As we have seen in recent times, Ethereum fees have been through the roof and the network has been more congested than driving through a busy street with roadworks during rush hour.
This overload of interaction can be contributed to the DeFi ecosystem as the majority of DeFi projects currently reside with Ethereum.
Although Ethereum is working on their solution proactively with the final testnet to be launched on 4th August and set to move into mainnet after three months (if all goes well), a solution that has already reached us regarding scalability and cost-reduction is the Layer 2 solution, Loopring Pay.
Loopring has ambitious plans, with its founder, Daniel Wang, being a former technical lead at Google and a former employee at PayPal.
Built on Ethereum, the technology used is zxSKARKS for its low cost and high throughput properties. It is the first project to release a working product using the technology.
The benefit of a second layer solution such as Loopring is the ability to batch-process thousands of requests off Ethereum whilst still allowing users to maintain custody.
The first significant milestone to be succeeded by Loopring was the scalability issue, followed by the launch of their Decentralized Exchange which allows for near-instant, low cost swaps between tokens.
The third major milestone that was released this year is their payment solution Loopring Pay that has been coined the “PayPal of crypto”; a non-custodial payment solution which performs at 1000 times the throughput than any other layer 1 payment solution.
For their next move, in the words of the Co-Founder & COO of Loopring Jay Zhou,
“I used to work at Paypal and can definitely see Loopring becoming the PayPal for crypto. We are also going to release a new smart wallet, called Hebao, which will allow users to create an account using an email address. No more remembering private keys.”
This update would be significant for mass adoption. If we remove the friction involved with interacting with cryptocurrency, it will be much easier for curious outsiders to step in and interact with the cryptocurrency and DeFi ecosystem.
One of the massive implications that the tech can have on DeFi is the ability to deposit funds onto a layer 2 solution such as Loopring, and take advantage of the very low fees, then interact with a layer 1 DeFi solution which will allow you to optimize yields (by lowering costs) and make use of arbitrage opportunities near-instantly.