Liquidity Mining on Loopring Exchange

Loopring Exchange (https://loopring.io) is Ethereum’s first zkRollup DEX. zkRollup is a type of layer 2 scaling solution, allowing for high throughput, low settlement cost (no gas), while maintaining complete Ethereum self-custodial security guarantees. This makes it a great solution for high performance orderbook trading, and that is exactly what Loopring is incentivizing with its liquidity mining program.

It’s important to note that liquidity mining on Loopring is not a single, one-time offering, but a continuous program(s) available to liquidity providers on the DEX, likely forever. It incentivizes users to place resting limit orders on certain orderbooks. In other words, add liquidity to the orderbooks, get rewarded. How much an ‘order placer’ (market maker) can earn depends on the specific campaign.

A campaign basically specifies:

  • Which trading pair(s) are being incentivized

  • Spread

  • Reward pool (what is $ amount? paid out in which token?)

  • Duration

To give you an example of how this all ties together, consider this actual campaign from bZx on Loopring.

The campaign rewards any user who places a resting limit order on the BZRX-ETH orderbook within a 1% spread. There is a reward pool of $2k in vBZRX tokens. The campaign lasts for 30 days from start date.

To dive a bit deeper: the $2k is split up hourly, and since there are 720 hours in 30 days, that means there is $2.78 (2000/720) up for grabs every hour for the month. The Loopring liquidity mining program takes a snapshot of the BZRX-ETH orderbook every hour, and captures all orders within the 1% spread. The hourly amount ($2.78) is then attributed to all order placers, proportional to A) their order size (a $100 order will earn 2x the rewards of a $50 order), and B) the order balance (if there are $10k in bids and $5k in asks, an ask will earn 2x the amount of a bid). While rewards accrue hourly, payouts happen at the end of the month, directly to your Loopring layer 2 account.

So that’s it. In one sentence: it pays to have tight, large, balanced orders on the book every hour. Even if no one fills your order, it doesn’t matter. Adding liquidity is all that’s needed. In fact, if someone fills your order, that is a bonus, as makers receive a rebate on all volume, any pair. Default rebate is 1.6 bps of volume. For the original announcement post on liquidity mining, see here.

Ok, now let’s jump into how to get started. It is super simple.

  1. Register an account on Loopring.io. Registering just means making one on-chain transaction that ties your Ethereum address to the off-chain data structure (Merkle tree). This costs gas. No KYC or anything like that.

  1. Deposit assets onto the Exchange. This is also an on-chain transaction. Whenever you have to deposit/withdraw assets onto the zkRollup, it costs gas as you are dealing with layer 1 (Ethereum). Actually trading/transferring on the zkRollup is gas-free, and often completely free.

  1. To see which pairs currently have campaigns running, head to the Liquidity Mining tab. Here you will which trading pairs are being incentivized, your own rewards on the pair, as well as a leaderboard. For instance, there are currently four trading pairs being incentivized, with a total of $10k in rewards. For greater detail on the spread, reward amount, duration, and other parameters we mentioned above, you should simply stay up to date with Loopring’s blog or twitter, where we will announce all campaigns before they start. (We will begin exposing more info on the liquidity mining page itself in a newer release).

  1. Head to home page (trading page). Place a limit order on the pair(s) in question, and that’s it, you are liquidity mining! As we said, any order within the specified spread range is snapshotted every hour. If you have even 1 order on the book within the spread at the hour mark, you have earned rewards. Note, only rewards greater than $5 equivalent will be paid out at the end of a month, if it’s less, it simply stays there and rolls over to next month.

  1. As you see, even placing one order manually on the orderbook means you are earning liquidity mining rewards. However, to maximize the mining, it is very likely that more serious participants want to set up a trading bot, so they can ensure that they are continuously placing orders at the right spread as the market moves, etc. For that, anyone can
    A) plug into the Loopring Exchange via our API: https://docs.loopring.io/en/.
    B) If you want a head-start in building your market maker bot, we have a Hummingbot connector,
    C) as well as a VNPY trading bot framework optimized for liquidity mining on Loopring.

Now let your bot run and liquidity mine those rewards. These programs will likely last continuously, and increase in magnitude of rewards. Not only does Loopring support some (like LRC-USDT and ETH-USDT), but other great token issuers and projects do as well, such as bZx and Ren. If you have any questions about the above, need help setting up a bot, or have a suggestion for a next pair to run a liquidity mining campaign with, drop into the Loopring Discord.

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More market making software has been integrated with Loopring.io, including some that are friendly for non-technical users with a nice GUI. This helps anyone become a miner. See here for an updated list of trading bot software connected to Loopring: https://github.com/Loopring/awesome-loopring#Trading-Bot-Software

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