Loopring: Running Rings Around The Competition

Summary

• Loopring is a scaling Layer 2 solution for DEXs with compelling technology.
• The LRC-USD token is needed to pay fees, and its price will appreciate as Loopring gains popularity.
• We are in an altcoin bull market, and I expect LRC-USD to appreciate considerably in 2022.
• I do much more than just articles at Technically Crypto: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

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Thesis Summary

Loopring (LRC-USD) has gained a lot of popularity since it was announced that GameStop (GME) would be using it to launch its NFT marketplace. The token jumped over 40% and is up over 50% in the last month. So why did GameStop choose Loopring, and is it a worthwhile investment?

Technology

Loopring is an Ethereum (ETH-USD) based Layer 2 scaling protocol for Decentralized Exchanges, DEXs. Let’s break this down. Loopring works on the Ethereum blockchain, and its objective is to allow for faster and cheaper transactions within the Ethereum blockchain.

The Ethereum network has had issues with scalability for a while, leading to slowness and high gas fees.

Layer 2 solutions like Loopring or Polygon (MATIC-USD) provide scaling solutions so that Decentralized Apps can process more transactions. This is done by implementing new technologies, and in the case of Loopring, it is done through the use of zk-rollups.

Zero-Knowledge rollups are a way of bundling transactions together, off-chain, and then processing them on the Ethereum blockchain all at once. The key here is that the layer 2 solution, in this case, Loopring, is doing the heavy lifting for Ethereum. It is processing the transactions off-chain and bundling them together so they can be entered into the actual blockchain more easily.

Zk-rollups are not a Loopring invention, but how Loopring deploys this solution is innovative. Loopring uses On-chain data availability (OCDA), Ring Miners and order rings to make DEXs more scalable.

OCDA can be thought of as a switch. A DEX can decide to store its data on-chain or off-chain at any time. When stored off-chain, Loopring can achieve up to 16,400 transactions per second.

Another innovation we find is Ring Miners. Most decentralized exchanges use Automated Market Making protocols. Loopring, instead, rewards network participants that fill orders as quickly as they can. These are the Ring Miners, and they receive LRC fees for their work.

When a ring miner completes an order ring, the Loopring smart contract fills the order in the best way possible and executes an atomic swap, which is a direct transfer from the smart contract to the user's wallet.

All in all, Loopring offers a smart solution to one of the biggest problems faced by DEXs. There are other layer 2 solutions out there, but Loopring is gaining traction thanks to its unique and effective design.

Tokenomics: Should You Buy Loopring?

With that said, good technology doesn’t necessarily imply that LRC-USD, Loopring’s native token, is a good investment.

LRC is similar to ETH, in that it is necessary to pay fees. When GameStop launches its NFT marketplace, it will need LRC to pay for transactions. These fees are then distributed to liquidity providers, ring miners and also the Loopring DAO. Currently, the supply of Loopring is capped at 1,374,513,896.

So, is LRC worth buying? If you believe in Loopring’s technological offering, definitely yes. The value of LRC is a function of Loopring’s popularity. As more people and decentralized exchanges enter the network, demand for LRC will increase, leading to price appreciation.

Technical Analysis

Now, let’s do some technical analysis to see where Loopring’s price could go in the future.

Loopring Price Chart (Author's work)

If we look at the long-term chart for Loopring, we can see that it completed a 5 wave move up in 2021, and has since come down in a corrective A-B-C, which would be a wave 2. The purple box is my target for wave 3, which should be somewhere around $6.1-$7.5. These are the 1.618 and 2 fib extensions.

Loopring Price Chart (Author's work)

In the shorter time frame, we can see that LRC has rallied impulsively since it bottomed in March. It has completed what looks to be wave 1, which means we could expect a retrace somewhere around $0.86-$0.9. If you are looking to get in, this is a good place to set some buy orders.

Takeaway

In conclusion, I believe Loopring has the potential to perform very well in 2022. As I talked about in this article, we are beginning an altcoin bull market, which should help LRC move up in the coming months. The technology behind LRC is also compelling, and I wouldn’t be surprised if other big companies start using this technology.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Short position through short-selling of the stock, or purchase of put options or similar derivatives in LRC-USD over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Comments

[n00brian]

It would be great if you could write a follow up article with your updated analysis on the progress LRC has made, and renewed price predictions

[Humidity Lover]

Although I did not read every word, (I'll do that later) the author wrote a positive article on Loopring, yet he states, at the end, that he may begin a short position in it. I don't get that.

[James Foord]

@Humidity Lover That was a mistake. I meant long. Sorry about that.

[MPFX3000]

Since I bought near $3 I’m not yet jumping for joy.