Terra Network, the stablecoin platform, has introduced Loop Finance, a project building on the Terra network. It shares the same ambitions as Terra does, to induce mass adoption of crypto in a user-friendly manner. The team tweeted:
“Loop is a Terraform Capital project offering a two-fold product -- an AMM DEX and a non-custodial crypto wallet -- to the Terra ecosystem and beyond, optimized for mass adoption.”
The AMM DEX will be integrated into a beta-stage, non-custodial crypto wallet (Loop Wallet). It is aimed to help shopping in a way that is advantageous to small businesses and mainstream consumers.
All About Loop
Loop is a Terraform Capital project offering a product with two-fold benefit to the Terra ecosystem and beyond. First, Loop Markets is built on Terra deploying the Automated Market Maker (AMM) model of “lazy capital” pooled together. It enables a passive income for liquidity providers (LPs) and rapid swaps for a spectrum of Terra assets for traders.
The second is the Loop Wallet. It is a mobile, non-custodial wallet for shopping and merchant payments. It will integrate the Loop AMM and use liquidity for payment through native swaps of Terra assets and stablecoins from the Loop DEX.
The team behind Loop is a diverse group of entrepreneurs with a wide range of experience in traditional businesses and software and blockchain development. The two main motivations behind building Loop were to help bring crypto to the mainstream mass and help small businesses survive large organizations taking over their market.
What Does Loop AMM Offer?
AMMs are vital to DeFi liquidity. TerraSwap, TerraForm Labs’ implementation of an AMM DEZ, is the primary means of swapping native Terra assets with other stablecoins. They are integrated directly into the Terra Station Wallet.
Loop’s AMM design is similar to that of TerraSwap. It will list ERC-20 and SPL (Solana) tokens along with Terra native tokens once the Wormhole Solana-ETH POA bridge officially goes live. The LOOP governance token will incentivize pools for tokens that don’t exist on Terra currently, with POOL token rewards to help bootstrap liquidity.
LOOP also receives shared trading fees, and the tokens that will be incentivized include ETH, WBTC, UNI, SUSHI, LINK, BNB, CAKE, SOL, SRM, FTT, and more. Terra Bridge’s Shuttle bridge will be replaced by Wormhole eventually. Once this is done, users on Ethereum, Binance Smart Chain, and Solana will be able to port assets to Loop’s AMM on Terra.
They will also be able to swap assets from different chains on a single AMM venue. Loop farming will be incentivized too, but only on one side of the swap pair. This discourages the dumping of LOOP tokens on the open market and bootstrap liquidity of specific pairs.
Loop Wallet, A Gamechanger
Loop wallet is aimed at the mass adoption of Terra and has opted for combining front-end payments applications with AMM. Loop wallet will be a shopping app. People will be able to make purchases from small to medium scale businesses.
In-store pick-up and delivery will be made through Loop’s partnership with Doordash, an online food ordering and food delivery platform based in San Francisco. The app is currently in the beta testing phase. Loop will onboard many new merchants soon.
Tom Norwood, CEO of Loop, says,
“Our plan all along has been to build a non-custodial crypto wallet into the app, allowing users to spend their cryptocurrencies directly with merchants. One of the main reasons we chose Terra is because most merchants don’t want to accept volatile currencies, and therefore Terra’s suite of local currency stablecoins works perfectly for us.”
The Benefits Of Loop Wallet
The instant swap mechanism inside the Loop Wallet app will allow users to pay with any Terra currency and swap it automatically for a stablecoin preferred by the merchant. This removes the price-volatility risk for accepting crypto payments, a point that discourages merchants from adopting crypto-oriented apps.
LOOP rewards are given to customers as a part of a cash-back incentive program. By sourcing payments liquidity from an AMM DEX, consumers and merchants will bear significantly lesser fees than many current front-end fiat on-ramps. Here, sourcing liquidity from third parties is expensive, with additional costs incurred to end-users.
Small Businesses Can Gain Market Control
The team states that large businesses such as Ubereats, Amazon, Facebook, and Google have negatively impacted small businesses. Loop offers a low monthly fee and zero commissions for businesses, allowing them to control their audiences and sales channels.
Businesses can source the advantage of a new market that uses Loop while saving money on transaction fees. Cryptocurrency payments (and in the future - DeFi services like Anchor savings) offer merchants and end-users rapid, low-cost settlement along with high-yield savings.
Matching this value will be difficult for large organizations unless they begin integrating DeFi-native features themselves. The team further states,
“Users (both consumers and merchants) can benefit from better payments, settlement, savings, and rewards in an application market, mobile e-commerce, that accounts for roughly 45% of the total US e-commerce market already — a trend that is poised to accelerate. All of this can occur without users needing to be intimately familiar with what DeFi is or how it works.”
The Future For Loop And Terra
Loop Wallet is currently in its Beta testing phase, with the initial rollout planned to go live in Australia. Loop’s MVP for the AMM DEX is expected in the next 4-6 weeks. Once the Wormhole goes live, Loop Markets will provide liquidity for Terra’s cross-chain assets through its support for ERC-20 tokens and SPL tokens.
Loop can gain mainstream traction and liquidity for the wallet’s DEX with instant swaps through Loop AMM directly embedded within Loop Wallet. This will enable greater adoption of Terra’s stablecoins. Loop will integrate MoonPay as a fiat on/off ramp for its users. The team says,
“We’re thrilled about Loop’s vision of onboarding more mainstream users to DeFi. The design of originating advantages from DeFi and presenting them to the mainstream via user-friendly applications within competitive e-commerce markets is characteristic of many projects building on top of Terra — including Loop. The goal? Mainstream adoption.”
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.