If massive volatility and speculative rumor-based catalysts aren’t your cup of tea, Loopring (CCC:LRC-USD) probably isn’t for you. That statement also holds true for a good portion of the crypto market in these still nascent days.
With so much being said about Loopring, rumors and speculation are a good place to begin our analysis on the hotly-discussed crypto. And no surprises here, it all starts with another hotly-discussed stock: Gamestop (NYSE: GME).
It was almost a month ago — an eternity in the world of crypto — when rumors began to circulate around Loopring and GameStop. Those rumors likely began when an individual perusing the Loopring Github found code including GameStop on the site. That, in turn, led to the spread of rumors around the two trending topics of NFTs and the metaverse.
Initial speculation was that GameStop could potentially be using Loopring’s tech to create a marketplace for NFTs. There didn’t look to be much to substantiate such claims other than hearsay and speculation.
Then, Loopring became a hot topic based on the nascent and trending metaverse. Again, there’s not much to substantiate the idea of Loopring developing anything of consequence related to the metaverse. It too, seems like the type of speculative claim proffered by traders hoping to artificially spike demand in order to profit.
The most substantive news which might lend credence to any of these ideas is simply that GameStop announced it was hiring developers for an NFT platform in late October.
GameStop posted eight job listings calling for developers with NFT and crypto experience. The most pertinent news relating to Loopring is that the jobs specifically seek “NFT marketplace experience and knowledge of crypto, Ethereum [(CCC:ETH-USD)] and Ethereum Layer 2 products.”
That’s relevant because Loopring offers the first ZK-Rollup Layer 2. Confused? Me too. Nevertheless, it seems that the Layer 2 Ethereum connection served as enough of a catalyst to propel Loopring upward.
So, it’s necessary to explain Layer 2 Rollups in understanding Loopring and the attention it is receiving.
“Layer 2 is a collective term for solutions designed to help scale your application by handling transactions off the Ethereum Mainnet (layer 1) while taking advantage of the robust decentralized security model of Mainnet. Transaction speed suffers when the network is busy, making the user experience poor for certain types of dapps. And as the network gets busier, gas prices increase as transaction senders aim to outbid each other. This can make using Ethereum very expensive.”
Ethereum has long been plagued by speed and cost concerns. Although it established itself early on as a dominant force in crypto, cracks have emerged. Issues with transaction speed and gas fees have opened the door for projects including Cardano (CCC:ADA-USD) and Solana (CCC:SOL-USD) to chip away at its position.
And that’s part of the reason why ETH 2.0 has become such a hot topic. ETH 2.0 promises to beat back those rivals by resolving some of those issues.
What this means for Loopring is: Layer 2 rollup offers the security of Ethereum’s Mainnet but greater transactional speed at a reduced price.
Loopring offers transaction fees that are reduced by a factor of 30 to 100 over those for ETH. A chart of those fees over the past year can be found here, but suffice it to say, they are expensive.
Fees in the month of November look to be in the $5 to $6 range. That means users could reasonably expect Loopring fees to be between 5 cents to 17 cents if Loopring’s claims are accurate.
Loopring also claims to settle 2,000 transactions per second. Ethereum’s current daily transactions stand near 1.281 million. That equates to around 15 transactions per second, significantly lower than a Layer 2 protocol like Loopring.
What to Do
It’s easy to see why so many are speculating that Loopring could become important. GameStop may ultimately create an NFT platform, or perhaps a metaverse asset. And Loopring fits the bill as a potential candidate given its Layer 2 status. But that’s a big gamble.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.