Nowadays the crypto currencieshave a great importance in the minds of the investors especially E-investors. These block chain assets are spreading in huge amounts, so the need to exchange these assets has significantly increased. With the introducing of more and more assets these needs of exchange are magnified. Whether exchanging tokens for speculative trading motivations, or converting to access networks via their native utility tokens, the ability to exchange one cryptoasset for another is fundamental for the trading market. We found out that to do these exchange we need specific protocols to make these exchanges so the all rights of the investors and traders in crypto currency are reserved and there are two main protocols and we will explain them in details.
The crypto currencies exchange protocols and the differences between them:
Centralized crypto currencies exchanges: A third party that link another two parties that want to exchange with each other manages this type of exchanges. The main purpose of using this protocol is to protect the liquidity of the market so the crypto currencies are traded under stable prices and make the transactions more secure as they are done between accounts with clear information about the account holders. Coinbase and kraken are ones of the most famous centralized exchanges.
Decentralized crypto currencies exchanges: this type of crypto currencies exchanges are not managed by one party, but they have the same behavior of crypto currency itself and being distributed. This means that this type of crypto currencies exchanges doesn't contain the information and funds of the account holders and this makes the exchange process more secured and accurate.
Some Differences between Centralized and Decentralized crypto currencies Exchanges:
• In centralized exchanges all information of the customer and his volume and funds are brought together, this may sound convenient for the trader but this makes the information and the process potential point for hackers' attacks. In the other hand, these data are distributed in the decentralized exchanges so it does not have the same risk of being attacked like centralized exchanges.Because of that, there were many hack attacks on centralized exchanges as they hold so much value and data like the account information of account holders and that cause losses of many millions dollars.
• The centralized exchanges also have other disadvantage and this one is they could be censored by the government, this is considered a disadvantage as one of the main advantages of crypto currencies is they are far from government regulators hands. And this advantage can benefit a citizen who live under the rule of corrupt government and have a property doesn't want it to be seized. And in this case the centralized exchange system is more like the bank accounts and the government has the right to claim to the assets of a group or an individual or seizing them. In the other hand the decentralized exchanges are distributed which doesn't give the government the ability to track and shut them.
Loopring:
Loopring is a protocol of decentralized crypto currencies exchanges, which allow the users to trade assets online, and this protocol is Ethereum based protocol. The way it works is to facilitate the decentralized exchanges through ring sharing and order matching. One of the main advantages of the loopring protocol is that it will allow the centralized and decentralized exchanges to cross block chain and market liquidity to give the users the best prices possible.
It is important to note that Loopring’s open standard allows participants significant flexibility in how they operate. Ac- tors are free to implement novel business models and provide value for users, earning LRC fees on volume or other metrics in the process (if they so choose). The ecosystem is modular and meant to support participation from a multitude of applications.
LRC Token:
LRC is our generalized token notation. LRC is the Loopring token on Ethereum, LRQ on Qtum, and LRN on NEO, etc. Other LRC types will be introduced in the future as Loopring is deployed on other public block chains.
Decentralized Governance
At its root, the Loopring protocol is a social protocol in the sense that it relies on coordination amongst members to operate effectively towards a goal. This is not dissimilar to crypto economic protocols at large, and indeed, its usefulness is largely protected by the same mechanisms of coordination problems, grim trigger equilibrium, and bounded rationality. To this end, Lrc tokens are not only used to pay fees, but also to align the financial incentives of the various network participants. Such alignment is necessary for broad adoption of any protocol, but is particularly acute for exchange protocols, given that success rests largely on improving liquidity in a robust decentralized ecosystem.
Lrc tokens will be used to effectuate protocol updates through decentralized governance. Smart contract updates will, in part, be governed by token holders to ensure continuity and safety, and to attenuate the risks of siphoned liquidity through incompatibility.
Some important fraud and Attack Protections:
• Front-running Prevention: In decentralized exchanges, front running is when someone tries to copy another node’s trade solution, and have it mined before the original transaction that is in the pending transaction pool (mempool). This can be achieved by specifying a higher transaction fee (gas price). The major scheme of front running in Loopring (and any protocol for order matching) are order-filch when a front-runner steals one or more orders from a pending order-ring settlement transaction; and, specific to Loopring: when a front-runner steals the entire order-ring from a pending transaction.
• Dual Authoring process: For each order, the wallet software will generate a random public-key/private-key pair, and put the key pair into the order’s JSON snippet. (An alternative is to use the address derived from the public-key instead of the public-key itself to reduce byte size. We use authAddr to represent such an address, and authKey to represent authAddr’s matching private-key).
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