The world of cryptocurrencies is becoming ever more diverse and, with such an array of possibilities, alternative solutions are springing up to help investors and users take full advantage of the technologies available. 0x is one such project, which aims to provide a peer-to-peer, decentralized exchange protocol for the Ethereum blockchain.
If you have not heard of 0x (ZRX) yet, you are not alone! Here are a few pointers to help you understand this relatively recent actor on the crypto scene.
An introduction to 0x – What is 0x?
In October 2016, Will Warren and Amir Bandeali (who were to become the co-founders of 0x) were betting on how far the use of blockchain technology could be taken. Their conversation led them to consider how every asset conceivable could be given an associated token to represent it on the Ethereum blockchain. These assets could include stocks, digital game items, precious metals and even fiat currencies, to be traded outside of centralized exchanges. In order to carry out transactions between thousands of tokenized assets, they imagined a concept which slightly differed from the decentralized exchanges as we know them.
The 0x Project
The 0x project is an exchange protocol thanks to which Ethereum-based transactions can be made in ETH. It is also a way for a decentralized exchange to be operable by anyone. This means that the protocol may be utilized as an open standard for any developer wishing to make use of an exchange functionality, for which they can charge fees.
The 0x (ZRX) Token
0x (ZRX) is, to put it simply, the 0x project token. Any fees applied to transactions carried out using the 0x protocol are received in 0x (ZRX). These coins also represent the right to vote on decisions that will affect the future of the 0x project.
How does 0x (ZRX) work?
What sets 0x (ZRX) aside from other decentralized exchanges is how cheap, accessible and fast it is. To achieve this, 0x’s version of decentralized trading saves on gas and lightens up the network by relying on an off-chain ordering relay.
The Ethereum blockchain is at the heart of many smart contract-based decentralized exchanges. These smart contracts govern all trades and order functions, granting users full control over their assets, something which centralized exchanges (such as Bittrex or Binance) cannot offer.
With decentralized exchanges, each time a trader wants to use their funds to deposit them into a smart contract, to place, to fill or to cancel an order, for instance, they need to execute blockchain transactions. As they are processed by miners, these transactions have a cost – also known as gas – that represents the fee these miners receive for their actions. The issue with this solution is that every single movement requires payment which, even if these are minimal when taken individually, can add up very quickly. Processing time is also likely to experience variations.
While safe and convenient, decentralized exchanges do have their drawbacks, which 0x (ZRX) endeavors to answer. The key is off-chain ordering relays, which the protocol uses in combination with on-chain settlements. This means that off-chain orders are filled by another user, thus saving the chain for value transfers while other commands are treated on the side, allowing gas fees to be reduced.
What are Relayers, Makers and Takers?
The ‘relayers’ the 0x protocol relies on are in charge of broadcasting orders either through private or public order books. Since they host the order books themselves, these participants bring liquidity to the network and act as individual exchanges of sorts. The difference lies in the fact that relayers are not able to execute any trades. Instead, they play the role of go-betweens who present and broadcast the orders issued by ‘makers’ to the network. It is then up to the taker to submit the maker’s signature and their own to a smart contract owned by a decentralized exchange, thus fulfilling the order. Every time a transaction is completed, the relayer receives a fee in ZRX tokens, 0x’s native currency.
What is the ZRX token used for?
The ZRX token itself possesses its own set of particularities. Since the entire 0x protocol is based on the Ethereum system, it will come at no surprise that 0x (ZRX) is also an Ethereum token. Beyond its purpose as an internal currency for the network, it serves as a tool for decentralized governance over the protocol’s upgrade system. In practice, holding ZRX tokens entitles one to a say in how 0x can be improved and in what direction it can evolve. Each person’s decision-making ‘weight’ is proportional to their holdings. This is especially important to those using the 0x (ZRX) protocol because their choice to rely on it often stems from some advantages they find in its current form, which they would not want to see altered. In other cases, developers turn to it for its potential, and they know owning ZRX will enable them to make a suggestion based on their specific needs, present or future.
By delegating ZRX to market maker staking pools, token holders can also receive protocol liquidity rewards in the form of ETH tokens.
Where to buy 0x (ZRX)?
Becoming a relayer within the 0x (ZRX) network is, of course, not the only means of acquiring the precious token. One can indeed buy 0x, sell 0x tokens or exchange them for other cryptocurrencies on many centralized and decentralized exchanges. Even Bitit offers ZRX for those who value simplicity and wish to take advantage of various payment methods. Considered an asset in and of itself, the token occupies rank 47 at the Market Cap (at the time of writing this article). The price of 0x is currently at a little over $0.2 USD.
Where to store 0x (ZRX)?
Storage options abound when it comes to ZRX, which is considered an ERC20 token (and therefore abides by the rules and standards of the Ethereum network). As is the case for any other crypto asset, it is of the utmost importance to select a highly secure solution, ideally one that does not store private keys online. Web wallets are typically the least reliable, mobile wallets and desktop wallets may provide a reasonable compromise, while hardware wallets (Trezor, Ledger Nano S, etc.) offer the highest level of guarantee.
Thanks to the 0x protocol, wallet to wallet trading can take place without the need for a centralized exchange. More and more DApps are using it as part of their projects. This allows them to take advantage of fast, low-cost operation without having to sacrifice security or personal management of their assets, with smart contracts increasing the overall security of the protocol. In keeping with the principles that make cryptocurrencies such a different way to consider finance, decentralized exchanges are a necessity which will continue to be ever more relevant as the demand for secure, trustless trading continues to rise. In the meantime, 0x (ZRX) constitutes a convenient complementary solution to exchange platforms where the link between the cryptographic and the fiduciary worlds remains bound for now.