What is 0x? (ZRX)
0x is a software that aims to incentivize a network of users to create and operate new kinds of markets that don’t rely on traditional financial intermediaries.
With 0x, users can create markets for crypto assets representing any form of value – these could include markets for tokens representing physical real estate, to tokens representing shares of stocks and bonds, to tokens representing other crypto assets.
ZRX is used to incentivize users to host and maintain order books for 0x markets. In exchange for this essential service, 0x users gain exposure to fees paid when traders buy and sell assets on the platform, and they may earn additional rewards denominated in ZRX.
In this way, ZRX is essential to the protocol’s governance system, as those who hold the asset have the ability to vote on changes to the software. (For instance, token holders may be able to vote to increase or decrease the fees users pay and earn.)
Who Created 0x?
The 0x protocol is a product of a company called ZeroEx Inc, co-founded in 2016 by Will Warren and Amir Bandeali.
In July 2017, ZeroEx Inc held a public sale in which it raised $24 million in ether in exchange for ZRX tokens. Support for the project came from venture firms, including Polychain Capital, Blockchain Capital and Pantera Capital, among others.
Advisors to the company include Coinbase co-founder Fred Ehrsam, Augur co-founder Joey Krug and Scalar Capital co-founder Linda Xie.
How Does 0x Work?
0x is a software that allows users to create custom crypto asset markets.
Using the 0x protocol, users can both tokenize assets and buy and sell tokens running on the Ethereum blockchain.
Two types of users are needed to operate any 0x market:
- Makers – Those providing liquidity to the order book. Makers place orders on the exchange that do not trade immediately; rather, they wait for it to be matched.
- Takers – Those who take liquidity from the order book. Takers place orders that are instantly matched with existing orders.
The 0x order book is maintained by the protocol’s relayers. Relayers are tasked with facilitating communication between 0x order books and the transactions that settle on a blockchain.
When a user makes a trade, makers submit cryptographically signed orders to a relayer who then posts it to the order book for a transaction fee. These orders can contain the token being traded, desired price and expiration date.
Once an order is ready to be executed, 0x uses smart contracts running on Ethereum to match a taker’s demand with a maker’s orders, transferring the tokens between users.
Of note is that relayers do not take custody of the assets in any trade, as transactions happen on the blockchain.
Why does ZRX have value?
The ZRX cryptocurrency derives value from the role it plays in operating markets on the 0x protocol, rewarding relayers for hosting order books and facilitating trades.
In addition, ZRX is also used as a way to allow users to govern the software and set its rules.
For example, users can stake ZRX to gain the ability to vote on network upgrades and policies, with each vote being proportional to the amount of tokens they stake.
Users can also delegate their tokens to other validators, allocating votes to them while still earning a portion of the block reward.
Lastly, there is a finite supply of ZRX that can facilitate 0x markets.
As of 2020, only 1 billion ZRX tokens are scheduled to be created. This provides a certain scarcity to ZRX tokens, which could help their value increase over time.
Importantly, 0x is not the only cryptocurrency project seeking to leverage blockchains to create new kinds of markets. Other decentralized exchange platforms include Kyber Network, Uniswap and Bancor, each of which has varying technical capabilities.
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Why use ZRX?
Users may find the 0x protocol appealing based on its mission to provide an alternative to more traditional centralized exchange platforms.
To date, there are a variety of wallets that have already integrated 0x to allow users to trade cryptocurrencies within their ecosystem.
Investors may also seek to buy ZRX and add it to their portfolio should they believe in the future role of decentralized exchanges for exposure to a wide range of crypto assets.
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