Protocol Functionality

Loopring’s protocol is designed to facilitate efficient and secure trading of digital assets by combining off-chain order matching with on-chain settlement. This hybrid approach uses zkRollup technology to achieve high throughput and low transaction costs while maintaining the security guarantees that are an important characteristic of the Ethereum blockchain.

The protocol works as follows:

1. When the user initiates a trade on Loopring, the process begins with the creation of an order, which is then signed and submitted to the Loopring network.
2. This order is broadcasted to relays that maintain public order books.
3. The order is then matched off-chain by ring miners who employ a unique ring-matching algorithm.
4. This algorithm allows multiple orders to be combined into a circular trading loop, ensuring that trades can be executed even when direct matching pairs are unavailable.
5. Once orders are matched, the details are sent to the Loopring smart contracts on the Ethereum blockchain for validation and settlement.
6. The smart contracts verify the validity of the orders and execute the necessary token transfers in a single atomic transaction.

This ensures that all trades are final and secure, providing users with a reliable trading experience.

zkRollup Technology in Loopring

zkRollup is a Layer 2 scaling solution that enhances the performance of the Loopring protocol. It works by bundling multiple transactions into a single batch, which is then processed off-chain. The result is a zero-knowledge proof (zkProof) that succinctly represents the validity of all transactions within the batch. This zkProof is then submitted to the Ethereum mainnet for final verification.

The advantage of zkRollup is its ability to increase transaction throughput while reducing costs. The way this works is that by processing transactions off-chain and only submitting a minimal proof on-chain, this technology minimizes the data load on the Ethereum network, allowing Layer 2 protocols like Loopring to achieve transaction speeds of up to 2,025 transactions per second (TPS) with very low fees.

Loopring’s zkRollup implementation includes features such as on-chain data availability (OCDA) and Validium mode. OCDA ensures that all transaction data is accessible on-chain, providing transparency and security. Validium mode, on the other hand, stores data off-chain to achieve even higher throughput, reaching up to 16,400 TPS when enabled.

Workflow of Layer 2 Operations

Layer 2 operations in Loopring begin with the creation of an order by the user, who signs the order with their private key and then submits it to the Loopring network. The relays then broadcast the order to other participants on the network, including ring miners.

Ring Miners perform the computationally intensive task of matching the orders to confirm their validity. They receive orders and attempt to match them with other compatible orders to form a ring. Once a ring is formed, the details are submitted to Loopring smart contracts for on-chain settlement.

The smart contracts will then perform several checks to ensure the validity of the orders and the availability of the required tokens in the users’ wallets. If all checks pass, the contracts execute the necessary token transfers atomically, ensuring that all trades within the ring are settled simultaneously. This execution guarantees the security and finality of trades on Loopring.

Data Availability and Integrity on Ethereum Mainnet

Data availability and integrity are central components of Loopring’s zkRollup implementation. By using OCDA, Loopring ensures that all transaction data is stored on-chain, making it accessible for verification and audit purposes. This approach provides transparency and trust, as anyone can verify the validity of transactions by examining on-chain data.

The integrity of transactions is maintained through the use of zkProofs, which provide a concise and verifiable representation of the correctness of off-chain computations. By submitting zkProofs to the Ethereum mainnet, Loopring ensures that the security of the transactions is upheld by the security guarantees of the blockchain layer.

Benefits of zkRollup in Loopring

The integration of zkRollup technology in Loopring offers several benefits. Firstly, it enhances the scalability of the protocol by enabling high transaction throughput, supporting a large number of users and transactions without compromising on performance. Secondly, zkRollup reduces transaction costs by minimizing the amount of data that needs to be processed on-chain, translating to lower gas fees for users, making trading on Loopring more cost-effective compared to traditional decentralized exchanges.

Thirdly, zkRollup maintains the security of transactions by taking advantage of the Ethereum mainnet for final verification, ensuring that all trades are secure and immutable, providing users with confidence in the integrity of their transactions.

Highlights

• Loopring uses a hybrid approach with off-chain order matching and on-chain settlement for efficient trading.
• zkRollup technology bundles transactions off-chain, reducing data load and costs while maintaining security.
• Layer 2 operations involve order creation, off-chain matching by ring miners, and atomic on-chain settlement.
• Data availability and integrity are ensured through on-chain data storage and zkProofs for verification.
• zkRollup enhances scalability, reduces costs, and maintains security in the Loopring protocol.