OX (ZRX)- The Decentralized Exchange Protocol (2020 Review)
Hello there, this is an in-depth review of 0x. This is basically the most simplified review of 0x online today.
0x is a protocol that allows for decentralized exchange of tokens and assets issued on the Ethereum blockchain. OK let’s dive into this review.
To further simplify this review I have made an outline of things to be covered below;
- What is 0x — Basics
- Services Offered by 0x
- 0x Token- (ZRX Token)
- Trading on 0x
- 0x Transaction Fees
- Decentralized Exchanges And 0x Protocol
By clicking on any of the subheadings above you will automatically be taken to that heading Now you have the subheadings to be covered, let’s get started.
What Is 0x- Basics
0x is a decentralized exchange protocol that has its co-founders as Bill Warren (CEO) and Amir Bandeali (CTO). Based in San Francisco Bay Area, West Coast, Western US, it was founded in the year 2016.
0x is made using a protocol that involves Ethereum smart contacts that allow those around the world to run a decentralized exchange. 0x literally tokenizes everything i.e it turns transactions to tokens.
What distinguishes 0x from other decentralized exchanges is the use of smart contracts which removes the middlemen (Centralized Exchanges) allowing for a quick and easy peer-to-peer exchange and, therefore is cheaper. But it allows Relayers to create an off-chain order book.
Relayers help traders discover counter-parties (Buyers) and move orders cryptographically between them without a middle man who often charges a lot of fees, the relayers create their own decentralized exchange based on the protocol and can choose to charge a minimal fee for the transaction.
The very fact that 0x tokenizes makes it possible for almost anything to be exchanged from digital assets to even real estate.
What is a Relayer?
A relayer is a 3rd party platform that relays information from one party to another. In 0x protocol, the relayers collect off-chain orders people send it and relay them to parties that request these orders for possibly fill.
in other words, the relayers act as a bridge between the buyers and sellers of digital tokens.
What are smart contracts?
A smart contract is a computer protocol that digitally facilitates, verifies, or enforces the negotiation or performance of a contract.
Smart contracts allow the performance of credible transactions without third parties. Smart contracts enable you to exchange money, property, shares, etc in a transparent, conflict-free way while avoiding the services of a middleman.
What are Tokens?
Tokens are simply a digital innovation that does not have an independent network blockchain like the Bitcoin and other altcoins but is hosted on another blockchain to function like the Ethereum blockchain, tokens represent a utility or asset unlike the Bitcoin and other altcoins which serve or represent money.
What is a Protocol?
Protocols are a set of rules or procedures for transmitting data between electronic devices, such as computers.
In order for computers to exchange information, there must be a pre-existing agreement as to how the information will be structured and how each side will send and receive it.
What is a decentralized exchange? (DEX)
The main concept behind a decentralized exchange is giving full control to users/traders of their own assets.
Unlike a centralized crypto exchange (Coinbase, Binance) where the exchange stores a user’s private key, in a decentralized exchange, private keys remain with the users, hence the user is always in control of his own asset.
So in summary 0x is a trustless and frictionless exchange for Ethereum based assets. In simple terms, 0x defines all the rules in which an exchange need’s to perform trade functionality.
Anyone can build a decentralized exchange using 0x protocol.
Now you’re grounded on exactly what 0x is and how it works Let’s take a look at some of the services offered.
Services Offered By 0x
Some services offered by 0x includes;
- 0x API: The API allows you to easily integrate with 0x API once to aggregate liquidity from 0x Mesh, Kyber, Uniswap, and more and swap tokens at the best price.
- 0x instant: This facilitates the instant exchange of Ethereum based tokens on a relayer which supports such a service like the Radar Relay.
- OTC (Over The Counter): This service allows you to exchange Ethereum based tokens without the use or need of a relayer provided that you connect with the buyer directly via e-mail, text message e.t.c
That’s about the services which 0x provides Now let’s move into the features and benefits below.
Some features and benefits of 0x Include; Benefits
- Efficient design
- Extensible Architecture
- Secure Smart Contracts
- Increased liquidity in comparison to decentralized exchanges.
- Has over 30 available relayers on its platform
- Secure Non-custodial Trading; Non-Custodial Exchanges don’t have custody of their user’s money. On this exchange, traders have complete ownership and responsibility for their money. Enables tokens to be traded wallet-to-wallet with no deposits or withdrawals.
- Flexible Order Types; You can choose to sell assets at a specific “buy it now” price or allow potential buyers to submit bids this feature allows you to get a better offer for your product.
- Build A Business; This feature is mainly for the relayers as it enables them to monetize their product by taking fees on each transaction and join a growing number of relayers in the 0x ecosystem, it could also be seen as some sort of commission as almost anyone can become a relayer.
So basically those are the features and benefits. let us look at some drawbacks of the 0x protocol.
Drawbacks Of 0x
- Quite confusing; Since 0x is a protocol on which a decentralized exchange can be built and not just an outright decentralized it’s quite challenging for the average man to grasp kin knowledge of its operation and functioning.
- Restricted to the Ethereum Blockchain; 0x was specifically designed to operate only on the Ethereum blockchain this possess a threat as other more formidable blockchain technologies are emerging.
- Still outnumbered; 0x is still quite outnumbered in the sense that many top exchanges are centralized exchanges like Binance and its likes are still topping charts in terms of daily trade volume despite the lack or absence of trading fees in the 0x protocol. Thus 0x has a long way to go.
0x Token- (ZRX Token)
Tokens built on Ethereum are called ERC-20 tokens. Tokens exist to be used with DApps (Decentralized applications) tokens are used to activate features on the application they were designed for.
Since tokens were designed to run with DApps, the function of the token generally depends on the application. Like in a gaming DApp tokens gives users access to play the specific game.
So basically the 0x protocol has come up with a way to tokenize almost anything using its very own ZRX token.
The ZRX Token
The ZRX is an Ethereum token that is used to power the 0x protocol.
ZRX is literally the official token of 0x it is used to pay the trading fees charged by the relayers ZRX token is also used as a decentralized form of governance, this means that the more ZRX tokens you possess the higher your voting power and your ability to approve or disapprove any proposed update.
The total supply of ZRX is fixed at 1 billion. 50% of the tokens were released during the launch in August 2017, 15% were assigned to 0x, 15% to the developer fund, 10% to the founding team and 10% to the advisors and first supporters.
The tokens assigned to founders and staff members will be released sometime in 2021. Due to the fact that they were given a four years restriction.
Where to buy ZRX: ZRX can be traded on some of the most popular exchanges — which includes Coinbase as of October 2018.
It is listed on several major exchanges such as Binance, OKEx, and Bittrex. Where to store ZRX: As I earlier stated, ZRX is an ERC20-based token, so any Ethereum-compatible wallet will support 0x. Below are a few wallets that are quite useful.
- Ledger Nano S
Also, Read 10 Best Ethereum Wallets 0x price today is $0.275353 with a 24-hour trading volume of $54,667,735. ZRX price is down -2.3% in the last 24 hours. It has a circulating supply of 630 Million coins and a max supply of 1 Billion coins.
Yup… That’s the ZRX token cool aye? Now tag along with me as we also look at what trading on the 0x protocol entails.
Trading On 0x (How it works)
Trading on 0x involves basically 2 ways the
1.) (OTC) Over The Counter Orders(The point-to-point orders basically involve’s); Users sending a transaction via message (e-mail, text message, Facebook, etc) to the counterparty, a date of order expiration is stated by the maker of the order and the protocol makes an atomic swap between the two different types of tokens.
The order can only be filled by the specified taker/receiver address rendering the order useless to any other party.
2.) Broadcast Orders: All you got to do is visit the 0x website click on trade and select a relayer There you’ll see a list of available orders to fill. You can also choose to broadcast an order through a relayer by directly contacting them.
Yeah in the broadcast order it involves three key players which are the
- The Relayer
The Maker, often called the originator creates the order, the Taker fills or acts on the order the Relayer is the entity that hosts and maintains an order book/liquidity pool by signaling the market participants of an available order. The message format here is quite different from the p2p because the order can be filled by any taker that wants to.
Also, there is a transaction fee structure set up as a reward or incentive for Relayers who host an order book. Hosting an order book the Relayer has a fee schedule and the two parties(Maker and Taker) have to meet up the fee schedule.
That means both the Maker and Taker must pay fees as stipulated by the Relayer. Relayer then checks for validity and proper transaction fees.
If the order is not valid or falls short in terms of transaction fees, the order would immediately be rejected. If it meets requirements, then relayer post the order in their order book.
The order is swapped through the smart contract and then the filled order broadcasted to the Ethereum blockchain.
Now as you can see from the diagram above 1- Relayer hosts an order book with the Maker 2- The Maker goes through the fee schedule/ structure of the relayer and sees that it is acceptable 3- Relayer Broadcasts the order 4- An interested Taker fills the order and pays the fee 5- The filled order is broadcasted to the Ethereum blockchain
Note; Relayers keep an off-chain order book for transaction fees. These fees from the maker and/or taker get to the relayer on the completion of a trade.
Also to note is that, relayers just facilitate signals between trade parties by maintaining an order book. They do not actually execute trades on behalf of these parties. Ok, let’s dive into the transaction fee(s)
Ox doesn’t charge fees of any type to use their protocol it is Free Keep in mind, however, that if someone chooses to create a decentralized cryptocurrency exchange using the protocol, that entity, known as a Relayer, can charge fees based on his own discretion.
But that’s where the 0x OTC comes into play allowing users to exchange directly without the services of a relayer. Send a link to your counterparty to generate and send your order. Now, this literally blew my mind talking about revolutionary aye? (chuckles)
Decentralized Exchanges and Ox protocol
Decentralized exchanges were a wakeup call to the vulnerability and theft issue of centralized exchanges. With this, users keep control of their money instead of sending money to a wallet controlled by one individual or entity.
Therefore, users make use of a digital signature to authorize orders. This, in fact, means that while centralized exchanges are very fast, their decentralized counterparts are much slower.
Ox is more of a decentralized crypto exchange than a centralized one but with a few important differences.
Ox improves on the main flaws of decentralized exchanges; expensive, illiquid and much slower. The project addresses this by designing a standard protocol that can be used on all orders relayed off the blockchain.
With this protocol, orders only have to go back on the blockchain when executed instead of at every single transaction.
This hastens order processing and cuts costs by eliminating some unnecessary cumbersome transaction fees. Ox doesn’t charge you in any way for using their protocol, it is free.
However, if a person decides to use the protocol to develop a decentralized exchange, the person best known to be a relayer may charge an amount for transaction fees.
Note: Since 0x is a decentralized exchange protocol it can be used from anywhere in the world because it does not need to be registered and laws in that country will not influence the exchange.
0x protocol is a brilliant innovation that has managed to improve on the already existing decentralized exchanges By creating a lighting fast transaction medium that uses Tokens thereby reducing cost as well as increasing making it possible for almost anything to be traded online.
Its off-chain relayers feature enables low-cost transactions that centralized exchanges do not offer. Yeah… That’s it on this review of the cutting edge 0x protocol.
Now, are you going to start trading with 0x? or You still have some questions about the protocol?
Let me know by leaving me a comment below right away Now don’t forget to give me a share.