Dialogue with Loopring's new CEO: Seeking the next growth curve in a bear market

Author: Chain Teahouse

Although the cross-chain ecosystem is on the rise, the number of developers and the amount of funding accumulated in the Ethereum ecosystem still provide significant room for imagination in the Layer 2 space.

Compared to the explosive Layer 2s like Arbitrum, Optimism, and Polygon, Loopring, as a proprietary Layer 2, has also achieved low-key but rapid development over the past year.

So, what possibilities will Loopring explore in 2022 under the leadership of the new CEO Steve Guo?

1: Layer 2 is considered the best scalability solution before the arrival of ETH 2.0, but now emerging public chains and cross-chain ecosystems are also rising. Where do you think Layer 2's competitiveness lies?

Layer 2 has both advantages and disadvantages compared to emerging public chains.

In the past, many public chains claimed to be "Ethereum killers," but this concept is no longer mentioned; instead, they have shifted to becoming sidechains of Ethereum.

A clear trend is that everyone views Ethereum as the main chain for capital settlement, offloading resources like computation and storage through various technical means. Layer 2 essentially moves computation and raw data storage off-chain, while sidechains move these two aspects onto their own chains.

Both approaches have opportunities and are suitable for different application scenarios. For example, I believe trading is more suitable for Layer 2, while gaming-related applications may be better suited for sidechains.

The advantage of Layer 2 is that the solution guarantees the final security of assets, as security is ensured by Layer 1 (Ethereum).

However, for the vast majority of users, security may be imperceptible, while what they can intuitively perceive is that Layer 2 fees are still relatively high. Further reducing Layer 2 fees largely depends on two factors: first, the Gas fees for calldata on Ethereum need to decrease; second, the transaction TPS on Layer 2 must be sufficiently high.

Additionally, Layer 2 can be divided into specialized and general-purpose. Specialized Layer 2 can excel in certain specific application scenarios, while general-purpose Layer 2 allows for secondary development on top of it. In the future, specialized Layer 2 and general-purpose Layer 2 will coexist, and Loopring is also researching and following the direction of general-purpose Layer 2.

Overall, there is still some time before Layer 2 experiences large-scale explosion, but as a first step, proving this direction is already sufficient.

2: When we interviewed you in February last year, Loopring was still at version 3.6. After a year of development, what milestone progress has been made in products and the ecosystem?

Our development over the past year has been quite rapid, with the user base increasing nearly tenfold (approaching 100,000), total transaction volume reaching $4.5 billion, and TVL peaking at $750 million. The total number of followers on various social media platforms is also close to 200,000.

All these achievements are built on our products. Our DEX is the world's first decentralized exchange based on zkRollup, supporting both order book and AMM, with trading fees far lower than those on the Ethereum mainnet.

We also have a smart wallet product that natively supports Loopring's zkRollup solution. Additionally, as a non-custodial wallet, users do not have to worry about losing their private keys, as they can choose trusted individuals, institutions, or hardware wallets as guardians for their wallets.

Last year, we also introduced the concept of a "counterfactual wallet," allowing users to use the full functionality of Loopring Layer 2 without deploying a wallet contract upfront, and later decide whether to deploy a dedicated smart contract on the Ethereum mainnet. This solution largely addresses the issue of high initial onboarding costs faced by smart wallets.

Of course, another critical factor is that we directly opened fiat channels last year, allowing users to easily use zkRollup through credit and debit cards.

In addition, we provide a complete set of Layer 2 NFT solutions, including open minting, order trading, and transfer scenarios, and are advancing product iterations with some potential partners.

3: What future application scenarios are there for the dynamic NFT avatars Loophead that are currently being airdropped?

Loophead NFT was proposed by us at the end of 2021. We observed that the currently popular NFT images are mostly static, so we designed a brand new dynamic image mechanism, where the NFT image is related to the current price of a certain digital asset. For example, when the price rises, the image appears vibrant and lively, while when the price drops, it enters an icy world, making these NFTs more vivid.

Throughout 2022, we will mint and airdrop in batches to our users, with 1,000 minted each time. In the future, it may be tied to the ecosystem, such as linking it to users' VIP levels.

4: Compared to other Layer 2s, Loopring focuses on building its ecosystem around exchanges and wallets. What considerations are behind this?

The Loopring protocol was created in 2017 with the intention of building a DEX. To address issues of slow transaction speeds and high fees, we developed a zkRollup-based technical solution, which is what everyone currently knows as Layer 2. Later, we added support for NFTs.

Our decision to create an Ethereum smart wallet was made after some consideration. Beyond technical considerations, we believe that smart wallets represent a return to the concept of wealth management.

Most people are accustomed to managing wealth based on trust; we currently trust banks and institutions backed by the state to manage our wealth. With the advent of blockchain, many geeks advocate for everyone to manage their own assets, but most people lack the knowledge, experience, and confidence to do so. Responsibility, or complete control, is a double-edged sword.

The core idea behind the design of the Loopring smart wallet is to return wealth management to the foundation of trust based on decentralized technology, rather than requiring everyone to learn blockchain technology and specialized terminology.

The Loopring wallet allows users to manage assets through a trusted network of relationships, which users have the right to define. As long as the majority of people in the network are trustworthy and honest, the assets will be secure.

We aim to lower the barrier for users to enter the blockchain through the Loopring smart wallet, providing a safe and user-friendly trading experience. All technology should be hidden behind the scenes; truly good technology allows novice users to trade or transfer with just a click, similar to using stock trading software like Robinhood in the U.S.

5: Besides exchanges and NFTs, what other areas will Loopring focus on in 2022?

The first is to create a complete open-source solution for Layer 2 NFT trading markets, allowing users to mint their own NFTs at extremely low costs on Layer 2, enabling trading and transfers, with security equivalent to that of the Ethereum mainnet.

The second is to continue iterating on the smart wallet direction. Next, we will deploy the smart wallet to more chains and Layer 2s, such as Arbitrum, Optimism, BNB Chain, Moonbeam, etc.

The third area is still in the research phase, which is about general-purpose Layer 2, but it’s hard to say when we will have development results. However, bear markets are more suitable for focusing on work.

6: With the potential downward risks in the market, derivatives have started to gain attention. Does Loopring Exchange have plans for derivatives?

I can say very clearly—no, we will not pursue that.

With leverage comes the risk of total loss. For the sake of platform security, we will not touch this part of the market, even though the derivatives space itself is quite promising.

As for leveraged tokens, while they may not go to zero, they rely on being linked to centralized exchanges, so the entire mechanism has many opaque aspects that we are also unwilling to engage with.

7: As the new CEO of Loopring, what do you see as the opportunities and challenges for Loopring in the future?

To be honest, I feel a lot of pressure after taking over as CEO, mainly regarding market capitalization.

Because Loopring has already grown quite large—its market cap exceeds $1 billion, which is the standard for traditional unicorns. Moreover, we are now facing a bear market, making it difficult for individuals to resist the overall trend.

However, conversely, bear markets can be a good time to get things done. For example, our current zkRollup solution and smart wallet were planned during the bear markets of 2018 and 2019, and we are preparing for the next S-curve growth.

What we need to do now is continuously iterate on our products, accumulate users, and prepare liquidity funds, all of which are the foundation for an explosion when the next bull market arrives.