The Ethereum blockchain’s 0x protocol
What is 0x
The Ethereum blockchain’s 0x protocol and a collection of open-source smart contracts enable for the decentralized exchange (DEX) of tokens based on Ethereum. To put it another way, 0x is a decentralized infrastructure for trading that enables peer-to-peer token swaps without the need for a centralized middleman, like a conventional exchange.
With the help of 0x, DEXs will be standardized and interoperable, enabling users to transact in tokens directly with one another rather than relying on a centralized exchange to manage their assets or complete trades. The 0x protocol enables permissionless and trustless token trading, allowing users to keep ownership of their private keys and avoid having to put their trust in a third party to manage their assets.
Decentralized trading is made possible by the 0x protocol, which is built on top of the Ethereum blockchain and makes use of its smart contract features. ZRX, the 0x protocol’s native token, is employed for a variety of tasks within the system, including paying transaction fees and taking part in governance decisions.
Due to its ability to serve as a basis for developing DEXs and other DeFi applications that need token exchange functionality, 0x has grown in popularity among consumers and developers in the decentralized finance (DeFi) ecosystem. The 0x protocol has become one of the leading players in the blockchain field as a result of numerous DEXs and DeFi projects integrating with it to enable decentralized token trading.
The history of 0x
0x has a relatively short but eventful history. Here is a brief timeline of its key milestones:
2016: 0x is founded – 0x was founded by Will Warren and Amir Bandeali in October 2016. They envisioned a protocol for decentralized exchange that could enable efficient and trustless token trading on the Ethereum blockchain.
2017: Initial Coin Offering (ICO) – In August 2017, 0x conducted an ICO, raising approximately $24 million by selling its native token, ZRX, to fund the development of the protocol.
2017: 0x v1 is launched – In October 2017, 0x launched the first version of its protocol, which provided basic functionality for token exchange on the Ethereum blockchain. It allowed users to create and fill orders using smart contracts, and several DEXs integrated with 0x v1.
2018: Expansion and growth – In 2018, 0x continued to gain momentum as more DEXs integrated with its protocol, including popular platforms like Radar Relay, Paradex, and DDEX. The 0x team also released updates to the protocol, improving its functionality and security.
2019: 0x v2 is launched – In June 2019, 0x released the second version of its protocol, 0x v2, which introduced several improvements, including the ability to bundle multiple orders into a single transaction, reducing gas costs and improving efficiency.
2020: 0x DAO is launched – In August 2020, 0x launched the 0x DAO (Decentralized Autonomous Organization), which is a community-driven governance system that allows ZRX token holders to participate in decision-making and protocol upgrades.
2021: 0x v3 and growth of DeFi – In March 2021, 0x released the third version of its protocol, 0x v3, which introduced more features and improvements, including support for new token standards beyond Ethereum’s ERC20, such as ERC721 and ERC1155. The year 2021 also witnessed significant growth in the DeFi ecosystem, and 0x continued to be widely used by various DEXs and DeFi projects for decentralized token trading.
Since its inception, 0x has become one of the prominent protocols for decentralized exchange on the Ethereum blockchain, driving innovation in the DeFi space and contributing to the growth of the broader blockchain ecosystem. The team behind 0x continues to work on improving and expanding the protocol to meet the evolving needs of the blockchain community.
How 0x works
0x is a protocol that facilitates decentralized exchange (DEX) of Ethereum-based tokens. It is designed to enable efficient and trustless token trading on the Ethereum blockchain. Here’s a high-level overview of how 0x works:
- The 0x protocol is used to create orders by users that want to exchange tokens. The order defines the trade’s specifics, including the pair of tokens to be traded, the amount to be exchanged, the desired exchange rate, and any other pertinent information.
- Orders that have been created by users are broadcast to the decentralized 0x network, which is a network of relayers. Relayers are organizations that provide order matching by hosting off-chain order books.
- Order matching refers to the off-chain matching of purchase and sell orders depending on the parameters that were stated in the orders. When a match is discovered, a trade is carried out, and its specifics are handled off-chain.
- Settlement: After a trade is matched, a smart contract-enabled token transfer takes place on the Ethereum blockchain. The 0x protocol makes use of a collection of modular smart contracts to handle various aspects of the trade, including the transfer of tokens, the payment of handling costs, and the settlement of the trade.
- Atomicity and trustlessness: To ensure that trades happen atomically—that is, that the entire trade is done, or none of it occurs—the 0x protocol uses a notion known as “atomic swaps.” This avoids incomplete fills or lost deals. Although users maintain control over their private keys and are not required to trust a centralized middleman with their money, 0x is also designed to be trustless.
- ZRX coin for fees and governance: ZRX is the 0x protocol’s native token. It serves a variety of functions inside the protocol, including paying transaction fees to relayers and taking part in its management through the 0x DAO (Decentralized Autonomous Organization).
- Flexibility for DEX customization: By offering a flexible protocol, 0x enables DEXs to adapt their trading rules and fee structures, giving DEX operators the freedom to design their own distinctive trading platforms while utilizing the 0x infrastructure.
Overall, 0x enables decentralized and trustless token trading by leveraging off-chain order books and on-chain settlement using smart contracts, providing a scalable and interoperable solution for DEXs on the Ethereum blockchain.
Can 0x be trusted
As a protocol, 0x is designed to be trustless, meaning that users do not need to trust any centralized intermediary to execute trades. The 0x protocol is built on the Ethereum blockchain and utilizes smart contracts to handle the settlement of trades, ensuring that transactions occur in a transparent and decentralized manner.
Here are some factors that contribute to the trustworthiness of 0x:
Decentralization: 0x is a decentralized protocol that operates on the Ethereum blockchain, which is a public blockchain known for its security, transparency, and robustness. Transactions on the Ethereum blockchain are verified and recorded by a distributed network of nodes, making it resistant to censorship and tampering.
Open-source: 0x is an open-source protocol, which means that its codebase is available for public scrutiny. Anyone can review the code to verify its functionality, security, and reliability, which promotes transparency and accountability.
Community-driven governance: 0x has a community-driven governance system through the 0x DAO, where ZRX token holders can participate in decision-making and protocol upgrades. This helps ensure that the protocol evolves based on the consensus of its users and stakeholders, making it less reliant on a centralized entity for decision-making.
Audits and security measures: 0x has undergone multiple audits by reputable third-party security firms to identify and address potential vulnerabilities. Additionally, the 0x team actively monitors the protocol for security risks and implements security measures to safeguard against potential attacks.
Interoperability: 0x is designed to be interoperable with other smart contracts and token standards on the Ethereum blockchain, allowing for seamless integration with various DEXs and other DeFi projects. This interoperability enhances the trustworthiness of 0x as it can be used in conjunction with other well-established protocols and standards.
Despite these measures, it’s important to note that no technology is completely risk-free, and like any other protocol, 0x may have inherent risks and limitations. It’s crucial for users to exercise caution, perform their own due diligence, and understand the risks associated with using any blockchain protocol, including 0x. Users should also follow best practices for secure cryptocurrency storage, such as using hardware wallets and being cautious with their private keys.
Does 0x charge a fee
As a protocol, 0x itself does not charge any fees for token trading. However, there may be fees associated with using 0x-based decentralized exchanges (DEXs) or relayers that are built on top of the 0x protocol.
Relayers, which are entities that host off-chain order books and facilitate order matching for 0x trades, may charge fees for their services. These fees are typically paid by users when they submit orders or execute trades on a relayer. The fee structure and amount may vary depending on the specific relayer and can include maker fees (for creating orders) and taker fees (for executing orders). The fee revenue generated by relayers can be used to cover the costs of operating the relayer and generating revenue for the relayer operators.
In addition to relayer fees, there may also be gas fees associated with settling 0x trades on the Ethereum blockchain. Ethereum requires gas fees to be paid for executing smart contracts, including those used in the settlement of 0x trades. Gas fees are paid in Ether (ETH) and vary depending on network congestion and gas prices at the time of the transaction.
It’s important to note that the fee structure and amount associated with using 0x-based DEXs or relayers are determined by the specific relayers and are not controlled by the 0x protocol itself. Users should review and understand the fee structure of the specific DEX or relayer they are using before engaging in any trades to be aware of any associated costs.
How to use 0x protocol
Using the 0x protocol typically involves the following steps:
- Connect to a 0x-enabled decentralized exchange (DEX) or relayer: To use the 0x protocol, you need to connect to a DEX or relayer that supports the 0x protocol. There are several 0x-enabled DEXs and relayers available, and you can choose one based on your preferences.
- Create or select an order: Once connected to a 0x-enabled DEX or relayer, you can either create a new order or select an existing order from the order book. An order in the 0x protocol specifies the details of a trade, such as the token pair, the amount to be traded, and the price. Orders are typically represented in the form of an Ethereum transaction signed with your private key.
- Submit the order: If you are creating a new order, you will need to submit it to the Ethereum blockchain for settlement. This involves signing the order with your private key and submitting the transaction to the Ethereum network. This transaction incurs gas fees, which are required to pay for the computational resources needed to execute the trade.
- Wait for the order to be mined: After submitting the order, you will need to wait for it to be mined and confirmed on the Ethereum blockchain. This may take some time depending on network congestion and gas prices.
- Execute the trade: Once the order is confirmed, you can execute the trade by either being a maker or a taker. Makers create orders and place them on the order book, while takers select existing orders from the order book and execute them. The trade is settled on the Ethereum blockchain using smart contracts, and the tokens are exchanged according to the terms of the order.
- Pay fees (if applicable): If the DEX or relayer you are using charges fees, you may need to pay the relevant fees for creating or executing orders. Fees can vary depending on the specific DEX or relayer and are typically paid in the native token of the platform.
- Manage your tokens: Once the trade is completed, you will receive the tokens resulting from the trade in your Ethereum wallet. You can manage and transfer these tokens as you would with any other ERC20 tokens.
It’s important to note that the specific steps and user interface may vary depending on the DEX or relayer you are using, so it’s recommended to familiarize yourself with the specific platform’s documentation and user guides before using the 0x protocol. Additionally, as with any cryptocurrency trading, it’s essential to exercise caution, review the order details carefully, and understand the risks associated with trading digital assets.