🤔 What is 0x ?
0x is a decentralized exchange protocol that connects buyers and sellers of Etherium based crypto assets without the need for a central third party.
0x does not run decentralized exchange but provides API and tools for other projects to build decentralized exchanges.
Developers can use 0x platform to make markets for any Etherium based assets. Examples of projects built on 0x are Augur, Matcha, etc.
💡 What role does ZRX token play ?
ZRX is the native token of 0x protocol. It is used to:
- Pay fees: Users pay trading fees in ZRX token.
- Governance: ZRX is a governance token. ZRX token holder propose and vote on updates to 0x protocol.
- Staking: ZRX holders can stake their token to earn additional ZRX as rewards.
📝 Origin of 0x project
- 0x was founded in 2016 by Will Warren and Amir Bandeali.
- 0x white paper was released in 2017.
- The team raised $24 million in ether during ICO sale on 16 August 2017.
- The team decentralized the governance of 0x in 2018.
👴🏻 Founders
Amir Bandeali
- He then joined the University of Illinois at Urbana–Champaign in 2009 and graduated in 2012 with a Bachelor of Science in General Finance.
- After graduation, he worked as a trader at Chopper Trading from March 2014 to January 2015. Chopper Trading is a technology-based proprietary trading firm.
- Then in January 2015, he worked as a trader at DRW. DRW is a diversified trading firm that combines technology, research, and risk management to capture trading and investment opportunities. DRW is located at Greater Chicago Area, Great Lakes, Midwestern US.
- He is currently the Chief technology officer and Co-founder at 0x.
Will Warren
- Will was born in San Francisco.
- He attended the University of California, San Diego(UCSD) where he studied a Doctor of Philosophy in Structural Engineering before dropping out in 2016.
- Will Warren later continued his studies and earned a Bachelor of Science in Mechanical engineering from UCSD.
- After receiving a Bachelor of Science in mechanical engineering, Will worked as a graduate research assistant at Los Alamos National Laboratory conducting applied physics research
- He is the current CEO and co-founder of 0x.
😌 What problems does it solve ?
- No trusted third party: Users are in control of their funds. The exchange does not involve any middleman.
- Governments cannot regulate 0x protocol.
- Efficiency gains: Projects building on 0x do not have to run large number of servers and hire an army of developers.
- Networked liquidity: All the decentralized exchanges built using 0x share liquidity(order book) with each other, unlike centralized exchanges.
- Centralized exchanges pool all the funds and cryptocurrencies in one place, presenting a lucrative target for hackers.
- No complicated paperwork like KYC and long waiting period is involved.
🤖How does it work ?
0x ecosystem comprises:
- Market makers: Who create orders.
- Relayer: Who broadcast orders.
- Taker: Find orders to match with.
The transaction is executed on blockchain once the order is matched between the makers and takers.
Market makers
Market makers are wholesalers who buy and sell crypto assets at a slight difference(called spread) to make profit.
Market makers provide liquidity to the marketplace. They receive a part of transaction fees as reward for providing liquidity.
The amount of reward depends on:
- Amount of liquidity provided by the market maker.
- Amount of ZRX token staked by the market maker.
Other ZRX token holders can also stake their tokens with a market maker and receive part of the rewards.
ZRX token holders who decide to stake their tokens with market maker have to delegate 50% of their voting rights corresponding to the number of tokens staked.
0x relayer
Orders are created and matched off-chain but executed on-chain.
Orders are hard to find because they are created off chain. Relayers broadcast the orders through the network so that takers are able to find the orders.
Relayers:
- Provide a graphical interface to users for creating orders
- Aggregate orders in a single order book.
- Relayers also share orders with other relayers using 0x mesh protocol.
Takers access the order book and execute trades. Relayers charge a part of the transaction fee for providing their services.
⚙️ Working Demo
Following apps have been built using 0x:
- Brave wallet
Here is the complete list of decentralized exchanges built on 0x: click here.
🏛️ Governance model
The team decentralized the governance of 0x in 2018. ZRX token holders govern 0x protocol and 0x treasury.
ZRX token holders submit proposals. Other holders vote on the proposal. The proposal is implemented if it gets the majority votes.
Role of various participants in 0x governance is:
- Market makers: They have the maximum voting power because they hold maximum ZRX tokens and other holders delegate their voting power to market makers. This makes sense because their incentives are aligned with the project: their revenue depends on the volume and growth of the platform.
- Relayers: They also want the platform to grow because they profit from matching orders.
- Takers: They are the end-users. They just want to swap their assets for the best price. End-users will trade with whichever exchange that offers them the best price. They have to acquire ZRX tokens for paying transaction fees.
🤑 How much money does the project have for future development ?
- The project raised $24 million in ether during ICO sale on 16 August 2017.
- The project holds 30% of ZRX tokens, to fund future development.
- The project does not have any source of revenue.
👍 Tailwinds
- Several projects are building on 0x.
- Network effects: More buyers will attract more sellers and vice versa. This will start a chain reaction resulting in explosive growth.
😨 Risks and challenges
- Most Governments tightly regulate banking and trading sector. They cannot shut a decentralized protocol like 0x. However, they can target central relaxers who host order books.
- 0x project holds a sizable amount of funds. However, they do not have a profit model that generates revenue. 0x is a long-term project whose growth can be affected by lack of funds.
However, this can be easily be fixed by passing a proposal to share a part of fees to 0x treasury.
💰 Tokenomics
ZRX token has a fixed max supply of 1 billion tokens. They have been distributed as follows:
- 50% was allocated to participants in the token sale
- 15% was retained for ongoing expenses
- 15% was allocated to a developer fund to help grow the 0x ecosystem
- 10% was allocated to the team with a four-year vesting schedule
- 10% was allocated to initial advisors and investors
Token Inflation
ZRX token does not have inflation because: It has a fixed max supply, which is already in circulation.
Demand pressure
Token’s price increases due to demand pressure.
Demand pressure on ZRX token will come from:
- Governance: Project building on top of 0x would want to have a say in the governance of 0x.
- Market makers: They will acquire ZRX for staking.
- Staking: Other ZRX holders will also stake with market makers and earn part of trading fees as rewards.
- Users: They will acquire ZRX token to pay fees.
- Speculators: They will buy ZRX token for future price appreciation.
Market opportunity
Crypto exchange market is a multi-billion dollar industry growing at an exponential rate. Governance token of a project that aims to disrupt this industry must be worth a lot.
🧐 Indicators to watch out for
- Their YouTube channel is growing:
- Their Twitter followers are growing:
- Volume has picked up:
👋Final remarks
I expect:
- Most of the physical assets like equities, bonds, real estate to be tokenized in the future.
- 0x will support trading of these assets.
- Developers will build markets for these products in the future.
0x will help create a world where value will flow freely.
I will invest in 0x token because:
- Has fixed max supply.
- No inflation.
- Token price linked with the growth of 0x ecosystem(which is growing).
- Decentralized project.
- Excellent team with a long time horizon.
😊 Do further research
You can continue your research by using following resources:
