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Understanding Loopring and Dolomite

Loopring Protocol, Dolomite DEX, and the evolution of Web3 tech

The Loopring Protocol

Loopring is the name of restless innovation to build a decentralized exchange protocol. If you follow their development, you will understand Loopring’s thirst for problem-solving in the DEX protocol space.

Loopring’s Merkle Tree

How Does Loopring Work?

  • A Maker creates a buy order. This order goes into an Exchange’s centralized order book. Once this order is matched, an Operator will step into the picture for further processing (*an Exchange can be an Operator too).
  • The Operator’s task is to validate the order and create a Zero-Knowledge Proof (ZKP) for the trades, so Loopring Smart Contracts can perform trade settlement.

What is an Operator?

In Loopring’s ecosystem, an Operator’s task is similar to that of a miner (e.g. a Bitcoin miner in Bitcoin’s protocol). At any given point in time, this Merkle tree represents the state of the whole Loopring protocol. The state of the Merkle tree transitions to new states when an Operator creates a block.

  • Let’s say an Operator does not verify its committed blocks in a given time, Loopring protocol starts withdrawing its committed blocks.
Loopring Performance Results

Loopring Token Model

The most fascinating part is Loopring’s token incentive change. There are two significant changes from previous versions:

  • LRC can be staked to provide security, reduce trade fees, earn reputation, and reap participation rewards.
  • How much: User receives an amount proportional to the amount staked + how long it is staked
  • How long: Each token needs to be staked for at least 90 days.
  • 20% to the yet-to-launch Loopring DAO
  • 10% burned

Dolomite DEX

Now that we understand how Loopring is going to change the DEX landscape, let’s also look at Dolomite, a decentralized exchange built using Loopring v3!

  1. When you create an order on a CEX, it goes to a central CEX database. With Dolomite, it’s the same. A cryptographically signed order will go to Dolomite’s centralized database.
  2. When an order matches, the CEX executes the order and updates your token balances. In Dolomite, when an order matches, Dolomite sends the request to Loopring’s protocol, which then settles the order.

DEXs & Traders using QuikNode

QuikNode is used by DEXs and traders alike.

About QuikNode

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