How To Use Loopring DEX, Swap ETH to LRC, Add Liquidity, Withdraw Funds

DCV - December 19, 2021


This blog post will detail how I got started using Loopring, a Layer2 solution on the Ethereum network used to avoid expensive fees on the regular Ethereum blockchain. There's a slight learning curve and I will share some of the mistakes that I made using the Loopring decentralized exchange app so that you don't have to make those mistakes. But first, before I can use the Loopring app, I will need a couple of things:


  1. I need a Metamask wallet setup in a browser like Chrome or Brave. This YouTube video shows how to do that.
  2. I need some Ethereum to move and transact with, ideally already deposited in my Metamask wallet. Check out this video to transfer ETH to Metamask.

What is Loopring?

Loopring is a technology that sits on top of the Ethereum mainnet network, on a so-called Layer2, to make transactions and smart contract actions secure, cheap, and fast. The specific technology that Loopring uses is a "zkrollup".

Now let's take a look at how Loopring can be used to reduce gas fees.

Connecting Metamask

First, I need some Ethereum in my Metamask wallet. I already have some but it can be transferred there from a centralized exchange like Coinbase. I transferred my Ethereum to my Metamask wallet for free using Celsius.

To get started, I navigate to Loopring.io and click "Launch App". I need to connect my Metamask wallet and do so by clicking the "Connect Wallet" button at the top right. Metamask will pop up. I click "Next" and then "Connect". Neither of these actions cost any gas fees.

With my Metamask connected, I navigate to the "L2 wallet" page and click on "Deposit & Activate Layer2". In order to create an account, I can deposit Ethereum or any ERC20 token but I'm going use ETH. My Metamask balance is about 0.0259 ETH so I deposit 0.019 to save some for gas fees.

One thing to understand is the act of depositing on Loopring is an Ethereum Layer1 transaction, meaning it bridges from Layer1 to Layer2. This initial cost is comparable to a normal token transfer on Layer1, so kind of expensive. I pay this gas cost once, and then I'm on Layer2 with those assets living gas-free for as long as they are on Layer2.

Clicking "Deposit" brings up Metamask to confirm the deposit. This transaction costs about $27 in Ethereum fees. I click "Confirm" and that finishes the action.

It takes a few minutes for the smart contract interaction to finish and once it does, the balance in my Metamask wallet changes.

I refresh the page, click "Activate Layer2" and then click "Activate Account". Metamask pops up again for a signature. This action does not cost any gas fees. I click "Sign" and then "Sign" again. And that's it. My account on Layer2 is ready to use.

Swapping ETH to LRC (Loopring Token)

Now, I'm going to show how I can swap ETH to the Loopring token or LRC with minimal fees. I click on Trade, select the simple interface and select amount I want to trade. Here is the first pitfall I ran into.

There's a minimum amount needed to swap and that happens to be currently about 0.026 ETH. So, if you're wanting to dip your toes into the Loopring DEX, I suggest you deposit an adequate amount of funds so that you only need to pay the Layer1 deposit gas fee once.

So, I painfully deposited some more ETH into my Loopring wallet, pay an extra $30, so that I meet the minimum for the swap. I repeat the process and select ETH in the "From" field and LRC in the "To" field, enter the amount to swap, and click swap.

The swap happens pretty much instantaneously and I can take a look at my L2 wallet to see that I've converted all my ETH into LRC tokens now.

If I go to transactions, and click on "Trades", I can see the amount that I swapped and the fee that was paid to make the transaction. So just to explain this fee, the 0.043 LRC tokens that I paid is not a gas fee. Currently, Loopring's fees are 0.3% for swapping tokens where 0.2% of that goes to the liquidity providers and 0.1% goes to the protocol.

Yield Farming and Providing Liquidity

I wanted to test out the yield farming in the Loopring app as well and looked at the pools, specifically the LRC/USDC pool. It has most liquidity currently and returns an APR of 7.5%. This is kind of low with respect to DeFi but I just want to test it out.

I click "Add" to add liquidity. I know I need an equal amount of LRC and USDC but I input 40 LRC just to see what happens. Lo and behold, there's a minimum amount to provide liquidity. That minimum for this pool is 50 LRC tokens so you would also need that amount in USDC which currently translates to about $103.

Since I don't have that amount deposited I can't provide liquidity which sucks because other farming platforms like Pancakeswap don't have a minimum requirement. But if I were to provide liquidity, I would hold sufficient amounts of USDC and LRC and click the "Add Liquidity" button.

My position in the pool would be represented by LP tokens and I would immedidately see the tokens in my account balance. The name of the LP token would be something like LP-LRC-USDC.

The Loopring Orderbook DEX

Loopring also is an orderbook DEX so if I wanted to trade on the books rather than in the pool, I can do that by selecting trade at the top and then clicking "Professional".

Here you can see the price chart and history, technical indicators, make limit buys and sells, and also market orders.

Withdrawing Funds from L2 Wallet

How would I go about withdrawing my funds from the L2 wallet? If I'm done working on Layer2, I can go to my L2 wallet and click on withdraw to take my funds out at any time. Also, as noted by Loopring, my funds on Layer2 can bever be stolen, frozen, or seized by Loopring.

Upon withdrawing, there is a relatively large withdrawal fee, compared to Layer2 fees, of about 19 LRC tokens. This is for processing the withdrawal to cover compute power for the zk proofs and overhead gas fees to publish a rollup block to Layer1 on Ethereum.

I copy and paste my Metamask wallet address into the "Withdrawal Address" field and click "Withdraw". This brings up Metamask for a signature. I click "Sign" to continue.

And that's it for withdrawing. I check my Metamask for the LRC token deposits immediately but the transaction hasn't happened yet. After about 40 minutes, the withdrawal is finally confirmed.

That's it for this walkthrough of the Loopring Layer2 DEX. It cost me quite a bit of Ethereum to make this post but reading some comments in Loopring's Discord and blog posts, there maybe a fiat onramp that they are developing so that users would not have to transfer ETH from Layer1 to Layer2 and avoids that initial gas cost entirely. Are you excited about this project? Will you be holding or staking any Loopring?

Check out the video of this blog post here:



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