What is 0x?
0x is a blockchain protocol designed to facilitate digital asset trades in a decentralized manner. It uses the Ethereum blockchain. 0x and offers a solution to the drawbacks of cryptocurrency exchanges through an “off-chain order relay with on-chain settlement”. Its ZRX token is widely-traded and was recently listed on Coinbase.
Introduction To 0x and ZRX
Centralized cryptocurrency exchanges are plagued with problems. Hackers, embezzlement, and government shut downs make it a risky venture for anyone to store coins with them, but decentralized OTC options can be just as problematic. That’s why 0x (pronounced zero ex) was created.
Within the current paradigm, both centralized and decentralized exchanges present means by which to trade digital assets, each with their own pros and cons
Via the 0x hybridized model, off-chain state channels are employed for conducting orders and transactions to increase speeds; only orders that have been settled are recorded on the blockchain.
As an open protocol for asset exchange, 0x ultimately aims to support an ecosystem of interconnected exchanges and dApps that benefit from the network effect of a shared asset exchange infrastructure.
Amir Bandeali and Will Warren founded 0x in October 2016 with a belief that all assets will inevitably be traded on the blockchain. The platform was created to streamline Ethereum token trading using off-chain orders that reduce gas costs, transaction fees and other fees when compared to on-chain transactions.
This simple change doesn’t sound revolutionary, but as Ethereum scales in the wild, users are quickly learning the digital ledger and ETH costs to run it can get out of hand. By adding this layer, 0x created a lot of buzz for itself. Before explaining why it’s so necessary, let’s look at the ZRX token in terms of market cap and the ZRX coin price.
Review of the ZRX Token
Zero X has a total supply of 1,000,000,000. Its peak trading price was $2.37 on January 13, 2018.
It raised $24 million during its ICO, which ended August 2017. At that time, 50 percent of the total supply was released to investors, with 15 percent retained by 0x, 15 percent held in a developer fund, 10 percent kept by the founding team, and 10 percent going to advisors and early backers.
Zero-X ZRX tokens are used for decentralized governance, and although it’s currently restricted to the Ethereum blockchain, cross-blockchain solutions like Cosmos and Wanchain will soon connect 0x to the outside world. Tokens are not mineable, although the founder and advisor portions are being time released.
Cornell Tech’s Initiative for Cryptocurrencies and Contracts doubts the need for the existence of ZRX, as ETH could just as easily be used to fund transactions.
Still, over $10 million worth of ZRX is traded on a daily basis. It’s accepted on cryptocurrency markets including LocalTrade, Binance, HitBTC, Coinbase, ABCC, and 55 Global Markets. Trading pairs include BTC, USDT, and ETH.
Decentralizing Token Exchanges
We previously mentioned 0x briefly in an article discussing decentralized exchanges, and it was touched upon at the beginning of the year too. In the interest of brevity, check out either of the linked articles above to read more about the nitty gritty of the problems plaguing centralized exchanges and the advantages of decentralized exchanges.
The general overview is centralized exchanges require you to deposit your coins or tokens into an exchange-held wallet, providing a single point of failure. Should the exchange be compromised (which many have), users lose their money. They also charge transfer fees.
Decentralized exchanges allow for private transfers, but trust is a major issue when transactions are performed this way. Also finding a buyer or seller outside of an exchange can be difficult if you don’t personally know someone. Still, your assets remain in your wallet until ownership is transferred to another party.
0x isn’t a fully-decentralized exchange, but it’s also not a fully centralized one, giving it a lot of advantages over existing crypto exchanges like Binance and Coinbase. For one, transaction fees are optional. Yes, developers can choose to charge one, but that’s at their own discretion. This is a world of centralized and decentralized exchanges, all under one roof.
0x is the best of both worlds, addressing concerns of slow decentralized exchanges and unsecure centralized ones. Of course, it’s only a protocol, and instead of waiting for developers to create a p2p trading solution, the team launched 0x OTC, a consumer-facing product that enables direct p2p trading by any method you deem appropriate.
A maker broadcasts an order, a relayer posts the order in an off-chain order book, and a taker accepts the transaction.
And we’d be remiss not to mention the number of projects being developed using the 0x protocol already. dEX, Radar, Augur, Blocknet, Aragon, Lendroid, Dharma, Maker, and more are currently using it. Adoption is a major hurdle for even the best-designed, well-funded blockchain projects, but it’s a hurdle 0x is working to overcome as many times as needed.
The Price of Freedom
What will be interesting to watch over time is how the 0x supply is released and used. As we previously discussed, the no-fee model has major problems in sustaining value. While the technical protocol is great, skeptics wonder how sustainable the 0x business model is, citing the no-fee transactions severing the platform’s success from the ZRX coin’s value.
However, ease-of-use and a growing ecosystem supporting cross-chain functionality are going in 0x’s favor. Of course, it’s not the only decentralized exchange option even on Ethereum’s blockchain.
EtherDelta, for example, also relies on Ethereum and uses ETH instead of a proprietary token. It also removes the relayer from the equation. EtherDelta will benefit from the same market conditions 0x does, and they will serve competitive markets.
It’s unclear yet whether ZRX is a commodity or security, because it has deep roots in both while leaving vulnerabilities in its goal of decentralization. For example, should anyone purchase 50.1 percent of the ZRX supply, they would obtain complete control over the DEX smart contract, according to the 0x governance. Legislation, as much as the tech, could determine Zero-X’s market cap and position in the cryptocurrency market pecking order.
Still, 0x is gaining traction, especially in India, where crypto exchange Zebpay recently added 0x support to its platform. There are nearly 500 ERC20 tokens as of early May 2018, and the ability to exchange them among each other will be a boon to the entire Ethereum ecosystem.
The project’s development plowed ahead in 2018, adding 0X Instant and jumpstarting an accelerator program. In 2019, 0X Improvement Protocols (ZEIPs) were introduced to even further streamline consensus.
Competitors, projects like 0x, EtherDelta, IDEX, and Radar Relay are thus far able to coexist though. Fees and fraud in centralized exchanges aside, the proliferation of airdrops incentivizes hodlers to keep balances in their wallets. Decentralized exchanges may soon take over centralized ones – we just must wait until governments come to a consensus on crypto regulation.
0x has lofty ambitions to combine the best of both centralized and decentralized exchanges. Its team is focused on gaining support and adoption, and it’s well positioned to overtake major centralized exchanges like Binance and Coinbase, depending on how the US SEC and Congress decides to regulate cryptocurrencies and blockchains (especially Ethereum).
- 0x somewhat decentralizes crypto exchanges, even offering a p2p option with 0x OTC. Still, majority governance means whoever owns over 50 percent makes the rules.
- 0x uses off-chain ledgers and on-chain verification to enable trading among ERC20 tokens, of which there are nearly 500 to date.
- 0x has a lot of competition, and it’s unclear how government regulations may affect its future viability.
- Cross-chain platforms like Wanchain will soon open the gates for 0x to trade other tokens and coins from other blockchains.
Although 0x has a lot of unknowns clouding its future, it’s never easy competing in a billion dollar industry. Giants like Upbit, Huobi, and Binance aren’t going to go down easy, and 0x isn’t the only option available. We’ll wait and see whether or not the crypto industry is big enough to support them all, or which projects will survive a collapse.