0x is one seriously ambitious project. It’s primarily developing a protocol to enable decentralized trading of tokens on Ethereum. It has the potential to become the technical standard delivering seamless interoperability of tokenized value across platforms, geographies, and individuals.

In essence, 0x offers a decentralized exchange plugin for Ethereum-based (d)applications. Once the 0x Protocol has been integrated into a dapp, the dapp has a decentralized exchange function and the dapp’s native token can be easily traded against other ERC-20 tokens that have integrated the plugin and Ethereum.

There is a growing list of Ethereum-based projects that have integrated the 0x Protocol into their dapp, including Maker, Augur, Request Network, Aragon and Dharma. The tokens of these dapps are thus directly tradable against each other. For example, you could convert your payment through the Request Network into Maker’s stable coin DAI directly through 0x.

Due to several clever technical innovations, trading based on the 0x Protocol is much cheaper and faster than transactions on the Ethereum blockchain.

Centralized Exchanges vs. Decentralized

Even though many key players in the blockchain space are emphasizing the importance of decentralized exchanges, the reality is that over 99% of all cryptocurrency transaction volumes still stem from centralized exchanges. The main reason for this is that centralized exchanges provide fiat gateways, are easy to use, have advanced trading tools and provide liquidity to traders, all of which have not been enabled by decentralized exchanges thus far. However, these are issues that can and are being resolved.

On the other side, decentralized exchanges have multiple advantages over their centralized competitors in terms of security, as users fully control their own assets and therefore there are no tempting central wallets to hack. Moreover, decentralized exchanges allow for anonymity and in general, they make much more sense given the possibilities created by blockchain technology, such as no server downtime.

Centralized exchanges feel like a step back but are still necessary for now as DEX technology isn’t quite there yet. However, it’s being built out at a swift pace, and the 0x Protocol is a vital piece of infrastructure that brings liquidity and security to decentralized exchanges, while significantly reducing the cost of using these trading platforms.

Technical details

To pay for transactions on the Ethereum blockchain, GAS is used. Due to current scalability constraints of the Ethereum network, the prices of transactions have been rising while the speed has been falling. This has led to several decentralized exchanges such as IDEX and EtherDelta becoming overly expensive, especially when one makes frequent trades because each transaction executes a smart contract, which costs GAS.

To circumvent this, the 0x Protocol enables orders to be placed off-chain. Only actual value transfers are transmitted to the Ethereum blockchain.

This is made possible by the relayers of the 0x Protocol. Relayers broadcast all of the placed orders through the 0x protocol to the entire 0x network of relayers to match buyers and sellers. Simply put, the relayers are nodes of the 0x decentralized exchange that facilitate the matching of buy and sell orders.

Relayer Architecture

Relayers transmit orders to the 0x network by sharing a standard API. Once a sell order is filled, this match is broadcasted to and conducted on the Ethereum blockchain and the relayer receives a fee in ZRX tokens. The more relayers and dapps join the 0x network, the faster orders will be filled. A list of the current relayers of the 0x network can be found here.

Its possible to launch a relayer in a few minutes using a simple, extensible 0x relayer codebase that can be forked or used as reference material to create your own marketplace.

The 0x team wants to extend their protocol further and is working on Point-to-Point orders, which will enable parties to trade ERC20 tokens directly through any messaging system such as Whatsapp, Telegram or Reddit. A very nice trade widget has also been released, allowing instant token purchases in a single transaction.

Token economics

Besides paying relayers for successfully matched orders, the 0x token, ZRX, is used for the decentralized governance and development of the 0x protocol through a Proof-of-Stake consensus algorithm. ZRX holders can stake their token holdings on voting for improvement proposals of the 0x protocol.

This governance system is interesting because as more dapps start integrating the 0x protocol, more projects become reliant on 0x and will want to have a say in its future development.

There are currently plenty of debate over how useful the token is, and what its primary purpose should be. While users of various DEX’s can pay fees in ZRX, this is seen as an unnecessary friction point by others, who do not mandate that fees are payable in ZRX (eg. Paradex), and one DDEX has even gone so far as to fork the project and remove fees using a token entirely.

Roadmap

The team has been working on version 2 of the 0x protocol, which launched in September, and brings further modularity and extensibility, allowing developers to address many new use cases, including for non-fungible tokens (ERC-721).

Moreover, they will focus on improving the protocol’s UX and UI. Besides this, the team has indicated that they will be spending a lot of their time on rolling out their decentralized governance model, for which they have a separate roadmap.

The team has indicated it will release an updated core roadmap for 2019, although this is not yet published

Revenue

The 0x token sale ended on August 16th, 2017, during which the project managed to reach its hard cap of $24 million. The ICO price of ZRX was $0.048 a piece. In total, there are 1,000,000,000 ZRX tokens, of which 50% was sold during the ICO.

Stats & Metrics*

*(as of 10 December 2018)

Marketcap — $179,000,000

Price — $0.32