Loopring Code Review

Review Date: 12/02/2023

Decentralized exchanges (DEXs) are a vital component of the cryptocurrency ecosystem, as they enable users to trade without the need for intermediaries. However, the inefficiencies of DEXs have been a major hindrance to their adoption. Loopring, a scalable DEX protocol built on Ethereum, seeks to address these inefficiencies through a hybrid approach.

Loopring enables the building of high-performance, orderbook-based DEXs that do not take custody of users’ crypto-assets. The protocol is built with zkRollup, making it probably the first DEX protocol in the domain. Loopring aims to maintain the benefits of decentralized exchanges while lowering or eliminating their inefficiencies through hybrid solutions.

Loopring Exchange is the first decentralized trading platform built on top of the Loopring protocol. The protocol aims to improve order execution efficiency and DEX liquidity by managing the orders in a centralized manner but settling the trade on the blockchain. The result is a high-performance trading experience similar to centralized exchanges.

Loopring is capable of settling more than 2,000 trades per second on Ethereum. This high throughput is achieved through the use of zkRollup, a layer 2 scaling solution that aggregates multiple transactions into a single transaction on the Ethereum blockchain.

Another prominent feature that Loopring seeks to offer is low transaction cost. The majority of operations, such as trade and transfer settlement, are executed off the Ethereum blockchain, considerably reducing gas usage and overall transaction cost. Loopring intends to make trading accessible to everyone, regardless of their financial means.

Loopring Exchange provides an API to handle user off-chain requests, including order submission and cancellation and withdrawals. Other user requests, such as account registration, password reset, and deposits, must be submitted using Ethereum transactions. These requests are called on-chain requests.

Loopring uses Ethereum as a data availability layer and a zero-knowledge proof (ZKP) verification layer. It does not perform trading related computations on Ethereum, which is the primary reason why it is so efficient. By separating data availability and computation, Loopring achieves high throughput and low cost while maintaining security.

Notes to Take:

• Loopring is a DEX protocol on Ethereum that enables high-performance, non-custodial trading.
• Loopring Exchange is the first DEX built on Loopring, combining centralized order management with on-chain settlement.
• Loopring uses zkRollup to settle more than 2,000 trades per second on Ethereum.
• The majority of operations happen off-chain, leading to low transaction costs.
• Loopring offers an API for off-chain requests and uses Ethereum as a data layer and ZKP for verification.
• Loopring achieves efficiency by separating data availability and computation.
• Loopring provides a high-performance trading experience similar to centralized exchanges.
• The protocol seeks to make trading accessible to everyone, regardless of their financial means.