LRC-USD: Hybrid Loop Model Captures As Stylish Marketing Brochure

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Cryptocurrencies moving away from their original goal as a decentralized peer-to-peer (P2P) transactional ecosystem to become an ecosystem offering a myriad of applications, Loop (CCC:LRC-USD) represents another evolution of the underlying blockchain technology. However, despite the large discount that LRC tokens present on paper, potential investors should be careful with their decision-making process.

Source: Vladimir Kazakov / Shutterstock.com

Before we get into the reservations about Loopring, we should discuss its many good points. As described in the developer white paper, Loopring is an open protocol for creating a Decentralized Exchange Protocol (DEX) on the Ethereum blockchain.

As you may know, centralized exchanges have a lot of inefficiencies and vulnerabilities. With stocks, one of the glaring obstacles is that retail traders cannot easily buy and sell stocks after hours.

But even in the crypto space, centralized crypto exchanges have their challenges. Mainly, mainstream exchanges often feature hot custody or wallets using community lingo. Long story short, if hackers decide to compromise a centralized exchange, the funds of individual account holders are at risk.

On the other hand, decentralized crypto exchanges are not without problems either. The main ones, according to Coinmarketcap.com, are “lower efficiency (compared to centralized alternatives) associated with the limited capacities of the underlying blockchains and fragmented liquidity”.

Loopring aims to address these inefficiencies on both sides of the aisle by facilitating buy and sell orders directly between the trading parties while settling eventual transactions on the blockchain. In contrast, centralized exchanges settle orders in their internal registers, opening the door to price manipulation.

Finally, with a great concentration of the Loopring team dedicated to the development of its best-in-class zkRollup exchange and payment protocol, its blockchain network could very well help consolidate decentralized finance (DeFi) applications. A zkRollup, or zero-knowledge rollup, as a protocol is a “way to interact with the Ethereum backbone that avoids common transaction cost and speed issues, while providing a scalable solution.” , by blockchain developer Numio.

Indeed, with so many options to choose from today, some consolidation (and elimination of the weaker bids) would be welcome.

Loopring is not without flaws

When Investor place Contributor Mark Hake mentioned the Locked-In Total Value (TVL) metric for Loopring, I have to admit that initially I wasn’t sure what he was up to. Usually I tend to look at the stories and then analyze the numbers, whereas sometimes I feel – and this may be wrong, I speculate – that Hake pulls the story out of the numbers.

Still, that’s what makes this platform a wonderful place – you get a variety of full-color commentary and you can decide what’s best for you.

Either way, Hake states that TVL is “a sum of all the deposits people have made into decentralized finance (DeFi) applications based on this cryptocurrency.” His concern is that the TVL for Loopring has dropped significantly from its peak on November 25. So far, the metric hasn’t changed much since Hake looked at it on December 5.

Having gained a basic understanding of Loopring, I can better understand what is worrying Hake. You can have the safest and most efficient decentralized crypto exchange ever: that doesn’t mean you know what if it does not order liquidity.

It’s the same principle behind zombie exchange traded funds. Without liquidity (as in “without participation”), these ETFs linger and then eventually disappear. Thus, Loopring must presumably bring its TVL to higher ground, or at least not lose ground. This is not guaranteed during the morning crypto fallout of December 17th.

On a more fundamental basis, centralized exchanges are not completely irrelevant. For example, the reason some people prefer stocks is that, in most cases, your funds are safe if the underlying brokerage firm experiences a data breach. In a decentralized ecosystem, it really is the Wild West.

So no, Loopring is not an ideal hybrid of decentralized and centralized protocols as it may seem.

It’s time to stay on the sidelines

As I write this on a Friday morning, I am watching the top three indices flashing red, each losing more than 1%. Maybe the situation will improve after closing time, who knows? But it appears that risk appetite has waned following the Federal Reserve’s decision to turn off the monetary tap.

If so, I’d be worried about jumping aboard Loopring or any other crypto with anything other than coins you picked up from the parking lot. I’m not saying LRC is going to implode. However, I think common sense should be your north star by this time.

Let the carnage subside, then see what your options are. At first glance, if you thought the LRC was cheap today, it should be even cheaper if you wait.

As of publication date, Josh Enomoto did not hold (directly or indirectly) any position in the securities mentioned in this article. The views expressed in this article are those of the writer, submitted to InvestorPlace.com Publication guidelines.

Former senior business analyst for Sony Electronics, Josh Enomoto has helped negotiate major contracts with Fortune Global 500 companies. Over the past several years, he has provided unique and essential information for the investment markets, as well as various other sectors, including law, construction management and health.


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