Loopring Quarterly Update: 2021/Q1
This is the first edition of the Loopring Quarterly Update, the successor to the Loopring Monthly Update. The change of pace comes with the maturity of Loopring from a heavy R&D-driven project, to a project with more stable technology. In turn, we focus more on the commercialization of the protocol through our suite of products, so our updates are more apparent right in the hands of users, with less need for frequent written recaps. You can receive these updates in your inbox every quarter by subscribing here.
When 2020 came to an end, the Ethereum landscape was really getting more familiar with the concept of layer-2 scaling and rollups, and Loopring was finding its way into mainstream usage and discussion (or at least mainstream in the context of Ethereum!). The impetus, like most things, was necessity — gas prices reaching new heights made Ethereum L1 difficult or impossible to maneuver for everyone but the largest whales. Gas-free L2 was salvation. This trend has continued, and we now see L2 top of mind for many participants in the space — from end-users to dapp developers to infrastructure builders.
The last monthly update we wrote, in December 2020, saw us fresh off the launch of our massively upgraded protocol (v3.6), and our mobile smart contract wallet launch (on Android). The new protocol unveiled an Ethereum zkRollup AMM for the first time, which was quite an achievement, and drove lots of new users and assets to our L2. The first quarter of 2021 has allowed us to see our new protocol and products in the wild, learn from it, and further improve.
While the protocol and relayer still make meaningful advancements, we have begun to buckle down on the areas we seek to make the largest impact: users’ lives. This means Loopring has spent early 2021 settling into our product-focused vision. A blog post we wrote a few weeks ago, What Loopring Is and Isn’t, is a recommended read to understand that while we will continue to operate and innovate across the stack, we are becoming increasingly focused on the top, directly delighting users.
Quick Summary of Q1
1. Loopring Wallet
Loopring is now an Ethereum wallet provider. In Q1, we launched our smart wallet Android app on Ethereum mainnet with Loopring zkRollup integrated. This was a first ever — a wallet (let alone a smart wallet) with L2 directly integrated. The smart wallet is a very secure design decision, with social recovery, daily limits, whitelists, and more. We have fixed tons of issues and improved the overall user experience a lot. However, there are still a few important features missing, and specifically with the iOS app, which we have only ‘lightly’ just launched, as it lacks WalletConnect support, AMM joins and exits, and orderbook trading. These features will become ready on iOS in a few weeks. By then, the iOS and Android apps shall be on par in terms of features, and we will officially announce the Loopring wallet for iOS. You can learn about the security features and overall design of the Loopring Wallet here.
We successfully ran a few Red Packet campaigns for Loopring Wallet during the Chinese Spring Festival and have acquired quite a few new wallet users. We’ll leverage this feature again for future user acquisition campaigns. Red Packet also created a sub-account system that our wallet may use to charge for meta-transaction fees, which doesn’t incur any transaction costs on L2 or L1.
We realized that the biggest challenge for an Ethereum smart wallet is the unacceptably high cost of wallet deployment and meta-transactions, which prevents mass adoption by potential users (later in this post, you’ll see our plan to mitigate this issue). But on the other hand, we have grown even more confident and optimistic in the future of key-less, social recovery-based smart wallet solutions. We feel strongly that such a wallet design is fundamentally superb for most users. If you wonder why, please check out Vitalik’s post regarding social recovery wallets.
2. Exchange V1 Migration
We have migrated all users (and their assets) from Loopring Exchange v1 to v2 by utilizing bulk layer-2 transfers. We chose this approach with the majority approval from our community to minimize user cost, compared to the Merkle-proof-based withdrawals. The trustless Merkle-proof-based ‘Withdrawal mode’ was enabled for several weeks where users were able to eject from the zkRollup with the relayer being down and without our help. For more information on withdrawal mode, and the ultimate non-custodial security guarantees it offers users, please check out this post.
Loopring is proudly the first zkRollup that has gone through a graceful migration from one zkRollup to another. We will soon help WeDEX to migrate their users as well.
3. Exchange V2 Improvements
We enabled Fast Withdrawal for ETH, LRC, and DAI. At the extra inventory cost, fast withdrawal allows users to move their tokens from L2 to L1 within seconds. This is very convenient for those who would like to arbitrage on L1 using their funds in L2.
We have also improved the fee subsystem. Our relayer prices all services dynamically using gas and charges users in the tokens of their choice based on the most recent gas price and the token’s most recent price. The minimum order size is also dynamically adjusted based on gas price and token price.
We have been working with API users (programmatic traders and the like) and are collecting their feedback to improve our API quality and minimize the difference between our API and CEX APIs.
Our relayer now compresses rollup calldata before committing them onto Ethereum to reduce layer-1 gas cost. We have also improved AMM join/exit process to charge join/exit fees separately. Previously, higher exit fees are charged to cover both joins and exits layer-1 cost, which our community perceived as not straightforward. The cost to join/exit an AMM pool was also reduced by ~30%.
Another noticeable change to the relayer is the relaxing of access control of reading data. Now with a valid API key, you can read all data that can be derived from onchain data, which means a user can read not only his/her own, but everybody’s historical transfers, trades, AMM joins, exits, and swaps. But pending and canceled orders are accessible only by their owners (since those actions haven’t settled on Ethereum). This enhanced readability is very helpful for third-parties such as DeFi dashboards like Zapper and Zerion, or accounting apps like Rotki.
We enabled the feature of being able to send from L2 to any Ethereum address, whether that address has previously onboarded Loopring L2 or not. This means you can cheaply send assets from your L2 to any Ethereum address at all.
For a full overview of how to use Loopring Exchange, we recommend reading this tutorial.
4. Protocol Fees
We redesigned LRC tokenomics, with the new model being effective for Loopring Protocol v3.6, and Loopring Exchange v2. If you wonder how to “stake” LRC to earn protocol fees, please read this post on LRC token model v2. The model rewards LRC holders who use their assets productively for the good of the platform, as liquidity providers, insurers, and DAO members.
We have finished the first distribution of protocol fees (all paid with LRC this time) for those who have provided LRC AMM liquidity on our L2 since the launch of Loopring Exchange v2. The total amount of LRC distributed is roughly 242,000, equivalent to $166,741. Note that we excluded addresses owned by Loopring from the distribution.
All staking rewards for v1 had already been distributed to the v1 staking participants. Detailed information is available here.
5. Liquidity Mining
Throughout Q1 we have run 5 rounds of liquidity incentive campaigns that covered AMM & orderbook liquidity mining as well as AMM swap tournaments. Here is round 5 as an example of how they work. Our exchange distributed more than 3.5 million LRC as campaign rewards, with partners/sponsors also supplying their tokens as incentives.
We will kick off even more aggressive and broad campaigns, most likely in June, once we launched our new DEX web app and shipped some important features on our iOS app.
For token projects or issuers who would like to incentivize liquidity for their token on Loopring L2, we created this request form.
6. Media & Miscellaneous
Media
Throughout the quarter, Loopring has been featured in many media outlets as layer-2 picked up steam as a critical Ethereum narrative. Below are select examples of media or educational pieces Loopring has been covered in.
- LRC was included in the Bitwise DeFi index
- Vitalik’s Incomplete Guide to Rollups
- Vitalik’s Social Recovery Wallets
- The Daily Gwei
- Week In Ethereum
- DeFiPulse
Misc.
Loopring Exchange V2 connector was re-added to Hummingbot market making software, and the Autonio market making software.
Loopring L2 balances & positions are now displayed and tracked in DeFi dashboards Zapper and Zerion, and in accounting app Rotki.
We settled over 1 million transactions on Loopring zkRollup (v3.6), have nearly 20k users on there, and settled over $600m in trading volume. See all stats here. A new info dashboard and explorer is coming soon.
We started a community forum on Discourse at community.loopring.io.
We held our third community call. We will resume doing a monthly call from here on.
Path Forward
1. Multi-Layer Wallets
Given that smart wallets incur very high costs on Ethereum layer-1, we have decided to improve our wallet apps to support wallet creation and transactions on multiple general-purpose layer-2s. We’ll start with Offchain Labs’ Arbitrum, later Optimism, then zkSync 2.0 and StarkNet, whenever their testnets become ready for integration. Later, it’s possible we may also evaluate a few other blockchains (layer-1s), but we give priority to the Ethereum ecosystem.
The solidity smart contracts for Loopring Wallet 2.0 are code-complete and are being tested. In a few days, we’ll deploy them onto Arbitrum for app and backend integration.
Our new mobile apps will eventually enable users to manage multiple smart wallets deployed on different base layers. More on this topic in this short video.
2. Further Exchange Improvements
The merge of AMM and orderbook liquidity for the same trading pair is complete and being tested. This feature will launch in production in a few weeks. With that, orders placed with both the simple swap UI and the classic trading UI will be routed to the pair’s corresponding AMM pool and order book for the best price, able to be split for best execution. The orderbook and depth chart will also display the liquidity from the corresponding AMM pool. Using our new API, bots can specify where to take liquidity: only the pool, only the book, or both (with smart internal routing).
We are also considering adding a feature called Delegate Deposit/Withdrawal that is trust-based and will shorten user waiting time and lower processing fees.
We plan to release a new web app for the exchange before Q3. Most UX/UI redesign is done and our newly recruited frontend engineers are busy working on React implementation.
3. Cross-Chain Bridges
On top of trades and transfers, Loopring users also want to interact with L1 dApps and other L2s without paying high L1 gas fees. Users in the future will also want to move to Loopring from other L2s/exchanges without going through L1. That’s where Loopring Cross-Chain Bridges (CCB) will play a big role. CCB, similar to AMM, is an extension of Loopring’s core protocol. Once implemented, it will:
- Allow users to mass migrate from Loopring to any other rollup, no matter the migration data format.
- Allow rollups/exchanges to mass migrate users to Loopring using a standard L1 smart contract function which can be called by anyone.
- Allow Loopring users to efficiently interact with L1 dapps by batching multiple similar L1 interactions from users together so that the cost for the L1 interaction can be shared.
- Allows us to support other general cross-chain protocols like Connext and Hop protocol.
We are improving and testing the CCB codebase and will release/deploy the first production version in Q2 (UI integration will take a few more months and also depends on the overall L2 landscape and market demands). More info on this topic in this short video.
4. Independent zkRollup Block Explorer
We are working with Protofire on a Loopring Subgraph which will serve as an independent data source for a Loopring block explorer. Most data our zkRollup pushes onchain will be queryable using GraphQL, so third parties can use the subgraph for stats and reporting without trusting the data returned by our relayer.
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If you are interested in building a Block Explorer for Loopring, please join the Scaling Ethereum hackathon (April 16th — May 14th, 2021), we’ll offer a reward to winners for this task.
5. BAMM
Bounded Automated Market Makers, or BAMM, is an enhanced AMM design to improve AMM capital efficiency with very little extra implementation complexity. For each pool, the BAMM algorithm concentrates all liquidity to a small segment on the curve. The length of the segment can be configured per pool but is universal to all liquidity providers (LPs).
Depending on its configuration, BAMM pools can improve capital efficiency to any number in theory and can also enable liquidity provision with a single token.
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We will sponsor one more challenge at Scaling Ethereum hackathon (April 16th — May 14th, 2021) and reward the one who delivers the best BAMM solidity implementation. Stay tuned for more information and other hackathon tasks.
Questions and Feedback?
If you’d like to talk to us for partnership, questions, and/or feedback, please join our Discord, or drop us a line at foundation@loopring.org. We also have a new Discourse-based forum now: community.loopring.io.
“Flowing water does not compete for first place, the contention is endless”, so said Laozi, 2500 years ago. Here at Loopring, our engineers tend to keep their noses to the grindstone, especially during a crazy bull market, with an ambition to deliver products and solutions that we will be proud of. We’ll keep it that way. Even though we have indeed achieved many firsts for Ethereum, we are looking farther into the distance, seeking to build something that lasts.
About Loopring
Loopring is an Ethereum zkRollup protocol for scalable, secure exchanges & payments. Loopring builds non-custodial, high-performance products atop our layer-2, including the Loopring Wallet — a mobile Ethereum smart wallet, and the Loopring Exchange — an L2 orderbook and AMM DEX. To learn more, you can sign up for our Quarterly Update or see Loopring.org.
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