Deep Dive Project Analysis — 0x Protocol (ZRX)
Founded in October 2017, this young project with a stellar team aims to build a protocol for P2P exchange of any ERC-20 token in an open environment. Apart from a decentralised exchange that solves the problem of network congestion and free trading of assets, 0x is more of a platform for complex DApps to exchange assets on Ethereum blockchain. 0x is a protocol for trading currencies, digital goods like game tokens or items and traditional assets like stocks, gold or index funds in a completely decentralised and free way.
0x is an advanced version of a decentralised exchange like EtherDelta or Idex. These decentralised exchange (Dex) platforms are not as fast and powerful as centralised exchanges, because every transaction is done on Ethereum chain and this creates network congestion, but they have generated much buzz within cryptocurrency communities everywhere.
0x takes these transactions in an offline order book and only settlements are done on the main Ethereum blockchain. This makes sure the platform does not lag like most decentralised exchanges to date. The second difference is that because a Dex has the entire order book on the blockchain, adding, modifying or even cancelling the orders require a fee. 0x proposes to make an Automated Market Maker (AMM) smart contract that interacts with the blockchain allowing the trader to change the price in the smart contract anytime without incurring additional fees. A hybrid model of off-chain order relay and on-chain settlement provides the best of both worlds.
Instead of an exchange model, 0x relies on a relayer model. Creating and operating an exchange is a costly affair while on 0x anyone can become a relayer by hosting and propagating an order book that consists of generic messages. Relayers do not execute orders but simply signals the market participants and the taker executes her own trades.
Relayers can share their orderbooks and thereby increase the liquidity of the entire network with a standard API while still charging a fee for the transactions that get ‘taken’ through their order books. This ensures network effects are in favour of the relayers.
0x is completely open source and even the smart contracts governing the network are open source and the only way they can be changed is by adding or forking the existing smart contracts. This makes sure the DApps do not get disrupted and can rely on the core platform.
Exchange protocol for DApps
0x provides a pluggable architecture for DApps that require token exchange on the fly. So anyone who is building DApps that utilise their own ERC-20 tokens will find liquidity and market exchange / trading of Ethereum and their token on their platform.
0x has a team that would be the envy of any crypto project. Led by Will Warren and Amir Bandeali, this well rounded team of engineers, researchers, product and operations folks is guided by some big names in the crypto industry including Co-Founder of Coinbase — Fred Ehrsam, Founder of Polychain Capital — Olaf Carlson-Wee, Co-CIO of Pantera Capital and Founder of Augur — Joey Krug and Founder of Scalar Capital — Linda Xie.
DApps on 0x
A project that is relatively new, 0x is attracting the community of developers more than anything else. There are already several DApps built or being built on 0x protocol. Apps like dYdX, Request Network, Aragon, Augur and District0x demonstrate the power of 0x Protocol. In a crypto world where everyone is focused on listings and partnerships, this team is busy building a product and a community of developers that will power the next generation of DApps on the Ethereum blockchain.
Roadmap / Product development
0x’s amazing team has been delivering more than promised and earlier than promised. In the past year, developer trust has increased tremendously and in the latest update in July 2018, they released version 2 of the protocol.
Another thing that was fascinating is the extensive documentation. This shows that they are not only building something themselves, they have accounted for all those developers who will be building on top of 0x platform.
In a world that runs on tokens, apps will require conversion from one token to another on the fly and as more assets will be tokenised, currencies, digital goods and traditional assets will have to be traded on a platform that provides a trustless and open platform that is truly decentralised and governed by code. That is what ZRX or 0x is building.
This is one of the few projects that is building a layer of technology that will drive crypto and blockchain closer to mass adoption — or in popular crypto terms, tokenise the world.