It’s safe to say that 2017 has been the biggest year for crypto yet, and the trend shows no signs of slowing down.This past year has been incredible in terms of the growth of cryptocurrency, both in the value and the sheer amount of coins that have emerged. Even if we just shine a light on Bitcoin, it went from being worth about $1,000 USD to just under $10,000 USD.
If we zoom out, the trend continues to intensify with the value of the cryptocurrency market surpassing $200 billion at the beginning of November. The number of tokens created in 2016 versus in 2017 is barely even comparable and the year isn’t even over yet. But despite this growth, we still can’t say that crypto and blockchain have moved into the mainstream.
As interest in crypto grows, the ease in which people acquire and trade is becoming increasingly important. Crypto exchanges have popped up to provide a way for us to buy and sell cryptocurrencies. However, many still see these exchanges as risky, especially with scandals in the past such as Mt. Gox (2014) and Bitfinex (2016).
Loopring, a blockchain startup, has addressed some of the limitations and risks associated with trading that can bring crypto closer to the mainstream. The team at Loopring have developed a trading protocol that works with existing exchanges to make trading more secure and more accessible through improved liquidity.
The features that Loopring have worked into their protocol will facilitate and improve crypto trading in three ways.
By Reducing Risks Associated with Trading
Very few people like taking big risks. We are much more likely to take calculated risks, and based on the speculative nature of crypto many are reserved when it comes to investing. But, by making trading more secure, investors won’t have to worry as much about exchange platforms being hacked or contracts not being upheld.
One of Loopring’s main objectives, when they created their protocol, was to increase the security of trading. In addition to capitalizing on blockchain properties of transparency and decentralization, Loopring has integrated features that greatly reduce the risk of hackings and counterparty risk.
Often, platforms are hacked at their point of weakness. For example, most exchanges require investors to put the amount they want to trade into escrow. Therefore, money is held in a central location, which inherently makes it easy to hack. Exchanges using the Loopring protocol will not have a central point of weakness because users will keep their assets in their wallets until the moment of execution, meaning that users will maintain full control over their funds.
Counterparty risk, or the possibility that the other party in a trade won’t live up to its obligations, is ever-present for all traders. By using Ethereum smart contracts which self-execute, Loopring has greatly reduced this risk. All trades that are entered into will live up to their contractual obligations because it is extremely difficult to default on these. Contracts will always be fulfilled according to the rules outlined in the smart contracts.
By Increasing Flexibility and Adaptability of Trading Platforms
With the speed at which tokens and blockchains are emerging, we need to have exchange platforms that can support multi-token and cross-chain trades. Though ERC-20 provides a standard for Ethereum, not all coins are compliant and we need to be able to easily trade these even if it requires trading across blockchains.
Loopring protocol will allow for all of these types of trades. The importance of exchanges to adapt to users needs and to be flexible across tokens and blockchains is an important factor in increasing the accessibility of cryptocurrency because there needs to be a certain fluidity that will allow users to trade however they want.
People don’t want complicated, they want simple solutions. The more fluidity within the crypto community, the higher the chance of adherence by the lay person. This is compounded by the fact that blockchain and dApps are powered by tokens. If we want to see widespread acceptance of these technologies in everyday life, acquiring and trading tokens has to be safe, fluid, and easy.
By Creating a Network that Best Serves Users
Since Loopring is simply a protocol rather than an exchange platform, it will serve to fill the gaps between existing platforms in order to create a network of exchanges. So, rather than having to fill orders on a single platform, the Loopring protocol will find the best prices across exchange platforms and trade portions of orders, resulting in the overall best prices.
Loopring also allows for multi-token circular trades in which many orders can be filled by linking them together. This combined with the protocol’s ability to fill parts of orders will ensure solvency within the network. No platform that is part of the network will ever be in a situation in which there is not enough of a given currency to fulfill a trade because the gap will be filled by other players in the network.
By creating this network, Loopring has greatly facilitated crypto trading because it no longer faces the same limitations. Users no longer have to worry about things like solvency and filling entire orders at once, further increasing the accessibility of crypto for all.
If we want to see widespread use of crypto, we need exchanges that work for users. We need platforms that have our best interests at heart, and that is exactly what Loopring has created. The network of exchanges creates a safer space for trading that adds fluidity and accessibility that benefits the greatest possible number of people.