Loom Network is a Platform as a Service (PaaS) blockchain solution that enables sidechain development for Ethereum-based applications.
Loom believes that decentralized applications (dApps) have their own unique requirements when it comes to consensus methods and security measures, so they should be able to create and enforce their own rules to achieve faster and easier scaling. Initially, Loom Network focused on blockchain-based social media and gaming dApps. But it has since changed its business model to focus on enterprise blockchain applications for government agencies and healthcare providers. Loom Network's ERC-20 token, LOOM, is the utility token that powers the Loom Network.
What is the Loom Network (LOOM)?
Loom Network has its headquarters in Bangkok, Thailand since the project's launch in 2017. In 2018, Loom held an Initial Coin Offering (ICO) alongside the private sale of local utility token LOOM, which raised $45 million.
LOOM is an ERC-20 token with a fixed total supply of one billion. The company keeps 35% of the total supply in a reserve fund to ensure the continued development and longevity of the project, while 10% is held by team members and consultants. The remaining 55% of the token supply is in public circulation.
Customers and partners must have at least one LOOM network token to access the Loom Network. To use LOOM, businesses not only pay subscription fees for the Loom Network Platform-as-a-Service (PaaS) model, they also pay transfer fees to move assets between the Loom Network sidechains and the main Ethereum blockchain. We discuss this sidechain architecture in more detail below.
Loom Network realizes its vision of making decentralized applications (dApps) easily scalable on the Ethereum blockchain using the following tools:
- Loom Network's Software Development Kit (SDK)
- Proof of Stake (DPoS) Consensus Methodology
- dAppChains as a Tier-2 Scaling Solution
Loom Network SDK for Application Development
Loom Network provides an SDK that simplifies application development for software engineers who want to build on the platform. This SDK enables developers to build any type of dApp without requiring advanced knowledge of how to build natively on the Ethereum blockchain and without the need to know Ethereum's native Solidity programming language. Applications developed using the Loom SDK can then be integrated into the Loom Network platform via its own unique Ethereum sidechain called dAppChain, which is designed to execute different rules, consensus methods and data protocols that each developer can choose for their application.
Loom Network Proof of Stake (DPoS)
The Loom Network operates on the Proof of Stake (DPoS) consensus mechanism. Much like the more common Proof-of-Stake (PoS) system, DPoS encourages users to maintain system security by validating and securing network data. However, the distinguishing feature of DPoS is that the system is layered on a voting and authorization structure where stakeholders not only share their assurances but also have an active voice in making consensus more efficient, transparent and democratic. Unlike PoS with nodes, the DPoS system allows users to delegate their stake to a node of their choice (known as a delegate) and essentially choose the nodes they want. To verify new blocks. This elected delegate works like a senator or other elected representative in a national political system, speaking and acting on behalf of the larger community that elects them.
Also, unlike most PoS models, Loom Network's DPoS system is designed in such a way that transaction certainty does not depend on all network nodes competing for a chance to validate new blocks. The DPoS consensus mechanism is designed to work much faster than a regular PoS system, by democratically electing delegates to pre-validate new blocks. This functionality enables Loom's DPoS system to achieve much faster transaction certainty than the average PoS-based blockchain, and greatly improves network scalability by producing faster transaction confirmations with reduced network latency. Other projects using DPoS include EOS, Cardano, Tron, Tezos, and Cosmos.
Loom's dAppChain as a Layer-2 Ethereum Scaling Solution
In the blockchain world, Layer 1 refers to the underlying underlying blockchain architecture, while Layer 2 refers to a network built on top of Layer 1. For example, Bitcoin is considered a Layer-1 system, while the Lightning Network is a Layer-2 system. The Loom Network is a Layer-2 solution built on top of Ethereum (a Layer-1 solution).
Loom was born from the desire to create a simple, fast and scalable middleware platform that could enable developers and companies to build more efficient applications on the Ethereum network. Middleware is often likened to “software glue”. Ethereum suffers from the same scalability issue that is quite common among many public blockchain networks. Especially those that require multiple network nodes to validate each new block of transactions added to the blockchain. The different consensus methods that various blockchains choose to integrate into their protocols can significantly affect the rate of consensus, but all consensus mechanisms take time. This concept claims that it is impossible to build a blockchain protocol that perfectly implements the three main features (decentralized, secure, and fast) needed to create a truly stable, state-of-the-art system optimized for widespread enterprise use. In other words, due to the scalability issue, compromises are often required on one or more of these three fronts.
Various solutions to the scalability triad have been implemented over the past few years. Layer-1 solutions are those that make direct changes to the Layer-1 blockchain protocol itself. An example of such a change would be to increase the block size. To pack more transaction data into each new block to increase network scalability and transaction completion times. However, one of the disadvantages of increasing the overall block size is that each node has to process more data-intensive blocks to achieve precision. Presumably in this example, increased throughput could reduce decentralization, as many network participants will not have the power to process larger blocks efficiently. In turn, this can make the barrier to entry very high for individuals and hobbyists, while concentrating power in the hands of large and sophisticated businesses.
In contrast, Tier-2 scaling solutions work by increasing the speed of the network without significantly increasing the load on individual nodes. They do this by removing some of the required data processing from the main blockchain network. Therefore, they also reduce the burden of network responsibilities of individual network nodes in the process. Layer-2 solutions do not change the protocol at the base of the main blockchain, but instead increase operational efficiency by executing transactions externally from the main blockchain. Due to this structure, Layer-2 systems are also known as off-chain systems. The off-chain process alleviates transactional pressure from the underlying blockchain protocol while retaining many of its security, decentralization, and transaction speed features.
Layer-2 solutions are often found as smart contracts built on top of the original blockchain. As smart contracts, they have the ability to interact with external third-party software, and this software is where some of the network's processing operations are moved. Layer-2 development also allows the creation of “subchains” or “sidechains”, which are secondary chains linked to the main blockchain. Sidechains can handle complex processing tasks and even host entire dApps. All while having minimal interaction with the base layer blockchain they connect to. This is exactly the type of system Loom Network provides to developers creating dApps on the Ethereum blockchain. DApps created on the Loom Network platform are given a custom dAppChain that becomes their own unique sidechain built into the Ethereum blockchain.
LOOM Coin Review and Future
Loom Network initially focused on the development of blockchain-based social media and gaming dApps. Many of these dApps have gained significant popularity, including Crypto Zombies and Crazy House. Despite Loom's relative success in this regard, many dApps affiliated with Loom appear to be facing funding issues and not getting past the initial stage. Overhauling its mission and value proposition in 2019-2020, Loom Network shifted its focus to providing data availability for enterprise-level government departments and healthcare providers.
Many government departments and healthcare providers in developing countries still rely on physical documents for their data storage, which can be administratively cumbersome. Loom Network's enterprise blockchain platform aims to provide storage and management services as a solution to meet these needs and increase efficiency. The LOOM network token will continue to be used by network participants to pay for these new services.
In 2020, Loom Network made another change in its business model, again by imposing transaction fees payable in LOOM. This monetization path will help ensure that validators are compensated for their work securing the Loom Network. Transaction fees are paid by dApp developers rather than end users; This means that developers must invest and maintain sufficient LOOM tokens to cover the cost of dApp users' interactions with the underlying blockchain. This process allows the dApp developer to determine whether and how to pass this cost on to the end users of the system.
Loom Network's shift in business plan, development focus, and corporate team structure has spurred a fair amount of public speculation about the safety and longevity of the project itself, but many are hopeful that these latest developments will pave the way for better monetization, increased monetization. adoption and overall long-term viability of the project.