What is 0x? (ZRX)
0x is software that aims to encourage a network of users to create and operate new types of markets that are not dependent on traditional financial intermediaries.
With 0x, users can create markets for cryptoassets representing any type of value – this can include markets for tokens representing physical real estate, tokens for stocks and bonds, or tokens for other cryptoassets .
As one of the emerging groups of decentralized finance (DeFi) protocols, 0x uses a custom cryptoasset called ZRX and the Ethereum blockchain to distribute its management and operation.
ZRX is used to incentivize users to host and maintain order books for 0x markets. In exchange for this essential service, 0x users receive fees paid by traders when buying and selling assets on the platform, and they can receive additional rewards in ZRX.
In this way, ZRX is essential to the protocol's governance system, as those who own the asset have the ability to vote on changes to the software. (For example, token holders can optionally vote to increase or decrease the fees users pay and earn).
If you're interested in following the project, Ox keeps users updated on the status of its roadmap via its official website and blog.
Who invented 0x?
The 0x protocol is a product of a company called ZeroEx Inc, founded in 2016 by Will Warren and Amir Bandeali.
In July 2017, ZeroEx Inc held a public sale in which it raised US$24 million in ether in exchange for ZRX tokens. The project was backed by venture capital firms including Polychain Capital, Blockchain Capital and Pantera Capital.
The company's advisors include Fred Ehrsam, co-founder of Coinbase, Joey Krug, co-founder of Augur, and Linda Xie, co-founder of Scalar Capital.
How does 0x work?
0x is software that allows users to create custom crypto-asset markets.
The 0x protocol allows users to tokenize assets as well as buy and sell tokens running on the Ethereum blockchain.
To operate a 0x marketplace, two types of users are required:
- Makers – Those who provide liquidity to the order book. Makers place orders on the stock exchange that are not immediately traded; rather, they wait for it to be adjusted.
- Takers – Those who withdraw liquidity from the order book. Buyers place orders which are immediately adjusted to existing orders.
The 0x order book is managed by the protocol relayers. The relayers' mission is to facilitate communication between 0x order books and transactions processed on a blockchain.
When a user makes a trade, producers transmit cryptographically signed orders to a relayer, who then enters them into the order book for a transaction fee. These orders may contain the token traded, the desired price and the expiration date.
Once an order is ready to execute, 0x uses smart contracts running on Ethereum to match a buyer's demand with a maker's orders and to transfer tokens between users.
Remarkably, relayers do not hold assets in any trade, since transactions take place on the blockchain.
Why is the ZRX valuable?
The ZRX cryptocurrency derives its value from the role it plays in the 0x protocol's operational markets, rewarding relayers for hosting order books and facilitating trade.
Additionally, ZRX is also used to allow users to manage the software and set its rules.
For example, users can use ZRX to have the opportunity to vote on network updates and policies, with each vote proportional to the amount of tokens they use.
Users can also delegate their tokens to other validators, assigning them votes while earning part of the block reward.
Finally, there is a limited supply of ZRX that can enable 0x markets.
As of 2020, it is planned to create only 1 billion ZRX tokens. This gives ZRX tokens a certain scarcity, which could help increase their value over time.
It's important to note that 0x is not the only cryptocurrency project attempting to use blockchains to create new types of markets. Other decentralized exchanges include Kyber Network, Uniswap, and Bancor, each with different technical capabilities.
Why use ZRX?
Users may be attracted to the 0x protocol because of its mission to provide an alternative to more traditional centralized exchange platforms.
As of today, there are a large number of wallets that have already integrated 0x to allow users to trade cryptocurrencies within their ecosystem.
Investors can also try buying ZRX and adding it to their portfolio if they believe in the future role of decentralized exchanges to gain exposure to a variety of cryptoassets.