0x (ZRX) Review – Creating a Tokenized World Where Value Flows Freely

0x is an open protocol for decentralized exchange on the Ethereum blockchain. Its goal is to become the foundation for other protocols to develop increasingly sophisticated decentralized applications (DApps). It does this through its publicly accessible system of contracts. A decentralized and trustless protocol for exchange, it is not subject to a central party that can be hacked, steal customer funds or be subject to government regulations.

The Idea and the Team Behind 0x

With the release of Ethereum’s blockchain genesis block, many DApps have created Ethereum smart contracts for peer-to-peer exchange. However, these many smart contracts are of various quality, security, and unique configuration processes — and they all have the same function. This is a frivolous cost to the user, creating a fragmented user community based on different DApps.

In contrast, 0x is a public infrastructure funded by a global community of stakeholders, allowing everyone to use the protocol free of charge while at the same time enabling for-profit exchange applications to be built on top of its protocol. It can be used by developers as a platform on which to build exchange applications, while end users can think of it as the infrastructure for many user-facing applications, or DApps.

0x functions as a modular building block that can be assembled and reconfigured. It is an open and non-rent seeking protocol that enables trustless, fast exchange of Ethereum-based assets. In economics, rent seeking is the idea of attempting to increase one’s share of existing wealth without creating new wealth. Rent-seeking has been shown to result in lost government revenue, increased income inequality, and overall reduced economic efficiency. 0x’s mission, in contrast, is to create a tokenized world where all value flows freely.

The platform has a number of real-world applications, including:

• Decentralized governance for organizations – Allow seamless and safe trade ownership for startup capital
• Prediction markets – Generate a set of tokens that represent a financial stake in the outcomes of real-world events. These tokens would be instantly tradeable.
• Stable tokens – 0x can facilitate underlying economic mechanisms that allow stable coins to remain stable.
• Decentralized loans – Enable an ecosystem of lenders to self-organize and efficiently determined market prices for all outstanding loans.
• Fund management – Embed 0x into fund management smart contracts by enabling them to enforce security constraints.

0x’s team is composed of co-founders Will Warren, currently the CEO, and Amir Bandeali, the current CTO. Will’s background includes applied physics research at the Los Alamos National Laboratory following his degree in mechanical engineering from UC San Diego. Amir worked as a fixed income trader at DRW, a Chicago-based firm, after completing a degree in finance at the University of Illinois at Urbana-Champaign.

The company is named 0x because it is an abbreviation of the term zero exchange (this is also how it is pronounced, “zero-ex”). It is also the prefix for hexadecimal numeric constants including Ethereum addresses.

Projects Building on 0x

There are a number of decentralized applications, or DApps, that have committed to use 0x’s protocol, including Aragon, Dharma, and Maker DAO. Aragon is a project whose goal it is to empower everyone all over the world to easily and securely manage their organizations. Dharma is a generic, permissionless protocol for building online debt marketplaces. Maker DAO is a stablecoin, pegged against the US dollar.

In addition, there are many relayers that will be using the 0x protocol as well, including Amadeus, Ethfinex, and Radar Relay.

At the end of August, 0x announced that Ethfinex would be running on the 0x protocol. Together they will work to create an entirely decentralized exchange ecosystem.

0x Token Price History

Ox’s token launch was on August 15, 2017, successfully raising $24 million worth of ether. Its token initially sold for $0.048.

By the end of January, the token rose to $2.37. The token also rose after news of its potential listing on Coinbase, to $0.97 on July 14^th, 2018.

The 0x Platform

As mentioned, 0x is a modular system, and different components can be upgraded without disrupting active markets or affecting other components. Since business logic responsible for executing trades is separate from governance logic and trading balance access controls, both can be taken out — with no effect on the other.

In addition to this, as an open-source platform, 0x’s protocol will be completely free to use, in contrast to centralized exchanges, which have high operating costs. This is possible because orders are transported off-chain, which significantly reduces gas costs while also eliminating blockchain bloat. Instead, relayers collect a fee by helping broadcast orders and facilitating trades.

By sharing a standard API, relayers can aggregate liquidity pools, creating network effects that compound as more relayers come online.

As a trustless exchange, 0x functions as a distributed network without a centralized point of failure and no down time. As a result, each trade is settled atomically (linearizable or indivisible) and without counterparty risk.

The ZRX Token

The ZRX token is used by two types of players who pay transaction fees to relayers that host and maintain public order books. Since orders are transported off-chain, relayers are necessary to broadcast these orders, collecting a fee as they do so. (Think of a website’s function as allowing users to create, discover, and fill orders, and how it provides the UI and backend to do so).

The first type of player who pays transaction fees are makers. These players are considered market participants who generate orders. The second type of player, takers, are market participants who consume orders.

The tokens are also used for decentralized governance over 0x protocol’s update mechanism, which allow its smart contracts to be replaced and improved over time.  Since 0x is built on top of Ethereum, its protocol smart contracts have access to user funds and DApps that plug into 0x smart contracts. As a result, decentralized governance is needed to ensure the update mechanism is secure and is as least disruptive to the network as possible.

Although the decentralized governance system is still a work in progress, it will definitely involve token voting with ZRX. In the meantime, a multisignature, or multi-sig, will be used until the governance structure is formalized and encoded within 0x DAO. Multi-sigs require another user or users to sign a transaction before it is broadcast onto the blockchain)

The money raised from the token launch will be used to fund the development of free and open source software, as well as tools and infrastructure that support the 0x protocol and ecosystem. Tokens allocated to founds, advisers, and staff members are released over a 4-year period with a 25% cliff.

How to Purchase ZRX

The main exchange for purchasing ZRX is on Binance, which currently has the largest exchange of the currency. ZRX can be traded on Binance for BTC and ETH.  At the moment the current daily volume of ZRX traded on Binance is over $20 million.

ZRX is also available on the following exchanges:

• Upbit (Trade ZRX with KRW on Upbit)
  • Bittrex (Trade ZRX with BTC on Bittrex)
  • BitMart (Trade ZRX with BTC on BitMart)
  • OKEx (Trade ZRX with ZRX on USDT)
  • Poloniex (Trade ZRX with BTC on Poloniex)

How to Store ZRX

ZRX can be stored in any wallet that supports ERC-20 tokens such as Coinomi, MetaMask and Myetherwallet.

For maximum security, however, you should store your ZRX on hardware wallets such as Ledger Nano S and Trezor.

Roadmap and Future Plans

0x has recently released an updated roadmap, detailing three major phases:

Phase 1: Token Curated Registry

In the first phase, 0x will transition that Token Registry contract to one that is community managed. This transition will make for a low stakes cryptoeconomic system. 0x will be working with Aragon Labs to do complete this phase.

Phase 2: Community Veto Power

In order to shift governance of 0x to token holders, the company will need to verify the token voting scheme. To achieve this, 0x will launch a system that allows upgrade proposals to be submitted by the 0x core team and vetoed by ZRX holders.

Phase 3: Liquid Democracy

0x is looking into the concept of a delegative voting scheme, otherwise known as liquid democracy. Liquid democracy is known as a voting model for collective decision-making of large communities. One advantage of this type of voting is that voting power can eb and flow as the project matures or as incentives delineate.

Details of the additional phases of the roadmap will be announced in the future.

Although 0x has made significant progress in its development of its protocol, it is still waiting for the broader community to produce a set of tools for modeling and analyzing sophisticated cryptoeconomic systems. 0x is now committed to doing this internally.