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We didn’t get a chance to review the 0x ICO token when it came to market, but it’s now been almost 3 months since their ICO and we think it’s a fair time to check in and see if they made good on their promises. So we will first give our assessment of the project and move on to evaluate their progress.

0x is pronounced “zero X” and is aptly named for its mission to disrupt the centralized crypto exchange industry by charging absolutely ZERO fees for use of its protocol. The 800 pound gorilla in the existing market, Coinbase, was valued at $1.6B USD this past August when it raised $100M according to Forbes. Coinbase charges 1.49% when you buy a bitcoin with USD and then charges you another 1.49% if you want to convert your crypto back to USD and transfer back to your bank account.

I don’t see this as a rip-off, I see it as straight up robbery. 0x seeks to end the oligopoly of existing centralized exchanges.

Centralized VS Decentralized Exchanges

Not only are centralized exchanges expensive they also carry with them an inherent level of risk. They can be hacked, operators can run away with everyone’s money, or worst they could be subjected to government regulations and shut down at a whim. When the Chinese government ordered a shutdown of all Chinese exchanges, that sent the price of Bitcoin plummeting to $3000 from its previous all-time-high of $4800.

And let us not forgot how many centralized exchanges have already been hacked–MtGox, Shapeshift, Bitfinex, BitStamp, the list goes on–with each one further tarnishing the confidence in centralized exchanges and subsequently crypto as a whole.

But centralized exchanges aren’t all bad. They are efficient, fast, and easy to use. The current alternative is using a decentralized exchange. However, if anyone has ever used a decentralized exchange, take Etherdelta for example, they will have undoubtedly suffered the slow and clunky characteristics that plague all current decentralized exchanges today.

The reason for this is because with decentralized exchanges every trade or transaction needs to be added to the blockchain, a process which may quite simply come to a complete halt during times of high network congestion or at the best case take minutes during normal traffic. This is called “onchain” processing. This inferior trading experience makes it rather unpopular as a trading option and thus results in low liquidity further adding to the negative experience.

The 0x Product

So we have learned above how centralized exchanges are fast and efficient but comes at a high cost of price and security. And decentralized exchanges are cheaper and more secure but not very efficient. 0x has figured out a way to have the best of both worlds. And instead of simply building its own exchange, it has created a standardized protocol that will allow others to build their own decentralized exchanges using this protocol.

This protocol will be on the Ethereum blockchain and provides a framework which allows any ERC20 tokens to be traded over this protocol. What is unique about this protocol is that it will offer the best of both worlds. 0x will allow participants to match and begin a trade directly with one another OFF the blockchain (faster) but then settle the transaction via a smart contract ON the blockchain (secure). In essence, it will be faster than a decentralized exchange but also more secure than a centralized exchange.

However, its important to understand that 0x will not be maintaining the order book, nor be responsible for processing the actual transaction. That is the job of the decentralized exchanges that will be using the 0x protocol.

According to their whitepaper these decentralized exchanges are referred to as relayers and will provide an order book that will help match buyers and sellers to make efficient trades at mutually agreed upon prices. These relayers will also be able to benefit from the shared liquidity pool provided by other relayers also using the 0x protocol. While the actual use of the 0x protocol is free for the exchange, the exchange will charge its fees to participants using the 0x token (ZRX). So you can of 0x as a party that is giving away treasure maps while these relayers provide a guided service that escorts you through your entire treasure hunt.

In addition to building the protocol the 0x team has also built a consumer-focused OTC, which of course, is built on top of the 0x protocol. This OTC allows for a direct peer to peer token exchange that does NOT need to go through an exchange. You can check it out here: https://0xproject.com/portal

The 0x Team

If we’re simply judging a book by its cover one would not exactly peg 0x co-founders as silicon valley poster boys. At the helm is Will Warren, 0x’s CEO, a self-proclaimed UCSD PhD dropout, with no visible work experience other than 2 years as a lab-based research assistant at Los Alamos National Laboratory. Next we have CTO Amir Bandeali, an ex-fixed-income trader with no visible technical or programming experience.

It seems, however, polished resumes and academic excellence are much less important these days than surrounding yourself with a talented team of young and hungry go-getters. The most senior engineer on the team seems to be Brandon Millman, who has previously served a 4 year term as a senior full stack developer at Twitter. Additional engineers Fabio Berger and Leonid Logvinov are more green and only a few years out of college. It is comforting though to see that Director of Operations Alex Xu, previously from Google and Amazon, will be keeping things together on the day to day.

Of significant note is that 0x’s advisory board does in fact lend a tremendous deal of confidence and legitimacy to the young team. Advisors Fred Ehsam (Co-founder of Coinbase), Olaf Carlson-Wee (Founder of Polychain Capital), Joey Krug (Co-CIO at Pantera Capital and Founder of Augur), and Linda Xie (Co-founder of Scalar Capital).

0x Token Progress

0x’s roadmap and strategic rollout has been meticulously planned from the beginning as you can see here. Since their token sale on August 15th, the 0x team has made a tremendous amount of progress. They have iterated through 27 version releases and over 452 commits to 0x.js, their main library that allows relayers to integrate with the 0x protocol.

They have released, well ahead of schedule, their 0x Standard Relayer API which will allow integrated relayers to standardize the way they communicate with one other to share orderbooks and increase liquidity. They have also made continued improvements to their OTC product and rebranded it as 0x Portal.

Oh, and they have also redesigned their website, and deployed version 1 of the 0x protocol on testnets Ropsten and Kovan. Basically, they have already achieved their targets for Q4 2017 and so I suspect they will end up spending the majority of the remaining quarter focused on ensuring the smooth integration of their new partners.

They recognize that without an ecosystem of relayers building on to of 0x their protocol would be rendered worthless. And so they have done quite well in the area of partnerships including relayers Ethfinex, the decentralized sister of Bitfinex, Radar Relay (https://medium.com/@RadarRelay), and The Ocean (https://medium.com/@the0cean). They have a nice list of projects that are (or will be) built on top of 0x here. They have also managed to get the 0x token (ZRX) listed at Poloniex, Binance and about a dozen other exchanges.

Our Verdict On The 0x Project

We really like the 0x project because it has strong fundamentals and the team has proven their ability to execute like seasoned mercenaries. We respect the team’s unwavering determination towards achieving the monumental feat of standardizing decentralized exchange protocol while charging no fees. However, our issue with the project is simply just that. NO FEES.

The success of the project may not directly result in the appreciation of the ZRX token. In fact it may potentially have the opposite effect. The value of the token is, in the long term, inversely related to the velocity of the token, as Vitalik illustrates here. Essentially there is no reason for any party to hold onto the token for more time than is necessary to execute a transaction. And we can imagine the more successful the project becomes the higher the velocity. And with no fees 0x will not have the ability to execute buy-backs to increase the value of the token.

NOTE: in the original version of this post, we assumed that there will not be a significant increase in transaction volume in the short-term; however the fact that MV = 1/P * T means in theory that transaction volume would eventually outweigh the velocity in an exchange-type system. Although this does not change the final analysis for the token progress to date, it should be considered as accelerating the timeframe within which true token value might be achieved.

As such we are left (at least for now) entirely to the forces of speculation. Ultimately, I have little reason to doubt that the 0x project will succeed, in fact I really hope it does as I have a small position in ZRX. However I also have yet to find a potential near-term spark that will cause a rapid appreciation of ZRX. And for that reason I simply cannot make a buy recommendation, but I sincerely urge believers to watch this project closely.

Learn More about ZRX in our TELEGRAM CHAT (https://t.me/CryptoBriefingSupporters)

Disclaimer: I have a small position in ZRX

VIEWS STATED REPRESENT THE PERSONAL OPINION OF THE AUTHOR

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