What are Ring Miners?
Ring miners are essential participants in the Loopring protocol — a Layer 2 scaling solution that is also an innovative decentralized exchange (DEX) protocol.
With the help of these miners, Loopring can work without using order books, increasing the speed and productivity of the DEX itself.
The protocol incentivizes people hosting ring miners. When a user places an order and fills it out, the ring miner is rewarded with a portion of the fees and a margin split.
Their rewards come from split margins and LRC token rewards — Loopring’s native cryptocurrency.
What Is Ring Miners’ Role In Loopring Protocol?
Ring miners are nodes on Loopring that receive orders, and track and store trade history. Relays can opt into becoming ring miners it’s not explicitly required.
We call relays with the ring-mining feature turned on “Ring-Miners”, who produce order-rings by stitching together disparate orders.
Daniel W., et.al., 2018
The role of a ring miner in the Loopring protocol is to facilitate ultra-fast order execution by filling open orders and matching them into what are called order rings — collections of various exchange requests submitted to the protocol.
Ring miners look for open orders, bundle them off-chain, and fill them almost instantly, after which the smart contracts settle them on-chain in the most profitable and efficient way for all parties involved.
Example of Ring Miners in actions
Imagine three traders wanting to make a trade on a DEX based on Loopring:
- Alex wants to buy 1 ETH with 2800 DAI
- Grant wants 400 UNI with 1 ETH
- Carl wants 1000 DAI for 100 UNI.
With the help of ring miners, the Loopring can simultaneously complete these three orders in one trade, unlike a simple DEX, where trades would’ve been filled separately.
Now, Alex would trade the ETH directly with Grant, Grant would trade the UNI with Carl, and Carl would trade the DAI with Alex.
This can only be achieved by ring-matching, which links trades together and secures them through multiple users. DEXs built on Loopring can use ring miners to cut costs by almost 30 times while increasing the speed of the exchange.
Ring-miners try to fill the order fully or partially at the given exchange rate or better by matching it with multiple other orders.
Daniel W., et.al., 2018
Loopring: What Sets It Apart?
Loopring isn’t a DEX. It’s a Layer 2 scaling solution for Ethereum designed to facilitate the creation of DEXs, allowing every protocol that wishes to use it to integrate exchange functionality.
However, it’s not limited to Ethereum only. Loopring can work on any blockchain that enables smart contracts.
Another unique feature is that order management is handled off-chain by the ring miners. Order settlement, on the other hand, happens entirely on-chain and is secured by the underlying Layer 1 blockchain thanks to the power of zkRollups (a scaling solution based on zero-knowledge proofs) and smart contracts.
Finally, Loopring prevents front-running by dual-authoring orders with signatures, requiring two levels of authorization to prevent fair transaction processing.
Conclusion
Loopring is an innovative approach to the familiar DEX paradigm, that seeks to improve the fundamental infrastructure of decentralized trading and modernize it so that it can withstand the trading volumes of the future.
Ring-mining is an elegant solution to the issue of insufficient liquidity in small decentralized markets and a strong incentive mechanism for network operators.
Daniel, W., Jay, Z., Alex, W., & Matthew, F. (2018). Loopring: A decentralized token exchange protocol. Retrieved from
https://loopring.org/resources/en_whitepaper.pdf
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