Loopring

Validity proofs ensure state correctness

Each update to the system state must be accompanied by a ZK Proof that ensures that the new state was derived by correctly applying a series of valid user transactions to the previous state. Once the proof is processed on the Ethereum blockchain the L2 block is instantly finalized.

1. Operators - Loopring design doc

Zero knowledge SNARK cryptography is used

Despite their production use ZK-SNARKs are still new and experimental cryptography. Cryptography has made a lot of advancements in the recent years but all cryptographic solutions rely on time to prove their security. In addition ZK-SNARKs require a trusted setup to operate.

• Funds can be stolen if the cryptography is broken or implemented incorrectly.

1. Operators - Loopring design doc

All data required for proofs is published on chain

All the data that is used to construct the system state is published on chain in the form of cheap calldata. This ensures that it will always be available when needed.

1. Introduction - Loopring design doc

The system has a centralized operator

The operator is the only entity that can propose blocks. A live and trustworthy operator is vital to the health of the system.

• MEV can be extracted if the operator exploits their centralized position and frontruns user transactions.

1. ExchangeV3.sol#L315-L322 - Etherscan source code, submitBlocks function
2. LoopringIOExchangeOwner.sol#L123-L126 - Etherscan source code, hasAccessTo function call

Users can force exit the system

Force exit allows the users to escape censorship by withdrawing their funds. The system allows users to force the withdrawal of funds by submitting a request directly to the contract on-chain. The request must be served within a defined time period. If this does not happen, the system will halt regular operation and permit trustless withdrawal of funds.

• Users can be censored if the operator refuses to include their transactions. They can still exit the system.

1. Forced Withdrawals - Loopring design doc
2. Forced Request Handling - Loopring design doc

Regular exit

The user initiates the withdrawal by submitting a transaction on L2. When the block containing that transaction is proven the funds become available for withdrawal on L1. Finally the user submits an L1 transaction to claim the funds. This transaction does not require a merkle proof.

1. Withdraw - Loopring design doc

Forced exit

If the user experiences censorship from the operator with regular exit they can submit their withdrawal requests directly on L1. The system is then obliged to service this request. Once the force operation is submitted if the request is serviced the operation follows the flow of a regular exit.

1. Forced Request Handling - Loopring design doc
2. ExchangeV3.sol#L8118 - Loopring source code, forceWithdraw function

Emergency exit

If 15d passes and the forced exit is still ignored the user can put the system into Withdrawal Mode, disallowing further state updates. In that case everybody can withdraw by submitting a merkle proof of their funds with their L1 transaction.

1. Forced Request Handling - Loopring design doc
2. ExchangeV3.sol#L8159 - Loopring source code, withdrawFromMerkleTree function