assurances. It is the most scalable dApp built so far on Ethereum. The facilitation of thousands of transactions off-chain, with verifiably accurate execution through ZKP without bothering about the performance of the underlying Blockchain is unprecedented.
Therefore, the generally known scalability problem with DEX when it comes to speed, security and cost are exclusively behind us. The LRC DEX offers a platform that removes the hindrance to the adoption of Decentralised Exchange. Consequently, Professional traders can now trade without worrying about the jumbles of security and speed. This groundbreaking initiative is definitely going to leapfrog individual empowerment and eliminates centrally control wallets.
As a tokenised exchange, LRC tokens can be staked for various benefits. Stakers earn 70 per cent of protocol fees paid by Exchanges built on Loopring, while 20 per cent goes to finance Loopring DAO. The remaining 10 per cent gets burnt.
LRC staking takes up to a minimum period of 90 days. Aside from the protocol fees, stakers additionally earn the LRC levied from DEX owners, who misconduct themselves in the Loopring ecosystem. Furthermore, Loopring DEX owners as a condition must stake some LRC for financial security and reputation building. This strategy ensures that ill-disposed DEXs will lose their stake if they don’t adhere to the laid down protocol rules.
The more LRC stake held by a DEX, the more trust it has. It must be acknowledged that asset protection is 100% assured by the protocol and that LRC staking is for economic warrantees linked to service points. Similarly, the LRC staked by a DEX owner for reputation purposes earns discount in the protocol fee the DEX has to pay for each trade. The number of LRC staked determines the settlement cost for the DEX.
Market makers and professional/active traders, on the other hand, can likewise stake LRC to reduce the protocol fee on their venue of preference. A more economical protocol fee for a DEX can mean diminishing the trading fees carried through to their traders. Prevailing protocol fee is 0.02% for Makers, and 0.04% for Takers.