- 0X protocol is an open-source protocol and enables peer-to-peer exchange of tokens on the Ethereum blockchain. Several projects have been developed on 0X, such as Radar, ParaDex, and DeversiFi.
- The protocol is built on an off-chain order relay with on-chain settlement. Specifically, orders are signed and broadcasted on the blockchain, while settlement is done on the blockchain.
- Unlike Ethereum-built DEXs 1.0 (e.g., Oasis, IDEX), this protocol allows users to send and cancel orders without any associated gas fee, while maintaining the non-custodial feature of DEX.
- In addition, the 0X protocol allows interoperability between dApps, fostering the liquidity of networks through positive network effects.
- ZRX tokens are used for governance functions within the 0x ecosystem. They are also used by relayers to create liquidity pools.
0x is an open protocol that is designed to offer a decentralized exchange as part of the Ethereum blockchain. 0x is made using a protocol that involves Ethereum smart contacts that allow those around the world to run a decentralized exchange. The team behind 0x strongly believes that in the future, you will find thousands of tokens from Ethereum and that 0x can provide an efficient and trustworthy way to exchange them. 0x is designed to be different from both centralized and decentralized exchanges, providing the best possible combination of features.
Who Created the 0x Project?
The co-founders of 0x are Will Warren and Amir Bandeali, the first of which is the CEO and the second of which is the CTO. Both are in smart contract research and development. Warren used to conduct applied physics research at the Los Alamos National Laboratory after studying mechanical engineering at UC San Diego. Bandeali used to be a fixed income trader with DRW after he studied finance at the University of Illinois, Urbana-Champaign. Among the other team members, you will find blockchain engineers, software engineers, graphic and product designers, end-to-end business strategists, and people with other skills. The advisors for the project founded or work at companies such as Polychain Capital, Coinbase, and Pantera Capital.
The 0x project is being funded by Fintech Blockchain Group, Pantera, Polychain Capital, Jen Advisors, and Blockchain Capital, showing a diverse range of interests.
What’s the Goal Of 0x?
When Warren and Bandeali co-founded the 0x Project in October of 2016, they did so in hopes of a world that allows for every asset’s representation as part of the Ethereum blockchain. Ideally, the included assets would have everything from digital game items to stocks to gold and fiat currencies. With so much tokenization, there will be thousands of different types of tokens, requiring a trustless exchange for users. While the co-founders appreciate the developments of decentralized exchanges, they saw an opportunity for improvement. With 0x, they hope to address the inefficiencies of decentralized cryptocurrency exchanges as well as the inability of various exchanges to work together.
What Separates Centralized and Decentralized Exchanges?
Centralized cryptocurrency exchanges are the most common and are run by a single entity, which in turn offers a point of failure. Users of centralized exchanges deposit funds directly with the exchange, and the exchange then becomes responsible for connecting the buying and selling orders in real time. Coinbase is an example of a centralized exchange. The big risk with centralized exchanges is their vulnerability to hacking or front-running conducted by the administrator.
Decentralized exchanges were developed to resolve the issue of vulnerability to theft. With this type of cryptocurrency exchange, users keep some control of their money. Instead of sending money right to a wallet controlled by one entity, users rely on digital signatures to directly authorize trading orders. Unsurprisingly, this means that while centralized exchanges are very fast, decentralized ones are slower. Centralized exchanges also tend to have high-performance trading as well as advanced tools and are simple to use.
How Does 0x Improve on Decentralized Exchanges?
The 0x Project is closer to a decentralized cryptocurrency exchange than a centralized one but even then, it has notable differences. 0x addresses the main issues with decentralized exchanges: they are expensive, slow, illiquid, and can’t be operated with each other. To operate an order book on the blockchain, each adjustment or new order goes via the blockchain, meaning that everything is held to block times. This also results in network transaction fees at every interaction.
0x addresses both of those issues by developing a standard protocol. This protocol can be applied to all orders relayed off the blockchain. With the protocol, the orders have to go back on the blockchain when they are settled instead of at every transaction. This significantly speeds up the process and eliminates some of the unnecessary transaction fees.
What Does 0x Cost?
Since 0x will prevent users from having to pay transaction fees by reducing the reliance on the blockchain, there is an opportunity for 0x to charge for use. However, 0x doesn’t charge fees of any type to use their protocol; it is free. Keep in mind, however, that if someone chooses to create a decentralized cryptocurrency exchange using the protocol, that person, known as a Relayer, can charge fees.
What Is 0x OTC?
In addition to the 0x protocol, the team also created 0x OTC, a consumer facing product that uses the 0x protocol. The 0x OTC allows peers to exchange Ethereum tokens without requiring a Relayer, provided they connect with the counterparty directly. It is live and simple to use. Send a link to your counterparty to generate and send your order. You can send the order however you want because it is relayed via the blockchain. This way, you can use pencil and paper, email, social media, or any other method of sending the order.
What Are 0x ( ZRX ) Tokens?
Another aspect of the 0x Project is the unique 0x Ethereum token, known as ZRX. This token is how users pay Relayers’ trading fees. It is also a decentralized form of governance for the 0x protocol’s upgrade system. Essentially, those who own ZRX have input in the protocol and improvements to make that is proportional to the amount owned.
There is a fixed supply of one billion ZRX, and the token launch was recent, on August 15, 2017. 50 percent of the tokens were released during the launch with 15 percent retained by 0x, 15 percent going to the developer fund, 10 percent going to the founding team, and 10 percent going to the advisors and early backers. The tokens allocated for founders and advisors as well as staff members will be released over the course of four years, while those bought during the launch event were liquid immediately.