0x: The Open Protocol Offering Decentralized Exchanges
0x is designed to offer decentralized exchange as a part of the Ethereum blockchain and it is made by using the protocol that involves Ethereum’s smart contracts which then allow those around the world to run a decentralized exchange. The team behind 0x believes that in the future, there will be thousands of tokens from Ethereum and that 0x can provide a trustworthy way to exchange.
The co-founders of 0x are Amir Bandeali and Will Warren. Warren is the CEO of the company and Amir is the CTO and both of them have knowledge for smart contracts and development. Warren used to conduct applied physics research at the Los Alamos National Laboratory after he finished studying mechanical engineering at UC San Diego. Bandeali worked as a fixed income trader with DRW after he finished university at the University of Illionois, Urbana-Champaign.
Among the other team members, there are plenty of blockchain engineers, graphic designers, product designers and software engineers as well as business strategists and people with many skills. The advisors for the project founded or work at companies such as Pantera Capital, Coinbase and Polychain. The 0x project is being funded by Fintech Blockchain Group, Jen Advisors and Blockchain capital.
When the co-founders decided to create the 0x project in October 2016, they hoped for a world that will allow for every asset’s representation as a part of the Ethereum blockchain. Ideally, this included assets that will have everything from digital game items and stocks, to gold and fiat currencies. With such a huge wave of tokenization, there will be hundreds of different types of tokens requiring a trustless exchange for users. The founders noticed the opportunity for improvement of decentralized exchanges and they hope to do just that. The team hopes to address the inefficiencies of decentralized crypto exchanges as well as the inability of various exchanges to work along.
The Difference Between Centralized and Decentralized Exchanges
Centralized crypto exchanges are the most common type of exchanges and are run by a single entity. The users of these exchanges deposit funds directly with the exchange and the exchange then becomes responsible for connecting the buy and sell processes in real time. One of the most popular centralized exchanges is Coinbase. One of the biggest risks with centralized exchanges is their exposure to hacking or front-running conducted by the administrator.
Decentralized exchanges were created to resolve the issues that the centralized exchanges had. With this type of crypto exchanges, the users keep control over their money and they can rely on digital signatures to directly authorize trading orders rather than sending the money right to a wallet controlled by one entity. This means that while the centralized exchanges are very fast, the decentralized ones are slower and they tend to have lower performance trading as well less advances tools that are simple to use.
How Does 0x Improve Decentralized Exchanges?
The 0x project is much closer to a decentralized exchange than a centralized one but overall it has notable differences. The project addresses the main issues with the decentralized exchanges: they are expensive, not liquid, slow and cannot be operated with each other. To operate an order book on the blockchain, each adjustment or new order goes via the blockchain which means that everything is held to block times. This also results in network transaction fees at every interaction.
0x addresses both of those issues by developing a standard protocol which can be applied to all orders relayed off the blockchain. With this protocol, the orders have to go back on the blockchain when they get settled instead at every transaction. This will speed up the process and will eliminate some of the unnecessary transaction fees.
What Does 0x Cost?
Since the project will prevent users from having to pay transaction fees by reducing the reliance on the blockchain, there is a huge opportunity for the 0x project to charge for use. However, it doesn’t charge fees of any type to use their protocol meaning that it is free. However, if someone chooses to create a decentralized crypto exchange using the protocol, that person can charge fees.
What Is 0x OTC?
The team also created the 0x OTC which is a consumer facing product that uses the 0x protocol. The OTC allows the peers to exchange Ethereum tokens without requiring a Relayer provided they connect with the counterparty directly. You can send the order however you want because it is based on the blockchain. This way, you can use email, pencil and paper or any other method of sending the order.
Another aspect of the 0x project, is the unique 0x Ethereum token known as ZRX. The token is how the users will pay the Relayers’ trading fees and it is also decentralized form of governance for the 0x protocol’s upgrade system. Those who own ZRX have input in the protocol and improvements to make this proportional to the owned amount.
There is a fixed supply of one Billion ZRX and the token launch happened on August 15, 2017. 50 percent of the tokens were released, 15 percent were directed to the developer funds, 10 percent going to the founding team and 10 percent going to the early backers. The tokens allocated for founders and staff members will be released over the course of four years.
How to Buy ZRX
0x has become the 6th cryptocurrency that was listed on Coinbase. The token was initially listed on Coinbase Pro but is now available on the regular Coinbase platform. This means that it is very simple to purchase the ZRX token via any of these platforms.
This project seems like a logical step from decentralized crypto exchanges since it takes care of many of the flaws that the exchanges contain. Due to its versatility and the easy availability of the platform, it’s no wonder if 0x starts growing quickly and providing the basis for similar exchange systems based on the Etherum blockchain.