0x: The Community-owned Liquidity API

0x v3 is now live on Ethereum mainnet!

Update: 0x v3 has been approved and is now live on Ethereum mainnet!

Key Takeaways

Version 3 of 0x is a major protocol upgrade that will deepen liquidity for the DeFi ecosystem and improve the developer experience of building on 0x. Introducing 0x v3 is an exciting new chapter for our protocol, as this upgrade will establish 0x as the liquidity API and DEX aggregator for the greater DeFi ecosystem.

The robust v3 feature set includes a new ZRX staking mechanism, DEX liquidity aggregation, the ability for relayers to support flexible fees, and various technical improvements for ecosystem devs. Check out the comprehensive changelog on Github.

To transition protocol ownership to 0x market makers and encourage participation in governance, a ZRX staking mechanism gives market makers monetary rewards (in ether) and additional ZRX voting power for providing liquidity. Every ZRX holder may earn staking rewards as well by delegating tokens to market maker pools.

We developed a powerful set of bridge contracts that aggregate DEX liquidity from 0x and other networks like Kyber, Uniswap, and Oasis. With Liquidity Bridges, 0x becomes a one-stop shop to source the best prices for both popular and long-tail trading pairs across DEXs.

The 0x Core Team is currently answering community questions regarding 0x v3 on our Reddit AMA through the end of the week.

Overview

Adoption of 0x has increased substantially since the release of v2 in September 2018. There are now dozens of teams in our ecosystem building projects in a range of verticals including NFT gaming, prediction markets, and decentralized finance (DeFi). Even though 0x is used to service a diversity of markets, we have focused on providing the best liquidity API for the rapidly expanding DeFi economy. Liquidity flowing into the 0x Network has increased significantly due to scaling up our Market Maker Program in response to a few stablecoin markets gaining traction.

With this growth, new issues and opportunities have arisen. The 0x Core Team has been hard at work over the past year building the next generation of the protocol to offer DeFi projects deeper liquidity for key trading pairs and an improved developer experience.

Average slippage for $1K trades for open orderbook liquidity

We have bundled together several 0x Improvement Proposals (including ZEIP-28, ZEIP-31, ZEIP-42, and ZEIP-47) into a single v3 implementation to be considered by ZRX holders. In this post, we’ll review v3’s most important features and discuss the benefits to the ecosystem. This is our biggest upgrade since the launch of the network in August 2017. The 0x Core Team is very excited about this evolution of the protocol, as it will solve some of the major problems facing decentralized exchange and establish 0x as a robust liquidity API for the DeFi ecosystem.

0x v2 Exchange Contract Monthly Volume (USD-equivalent)

0x v3 Timeline

The 0x Core Team has thoroughly tested the v3 contracts. In addition, Trail of Bits and ConsenSys Diligence are in the process of completing their external audits of 0x v3. We will post their reports as they become available before the vote. We will also be running a bug bounty on the v3 contracts. Stay tuned for updates on the bounty as well!

Voting will commence on November 4th and run through November 11th. As with previous votes, the 0x Core Team will collect cryptographically signed votes off-chain and tally up votes based on a snapshot of ZRX balances at a given block height. This is a temporary coordination process that we will use until we are ready to transition to a binding on-chain mechanism. If the vote is approved by our community of ZRX holders, v3 will be implemented on mainnet on December 2nd following a mandatory two-week grace period.

What’s New in 0x v3

Staking ZRX

0x is public infrastructure, a pipeline of upgradeable smart contracts governed by the users of the protocol. ZRX is the protocol’s token that empowers 0x users to vote on ZEIPs that upgrade the protocol over time. Market makers are important stakeholders in the 0x ecosystem, as they provide the liquidity necessary for markets to function and are directly incentivized to support proposals that result in new markets and greater trade volume.

To grant market makers ownership in the protocol and encourage participation in governance, a ZRX staking mechanism gives 0x market makers monetary rewards and additional voting power for providing liquidity to the markets running on the protocol.

While market makers are critical to 0x’s long-term growth, every ZRX holder can contribute by earning staking rewards and voting on proposals. Here’s how staking ZRX works:

For each 0x trade, the buyer (also known as a taker) pays a small protocol fee denominated in Ether that is calculated as a multiple of the trade’s gas price. The fees are routed into a Liquidity Rewards Pool over the course of a 10-day interval, known as an epoch. At the end of each period, the Liquidity Rewards are automatically distributed to market makers based on their trade activity and the amount of ZRX staked over the epoch. Any rewards that were not distributed (due to liquidity providers not being fully staked) will automatically roll over to the next epoch, bootstrapping the future Liquidity Rewards Pool for market makers.

Market makers form staking pools in order to increase their potential liquidity reward payouts and participate in governance. Market Makers maximize their share in rewards by providing competitive liquidity and specifying the percentage of rewards shared with delegators.

Any ZRX holder is able to securely delegate their tokens to staking pools to receive an allocation of these liquidity rewards. Once a token holder delegates their ZRX, half of their voting power becomes controlled by the market maker running the pool. ZRX holders maximize their share by comparing staking pools and delegating their tokens to the market maker that generates the greatest rewards for their pool.