What is the 0x Protocol?

0x is an open protocol that allows token to token trading on decentralized exchanges and relayers. Initially it has been built for the trading of ERC20 tokens, but has been built in such a way that it could easily be integrated into other chains in the future.

0x Protocol v1 is live, with v2 scheduled to launch in Q2 2018.

What problems do DEXs solve?

You remain in control of your funds — no risk of an exchange getting hacked that is holding your tokens.

They create global order books. Decentralized exchanges are borderless and can serve anyone from any country.

They are low friction. No signup required, just trade.

Decentralized exchange protocols create even more global pools of liquidity. Orders share the same format and can be matched by anyone in any venue, from a p2p relay network to a decentralized exchange app to a text message. Two different DEXs/relayers can connect their order books together increasing the liquidity for everyone.

Team

Co-founder/CEO — Will Warren

B.S., Mechanical Engineering @ UC San Diego (PhD. Dropout., Structural Engineering @ UC San Diego)

Studied Applied Physics @ Los Alamos National Laboratory

Technical Advisor @ Basic Attention Token focusing on smart contract research and development

Co-founder/CTO — Amir Bandeali

B.S., Finance @ University of Illinois at Urbana-Champaign

Trader @ DRW focusing on fixed income trading

Senior Engineer — Fabio Berger

B.S., Computer Science & Economics @ Duke University

Software Engineer @ Airtable/Teleborder

Advisors

Co-founder & CEO @ Coinbase — Fred Ehrsam

FX Trader @ Goldman Sachs

Computer Science at Duke University

Founder @ Polychain Capital — Olaf Carlson-Wee

Polychain Capital is a $200M crypto hedge fund backed by Sequoia Capital, Andreessen Horowitz, Founders Fund, and Union Square Ventures

First employee @ Coinbase

Co-CIO @ Pantera Capital — Joey Krug

Founder @ Augur

Former Coinbase employee

Co-founder @ Scalar Capital — Linda Xie

Crypto fund manager

Former PM @ Coinbase

Community

Reddit: ~9.7k subscribers with a high level of daily activity

Twitter: ~91.5k followers with 500+ likes on AVG per tweet

Slack: ~13.7k users, and ~4k messages in their “general” channel since Aug 2017

Medium: ~12.9k followers with monthly blog posts

List of projects building with the 0x Protocol that could impact $ZRX through achieved milestones (not exhaustive):

dApps — Aragon, Auctus, Augur, Blocknet, ChronoBank, District0x, dYdX, Dharma, Ethix, Lendroid, Maker, MelonPort, OpenANX, Request Network

— Aragon, Auctus, Augur, Blocknet, ChronoBank, District0x, dYdX, Dharma, Ethix, Lendroid, Maker, MelonPort, OpenANX, Request Network Relayers — Dextroid, ERX dEX, Ethfinex, IDT Exchange, OpenRelay, Paradex.io, RadarRelay, The 0cean, Amadeus, Decent Ex, DDEX

— Dextroid, ERX dEX, Ethfinex, IDT Exchange, OpenRelay, Paradex.io, RadarRelay, The 0cean, Amadeus, Decent Ex, DDEX Speculative catalyst — ZRX being added to Coinbase, as the demand for DEXs increases and the average person needing ZRX to trade on DEXs/Relayers.

Token Mechanics

Transaction Fees — Pay trading fees to relayers for their services.

Governance of the Protocol — Decentralized governance over 0x protocol’s upgrade system, meaning owning ZRX gives you a say proportional to your holdings in how the protocol should be improved over time.

Market Size

Cryptocurrency exchanges generate millions of dollars each day in relatively large fees, and these amounts are continuously growing. Just a small fraction of the market share equates to a massive dollar value. In addition, the exchanges are still affected heavily by laws, regulations, and even news. The potential Chinese ban on cryptocurrency trading has already put a temporary stop to billions of dollars of daily trading volume. This ban will force many users to move to more decentralized exchanges that are able to overcome censorship and remain globally accessible to all.

This is an advantage for 0x. Centralized exchanges will not be able to compete with 0x-based decentralized exchanges on fees because centralized exchanges have high operating costs. This is because centralized exchanges must build and operate proprietary infrastructure to securely handle user funds. This is not to say that centralized exchanges will be completely replaced. They will continue to play a critical role in the cryptocurrency ecosystem. Their major benefits being that they offer fiat on/off-ramps, better performance and they cater to customers that are uncomfortable managing their own private keys.

This will increase over time as more and more Ethereum projects come online. Also, improvements such as Proof-of-stake, sharding and parallelizability will be integrated into the Ethereum blockchain, increasing throughput by 10x-1000x. Unless something fundamentally changes in the greater blockchain ecosystem, the additional throughput created by the 0x Protocol will be put to use quickly. New 0x-based exchanges will emerge that specifically focus on trading tokens such as prediction markets like Augur and Gnosis, shares of Melon funds, Dharma’s debt instruments, shares of Aragon-based decentralized organizations, district0x-based marketplace assets, dYdX derivatives and many more.

But again, decentralized exchange protocols can automatically support new tokens immediately. For any applications creating and supporting thousands of tokens, this will be a huge requirement. Imagine millions of single day prediction markets with a token representing each and every outcome. The same requirement applies when we get thousands of tokenized information feeds for different topics. If you believe we are headed to a world of thousands of tokens, supporting them all natively is critical. If that is the case, then when dealing with a large number of tokens, you would want to do it through coding rather than manually. This is where the programmatic interface of decentralized exchange protocols is so important.

This major problem has be multiplied in the past couple of weeks due to the even greater influx of people trying to open accounts on centralized exchanges. Certain exchanges actually had to prevent new users from creating accounts to keep up with the demand. This is then coupled with issues users are facing when trying to withdraw funds from centralized exchanges. The combination has resulted in unnecessary volatility, temporary changes in trading volume, and most importantly has highlighted the importance and need of decentralized exchanges.

There are many decentralized exchanges and relayers that are/or will be using the 0x Protocol, which is lowering the barriers to entry for decentralized exchanges and dApps. All of which results in more projects, higher competition, and increased accessibility.

Taking it even one step further, the future of decentralized exchanges is mind boggling. The number and scope of assets that become tokenized will exceed what we see in current financial markets by orders of magnitude. Thanks to decentralized exchange protocols, those tokens will be tradable on unified global markets. And tokens, unlike most assets, allow programmatic interaction with their corresponding systems, so the ability for interplay between the asset, its native system, and other assets is higher than ever.

Competition

AirSwap ($AST)

Building the Swap Protocol that is implemented into their “Token Trader” app, which acts as a DEX utilizing the Swap Protocol for token trades. Product is not yet built.

Trading at $0.65/AST with a $100M market cap.

Kyber Network ($KNC)

Decentralized exchange and payment network utilizing atomic swaps. Product is not yet built and is expected to launch by Q2 2018.

Trading at $3.10/KNC with a $416M market cap.

Summary

The 0x Project has a strong dev team, arguably the most solid group of advisers from the blockchain ecosystem (Coinbase Mafia!), building much needed infrastructure for DEXs, built up a large community around them through a large number of partnerships with dApps (which are some of the best projects out there) and Relayers which will support the growth of the 0x Protocol as we see a shift towards decentralized exchanges.

Another great thing about the 0x Project is that it completed building the core protocol before launching its token sale. Too many projects these days raise a ton of capital on just an idea, and that often produces the wrong incentives towards the completion of the project.

Sits at ~$574M market cap today ($1.13/ZRX), leaving plenty of opportunity to grow into a top 10 token by the end of 2018. [Personal price target range is $15–$25 by January 2019.]