Order Ring (Loopring)

An order ring, also known as Loopring, is a protocol for building decentralized cryptocurrency exchanges. It facilitates the trading of digital assets directly between users without the need for a centralized intermediary.

In an order ring, multiple orders across different trading pairs are combined to form a circular trade, maximizing liquidity and efficiency. This allows users to execute trades at the best possible prices across various markets simultaneously.

For example, suppose there are three users: Alice, Bob, and Charlie. Alice wants to trade Ethereum for Bitcoin, Bob wants to trade Bitcoin for Litecoin, and Charlie wants to trade Litecoin for Ethereum. Through the Loopring protocol, their orders can be matched in a circular trade: Alice trades Ethereum for Bitcoin with Bob, Bob trades Bitcoin for Litecoin with Charlie, and Charlie trades Litecoin for Ethereum with Alice. This process is executed trustlessly and securely on the blockchain.

By enabling order rings, Loopring enhances liquidity and reduces trading costs on decentralized exchanges, making them more competitive with centralized counterparts. Additionally, Loopring provides features such as order sharing, ring-mining incentives, and on-chain settlement to further optimize the trading experience for users.