0x is an open, permissionless protocol that allows ERC20 tokens to be traded on the Ethereum blockchain. Here’s our review.
What is the 0x Protocol?
0x is a protocol that makes it easy to swap ERC20 tokens. ERC20 tokens are standard tokens built on the Ethereum blockchain. It’s an off-chain order relay system that settles transactions on-chain.
In layman’s terms, the 0x Protocol is a scaling solution for the Ethereum blockchain. It’s proposed as a way to help the Ethereum blockchain handle more traffic. Instead of trying to radically change the Ethereum blockchain, 0x creates an off-chain order relay system (it processes orders away from the Ethereum blockchain) with on-chain settlement (orders are ultimately added to the Ethereum blockchain).
Like similar scaling solutions, 0x wants to increase the speed and reduce the costs of Ethereum transactions without sacrificing the security or immutability of the Ethereum blockchain.
Today, projects building on 0x include Ethfinex, Dharma, Blocknet, Augur, Auctus, Radar, Paradex, Aragon, Status, and other notable names.
How Does the 0x Protocol Work?
The 0x Protocol transports orders off-chain, massively reducing gas costs and eliminating bloat on the Ethereum blockchain.
Relayers help broadcast orders, then collect a fee every time they facilitate a trade. Anyone can build a relayer. Some of the relayers currently building on 0x include Ethfinex, Radar, and Paradex.
Key Features of the 0x Protocol
0x is built on Ethereum’s distributed network. There’s no centralized point of failure and no downtime. Each trade is settled atomically and without the counterparty risk. Like other atomic swap platforms, 0x completes P2P trades instantly, which means you receive your tokens immediately as you send your tokens, without the need for a trusted, centralized exchange to act as an intermediary.
By sharing a standard API, relayers can easily aggregate liquidity pools, creating network effects around liquidity that compound as more relayers come online.
0x is an open source, permissionless, and free protocol to use. You can trade directly with a known counterparty for free. Or, you can pay a relayer some ZRX tokens to access their liquidity pool.
Overall, 0x is a building block for decentralized apps (DApps) that require exchange functionality. A number of developers are already using 0x in their web applications and smart contracts. You can learn how to implement 0x into your project by visiting 0xproject.com, where you’ll find plenty of tutorials.
Use Cases for 0x
Some of the use cases for 0x Protocol include:
Decentralized autonomous organizations (DAOs) and other structures rely on tokens to represent ownership and guide governance logic. 0x allows decentralized organizations to seamlessly and safely trade ownership for startup capital.
Decentralized prediction market platforms generate sets of tokens representing a financial stake in the outcomes of real-world events. 0x allows these tokens to be instantly tradeable.
“Stablecoins” only work if they have an efficient, liquid market. 0x facilitates the development of stablecoins by creating the underlying economic mechanisms – like the liquidity and efficiency – that allows these coins to work.
An efficient decentralized lending platform requires a liquid market where investors can buy and re-sell loans. 0x facilitates the creation of an ecosystem of lenders who self-organize and efficiently determine market prices for all outstanding loans.
Decentralized fund management limits fund managers to investing in pre-agreed upon asset classes. By embedding the 0x protocol into fund management smart contracts, funds can enforce these security restraints more effectively.
Who’s Behind 0x Protocol?
The 0x protocol was created by a diverse, globally distributed group with backgrounds in engineering, research, business, and design.
Key members of the team include co-founders Will Warren (CEO) and Amir Bandeali (CTO). Warren previously worked in applied physics at the Los Alamos National Laboratory and studied mechanical engineering at UC San Diego. Bandeali, meanwhile, was previously a fixed income trader at DRW.
0x Protocol ZRX Conclusion
The 0x protocol is an off-chain protocol that facilitates the cheap, fast transfer of ERC20 tokens. Transactions are relayed off-chain, then processed on-chain. It’s an open, permissionless protocol currently in use by Ethfinex, Augur, Status, and other major players.
To learn more about 0x protocol, and to discover how to add it to your project, visit online today at 0xproject.com.