2021 has been an exciting year for cryptocurrencies. It has not only answered an age-old debate of “whether crypto would be accepted around the globe”, but now we are exploring new dimensions to which blockchain technology may contribute.
The integral part of these dimensions is a superior blockchain network that can cost-effectively support high transaction bandwidth. Terra Network has undoubtedly proved its metal and is moving ahead on the way of large-scale adoption. Initiated in South Korea, the network already supports several DeFi (Decentralized Finance) Applications, and many are in development as we speak.
Further, for an efficient blockchain ecosystem, you need a Decentralized Exchange (DEX) that would allow free flow of cryptocurrencies across the network. Till now, this exchange on Terra Network was handled through TerraSwap, which is the network’s first exchange.
However, there were a number of issues that were not addressed by TerraSwap, such as:
- There were no incentivized liquidity pools on the network (except for the synthetic assets of Mirror Protocol, a synthetic assets platform on Terra),
- For newly launched projects on Terra, there was no platform to create incentivized Liquidity Pools,
- TerraSwap does not support Cross-chain assets (such as Ethereum or Solana), and
- Direct Swapping of Non-Terra tokens is not possible.
Therefore, there was a need for a better Automated Market Maker DEX, which is precisely what we have brought to you today. The project is called Loop.Finance, which is an Automated Market Maker (AMM) DEX built on the Terra Blockchain Network.
So, let dive deep and understand what is so special about this new DEX on the platform.
What is Loop Finance?
Loop Finance is a smart contract-based Decentralised Exchange (DEX) built on the Terra Network that allows you to exchange your tokens on the network securely and in a decentralized manner.
There is no intermediary authority to regulate a transaction, just a combination of a code that executes the transaction, a liquidity pool that provides liquidity, and the network that records the transaction.
To understand more about how Automated Market Maker (AMM) protocols work, I suggest you read our Beginners’ Guide to Crypto Liquidity Pools.
Now let us understand the founders of Loop.Finance.
Who are the Founders of Loop.Finance
Thomas Norwood – CoFounder – Twitter
Tom is based in Melbourne, Australia, and has an educational background in multimedia from RMIT University, Australia.
He has been an Entrepreneur for over 20 years on the professional front with experience in digital marketing, web development, and software development. Further, he has been in the blockchain industry for the last four years. Before co-founding Loop Finance, he founded Trybe, which is a tokenized publishing platform and social network.
Currently, Tom is the face of the platform and publishes several articles and videos for the Loop Finance Community. We will discuss this community in a short while.
Simon Rahme – CoFounder – LinkedIn
Simon is also based in Melbourne, Australia, and has an academic background in economics and finance.
He is an app developer with more than ten years of experience. He has another venture called Legacy Apps, an app development service provider and serves clients such as Nickelodeon, LinkedIn, Govt. of Australia, etc.
In Loop Finance, he has been entrusted with the role of a Development Partner.
Now, let us know about the components of this platform.
Components of Loop Finance
The various components of Loop Finance are as follows:
1. Decentralized Exchange (DEX)
The primary service of Loop Finance is a Decentralised Exchange (DEX) which can be used to swap tokens on the Terra Network. Further, in the future, the exchange would support Terra-based tokens and integrate with other blockchain networks such as Ethereum and Solana.
Moreover, basis Loop’s Roadmap, by Q1 2022, the platform will integrate with Thorchain, a cross-chain interoperability protocol to allow the exchange of many other tokens such as Bitcoin (BTC), Litecoin (LTC), Binance Coin (BNB), etc. Currently, you can connect with the exchange through the TerraStation wallet. However, the platform has planned an in-house chrome extension wallet in the future.
Currently, the exchange supports 17 different pairs. Further, the average 24-hour volume is around $6 Million. You can explore Loop Finance DEX here.
2. Liquidity Pools and Yield Farming
The second component of the platform is the Liquidity Pools which provide liquidity to the DEX. A user can provide liquidity to these pools and earn a share in the trading fees of the DEX. Based on the Loop Finance whitepaper, 75% of the trading fee collected by the platform will be distributed to the Liquidity Providers.
This is a fantastic method of earning passive income on your crypto tokens. Further, the platform occasionally incentivizes the Liquidity Providers through Liquidity Mining.
However, depositing funds to the liquidity pools is always subject to the risk of impermanent loss. Therefore, a user should always consider it before providing liquidity to the platform.
To know more about Impermanent Loss, you can refer to our Impermanent Loss Guide here.
To read more about providing Liquidity and Yield Farming procedure on Loop Finance, click here.
3. Liquidity Bootstrapping Pools (LBPs)
Loop Finance provides Liquidity Bootstrapping Pools (LBPs) for newly launched projects, which help these projects generate liquidity with small initial capital. LBPs exist for a specific period until the duration of an IDO (Initial DEX Offering) in which a new token is offered to the prospective investors.
Unlike regular Liquidity Pools, LBPs have variable weights in which the ratio of two assets keeps changing to avoid any substantial volatility in the asset’s price. Thus, LBPs are a win-win for both the project and the investors. Projects get seed funding, and investors are saved from the high volatility in the token price.
After the duration of an LBP has lapsed, it is converted into a normal Liquidity Pool with updated prices and asset ratios. The concept of LBPs was first initiated by Balancer, which is an AMM on the Ethereum Network.
You can read more about Liquidity Bootstrapping Pools here.
4. LOOP Token
LOOP is the in-house token of Loop Finance. The use cases of the LOOP token are as follows:
- Governance – The LOOP token holders will govern the platform
- Staking – LOOP tokens can be staked on the DEX. Based on the whitepaper, 25% of the platform’s trading fee will be distributed to the staked LOOP tokens.
- Liquidity Rewards – LOOP tokens can be deposited in the various liquidity pools available on the DEX. As discussed before, 75% of the trading fee will be distributed to the Liquidity Providers. Further, the platform would also reward Liquidity Providers through Liquidity Mining.
|Maximum supply||1 Billion|
|Market Price (Amount in $)||$0.494|
|Fully Diluted Value (Amount in $)||494 Million|
The information on the token economy is not sufficient as the updated circulating supply of the token is not available. However, by September 2021, the circulating supply was approximately 16 Million (1.6% of Maximum Supply) based on which the current market cap is $8 Million (approximately).
In addition to this, LOOP Finance has just concluded an IDO on Start Terra (a project launching platform on the Terra Network). Total 25 Million tokens were offered @ 0.1 UST, which will be unlocked in the next 11 months and hit the circulating supply.
Lastly, 2 Million tokens are planned shortly to be rewarded to the liquidity providers on the platform.
|Core Team||150 Million||15%|
|Token Sale||150 Million||15%|
|Community Fund||250 Million||25%|
|Liquidity Mining Rewards||250 Million||25%|
The project was launched on August 11, 2021 and 1 Billion LOOP tokens will be emitted as follows:
|Year||Token Emission (%age)||Token Emission (No.)|
|Year 1||29%||290 Million|
|Year 2||29%||290 Million|
|Year 3||22%||220 Million|
|Year 4||10%||100 Million|
|Year 5||10%||100 Million|
Currently, LOOP tokens can be bought on two exchanges:
- Loop Finance
Please note that another token named LOOP is the in-house token of another platform called Loopring. However, there is no connection between Loop Finance and Loopring. Therefore, make sure you are dealing with the correct LOOP token.
5. Loop Community and LOOPR Token
Loop community is a crypto content platform on which the community members can share crypto content for the education and information of other members. The platform rewards the contributing members in LOOPR tokens which is another in-house token of Loop Finance.
A community member has rewarded LOOPR tokens when participating in the community either by writing, rating, or commenting on the articles.
In the future LOOPR tokens could be swapped with LOOP tokens or staked on the DEX to earn more LOOP tokens.
For more information on content publishing on the Loop Community, watch this video.
The Roadmap of the project looks very interesting:
- Within Q4 2021, the platform is scheduled to integrate with Solana and Ethereum network.
- By Q1 2022, Loop Finance has scheduled the integration of Thorchain, which will allow the exchange of BTC, LTC, and BNB with Terra tokens.
- Further, the most awaited feature would be the platform’s in-house mobile application, which will be released in Q3 2022. This should provide substantial ease of use to the platform’s users.
Is there any Competitor of Loop Finance?
Terraswap is an existing competitor of Loop Finance, which indeed has better liquidity and many token pairs. However, Loop Finance is better than TerraSwap as it has a better user interface and provides several options to earn passive income on your crypto assets.
Another AMM DEX which could give Loop Finance an intense competition is Astroport which is still under development. The platform is being built by Astroport Joint Venture (a venture between Delphi Labs, IDEO CoLab Ventures, TerraForm Labs, and Astroport Builders). The objective of Astroport is to empower the whole DeFi ecosystem built on the Terra Network. You can read more about Astroport here.
Now, let us consolidate the pros and cons of the Loop Finance Platform.
What are the Benefits of Loop Finance?
The benefits of Loop Finance are as follows:
- Incentivized Liquidity Pools on Terra Network,
- Integration with Solana and Ethereum Network (planned),
- Integration with Thorchain Network (planned),
- An interactive Mobile application (planned),
- The platform has various bounty programs
What are the Limitations of Loop Finance?
However, there are a few limitations of the platform as well:
- The platform is relatively new, and therefore there is low liquidity and less number of token pairs,
- Updated information of LOOP circulating supply is not available,
- The need for a dual token system (LOOP and LOOPR) is not clear
According to our understanding, the platform is a perfect addition to the Terra ecosystem. It gives you several passive earning options such as Staking and Liquidity Mining. The project can be valuable and could become single-point access to the Terra DeFi Ecosystem. Therefore, the platform’s value could increase over the long term (18-24 months).
However, we are not completely satisfied with the token economy and the information available on the platform. Further, almost 100% of the existing circulating supply has just been issued through IDO (25 Million LOOP) at 20% of the current market price, which will hit the market gradually in the next 11 months. This could reduce the token’s price in the market.
Therefore, at the moment it is a risky project to invest in and we suggest you keep this token on your watchlist to monitor it.
Please note that we are not financial advisors and this is not a financial advice. Please consult your financial advisor before making any investment or trading decision.
I hope this research report helped you to understand Loop Finance project. For your information, we are closely monitoring the Terra Ecosystem and would update our subscribers in case we find any other good projects being introduced on the network. To stay updated, make sure you subscribe to CoinSutra newsletter.