0x is an open-source protocol built on the ethereum blockchain that enables the peer-to-peer exchange of ethereum-based tokens. It is also referred to as a decentralized exchange (DEX).
The 0x platform provides a means of exchanging a variety of tokenized assets such as stocks, gold, real estate, video game items, etc. and seeks to promote interoperability between decentralized applications (dapps) which include exchange components1.
Will Warren and Amir Bandeali co-founded 0x in 2016 with the intention of providing a standard protocol on the ethereum blockchain that allows any ethereum token to be traded as well as for anyone to operate a decentralized exchange (DEX). The parties operating the exchanges and building on top of 0x are referred to as relayers, and they host off-chain order books and can choose to charge fees for their work, though 0x does not require users to pay fees to utilize its platform2.
0x’s own ethereum token (ZRX) has two main use cases within the protocol. The first is for paying trading fees to Relayers for their services. The second and most important use is to enable ZRX token owners to influence the blockchain’s governance. This means that the owners have authority, proportional to their holdings, to provide input as to how the protocol should be developed over time3.
How does 0x work?
0x is an ethereum-based decentralized exchange (DEX) meant for trading assets and cryptocurrencies using smart contracts on the 0x platform. The 0x platform was founded in 2016 by Will Warren and Amir Bandeali with the intention of providing a standard protocol on the ethereum blockchain that facilitates the exchange of any ethereum token.
0x protocol’s native token (ZRX) is used for two primary reasons. The first is to pay fees to the Relayers – those who create a decentralized cryptocurrency exchange using 0x protocol. The second use case is for the decentralized governance of the protocol. This means that those who hold ZRX tokens are given complete control as to how the 0x protocol changes over time.
Launch & issuance
0x completed its initial coin offering (ICO) on July 16, 2017 and raised $24 million in ether – the cryptocurrency of the ethereum network – from a group of 12,000 backers.
The majority of the support for this project came from venture capitalist firms, including Polychain Capital, Blockchain Capital and Pantera Capital, along with Chinese investment firms Jen Advisors and FBG Capital4.
Network Design & Security Model
0x is built on the ethereum protocol. The main issues that 0x aims to address are the costliness, slowness and illiquidity of other decentralized exchanges5. Rather than recording every transaction (new orders and adjustments) on the blockchain the 0x protocol waits for all transactions to be settled off the blockchain before sending the orders on-chain to be settled.
Monetary Policy & Token Policy
0x has capped the ZRX supply at 1 billion tokens. 500 million ZRX tokens were sold to the public through an initial coin offering for a total of $24 million dollars worth of ETH.
According to the 0x white paper6, the fixed supply of ZRX tokens are issued to partnering dapps and future end users. In order for the relayers to get paid in ZRX tokens, they must host and maintain and order book off-chain in exchange for transaction fees. These fees are moved from the maker and/or taker of the smart contracts to the relayer upon settlement of a trade.
0x is implemented through an ethereum smart contract that is free and accessible to the public. The protocol is written in the Solidity programming language.
Authored by John Metais