Loopring - Wallets Must Make Money, Too
Of all the component parts of the forthcoming decentralized economy, the average user likely feels the strongest connection to their wallet. After all, this is where our precious cryptocurrencies are stored, and we’ve been inculcated to keep it safe at all costs.
Why, then, has it been so difficult for non-custodial wallets — home of our prized possessions — to turn a profit? Loopring protocol hopes to allow wallets to become money-makers; not by extracting rent from users, but by adding immense value, and turning wallets into exchanges: wallexes. In the future, we won’t call these wallexes, we will just call them wallets.
What a wallet is, and isn’t
Firstly, it’s worth noting that wallets don’t actually store our cryptocurrencies or tokens, because all of our valuable cryptoassets live on their native blockchain. They don’t exist anywhere else: ETH and ERC20 tokens live on the Ethereum blockchain, NEO and NEP5 tokens live on the NEO blockchain, etc. Wallets (hardware, software, paper/files) are actually ‘safes’ for our private keys: they house and protect the key which allows us to move our tokens from one address to another. Ownership is only represented by the ability to move our crypto. We refer to these as non-custodial wallets, because we are the custodians of our own funds, and must rely on no one else.
Secondly, we must not confuse a centralized exchange account as being similar to the aforementioned wallets. On a centralized exchange, our cryptoassets are attached to our accounts — name/email/password — but live on the centralized exchange’s server. Our assets are effectively numbers in someone’s database, and we receive an IOU in return.
Wallets (must) win
Comparing the two options above, we believe it’s a no-brainer that true crypto enthusiasts want to control their decentralized, censorship-resistant assets by storing them in safe, non-custodial wallets. Being able to trade seamlessly from these wallets, instead of having to go to a centralized exchange, is our vision of the future. However, as it stands, centralized exchanges are the biggest money-makers in the game: they receive fees from each and every trade we make, then charge us for the privilege to withdraw our funds. Binance, for example, made a purported $200M in profit last quarter.
Meanwhile, our beloved wallets operate without any obvious means to be a profitable project! They provide us with the peace of mind and security we crave, but we send our assets and financial support elsewhere. This is unjust, and it’s difficult to see how wallets will truly prevail and proliferate without the incentive or resources to build and grow. Without new wallet experimentation and progress, the entire ecosystem may miss out on fundamental building blocks.
Loopring Protocol + Wallets = ❤ & $
Because of this, Loopring protocol has always kept wallets front of mind. We want to empower wallets by giving them the tools to be successful and profitable; to become exchange portals. We invite wallets of all sorts — Desktop, Web, iOS, Android — to integrate Loopring protocol and become part of our decentralized exchange network. By doing so, you will offer your users an improved user experience and a glimpse at the future of the decentralized economy: the ability to trade directly from your wallet using open source smart contracts.
Of course, we mentioned profitability! Our current solution provides wallets with 20% of the trading fees their users’ orders generate. Where is the other 80% going? We are not keeping it for ourselves. On the backend, our official relay cluster is performing the order broadcasting and ring-mining — the decentralized matching-as-a-service — to facilitate trades. We will use the 80% of trading fees to cover our costs (AWS, etc). In fact, we have pledged to run our relay as a complete non-profit endeavour. We will evaluate costs monthly, and if 80% of fees results in any profit for our relay, we allocate it back to the wallets in proportion to the orders they initiated. Thus, 20% of fees is effectively the minimum that a wallet can expect to receive.
Of course, using our own relay cluster is just a first step to bootstrap the network. In the future, many relays and relay clusters will exist, removing us from the equation altogether. Relays and wallets can team up to create all sorts of interesting trading experiences and liquidity pools. Of course, our relay is completely open source. In reality, we think it is a bit early for third parties to build their own relay, although anyone is welcome to. Thus, our focus is on allowing third parties to integrate Loopring into their front end products.
We are keen on working with serious wallet projects and developers to get up and running and plug their wallets into the Loopring protocol and current relay backend. To get the ball rolling, we have built open source reference implementations of different types ourselves.
- Loopr is a web-based non-custodial Ethereum wallex that enables users to trade ERC20 tokens using the Loopring Protocol.
- Circulr (soon to be released) is similar to Loopr, but does not allow users to expose their private keys. Instead, one must use other wallets such as hardware, MetaMask, or Loopr iOS to sign orders and transactions. Thus, Circulr is not truly a wallet, and can be classified as purely a DEX.
- Loopr iOS (soon to be released) is a native mobile non-custodial wallet application. It can be used to interface with and sign orders generated from other web or mobile applications or interfaces, such as MyToken. As such, Loopr iOS acts as a mobile MetaMask.
An Android wallet implementation will also be built. We hope these reference implementations will inspire teams to build and integrate with the Loopring protocol.
Teams can fork our open source code and add value in numerous ways; unique UI and design decisions, focusing on specific token niches, or national/demographic targeting. We’ve already introduced some DEXs being built on the Loopring protocol, and we will soon share a list of 10 teams integrating Loopring into their products.
As wallets are at the front line in onboarding users to the decentralized economy, it is our goal to serve them, and in turn, continue adding value to the cryptocurrency movement at large.