0X (ZRX)? THE FUTURE OF DECENTRALIZED EXCHANGE?

Founded by the duo of Amir Bandeali and Bill Warren in 2016, 0x is a decentralized exchange protocol with its company headquarters in San Francisco Bay Area, United States of America.

Basically, 0x transforms traders’ transactions into tokens and it boasts a considerable degree of divergence from other decentralized exchanges. This is because 0x clears out the need for middlemen through the adoption of smart contracts.

Reading this article further, you’ll have a comprehensive review of 0x. Also, you’re certain to find out why 0x will likely emerge as the best decentralized exchange in future.

Definitions of Key Terms

Token –this is a virtual asset built on a different blockchain to act in the manner of the Ethereum blockchain. This means that unlike Bitcoin and other altcoins, tokens are devoid of an independent blockchain. While Bitcoin and other altcoins function in place of money, tokens instead serve as assets or utilities. Broadly, tokens, unlike Bitcoin, do not replace money but they represent specific assets/utilities and are found on the blockchain.

Smart contract –this may be defined as a computer protocol that paves the way for transactions to be executed without the need for third parties. In other words, a smart contract is a digital medium which allows for transparent, reliable and agent-free exchange of valuable items (such as shares, money, etc.) between parties.

Decentralized exchange –this is an exchange medium that lets the users (crypto traders in this case) exercise absolute control over their digital currencies. Decentralized crypto exchanges ensure that users are in perfect control of their private keys but same cannot be said about centralized exchanges. Put simply, a centralized crypto exchange (such as Coinbase) saves users’ private keys and this limits the control they (the users) can exercise over their digital assets.

Protocol –this refers to a set of pre-arranged procedures, instructions or rules that guide the transmission of information between computers. In other words, a protocol is that set of pre-arranged instructions that determine the exchange of information between computers.

For two computers to effectively send/receive information to/from each other, there must be a number of pre-set instructions for the exchange process. Simply, these instructions constitute a protocol and broadly, the protocol further determines the structuring of the information.

Relayer –this functions as an intermediary between trading parties, precisely sellers and buyers of digital tokens. Broadly, a relayer, in the 0x protocol, is an off-chain medium that relays orders between parties, hence removing the need for a middleman that possibly charges an outrageous fee for his service. While a relayer may charge a relatively small fee for a transaction, it’s notable that the relayer uses a self-developed decentralized exchange built on the 0x protocol.

Whilst relayers clear out the need for middlemen, they enable traders to easily locate buyers (counterparties) and this way, the buyers can receive the traders’ orders cryptographically.

Essential Features of 0x

1. Flexible Order Types: this feature gives 0x users the opportunity of receiving profitable offers for their assets. On one hand, it enables anyone willing to purchase your asset to table their bids for the asset. On the other hand, it allows you to specify a “buy it now” price for the asset
2. Secure Non-custodial Trading: this feature prevents 0x from being in custody of its users’ funds. This way, you’re certain to maintain full ownership of your funds. In a broader term, 0x as a non-custodial exchange removes the need for traders to make deposits or withdrawals (as the case may be) while performing wallet-to-wallet trading of tokens
3. Build a Business: considered most suitable for relayers, “Build a Business” is a feature which paves the way for relayers to make money through transactional fees. Notably, 0x maintains a budding community of relayers and as the membership (of this community) is open to virtually anybody, you could become a relayer, earning a kind of commission.
4. 0x Instant: this feature lets a relayer serve as the medium for the rapid exchange of Ethereum-based tokens. Normally, such a relayer should be usable with a similar service to Radar Relay and prettily, 0x Instant helps ensure the expeditious trading of Ethereum-based tokens on the relayer
5. OTC (Over the Counter): OTC removes the need for a relayer between traders of Ethereum-based tokens. This is to say that with OTC, you don’t need a relayer before you can exchange Ethereum-based tokens. However importantly, you’ll have to use an alternative medium (such as a text message, email, etc.) in establishing a direct connection with the potential buyer of your tokens
6. 0x API: this guarantees you hassle-free integration with the API of the 0x platform. This way, you’ll not only enjoy the benefit of exchanging tokens at excellent prices but also, you’ll get to aggregate liquidity from services including Uniswap, Kyber and 0x Mesh

What Are the Pros of 0x?

0x has got a decent number of excellent benefits which make it a better exchange than some of its counterparts. Having read this article this far, you may have observed some of these benefits. Nevertheless, below are the exciting benefits that 0x offers:

1. The presence of multiple relayers: 0x guarantees access to more than 30 relayers
2. Security of smart contracts: 0x avails traders the chance to utilize smart contracts that are devoid of security threats
3. Excellent design: the design of 0x makes way for efficient delivery
4. 0x liquidity is comparatively high

What Are the Cons of 0x?

0x is Ethereum-restricted –it is quite unfortunate that 0x was built with only the Ethereum blockchain in mind. This means 0x doesn’t operate on any other blockchain even as other dominant blockchain technologies are coming into the blockchain ecosystem.

The functioning of 0x isn’t readily understandable –lay people as well as individuals with deficient knowledge of how decentralized exchanges operate may struggle to quickly understand the functioning of 0x. By and large, 0x itself isn’t a completely decentralized platform but a protocol for building a decentralized exchange. This likely makes the operation of 0x somewhat difficult for a layman to understand.

How Does Ox Staking works?

Conclusion

Although 0x is associated with few shortcomings (just as explained earlier), it is very evident that its benefits far outweigh these shortcomings. Verily, these benefits sum up into the conviction that 0x could be the best decentralized exchange in years to come.

With ZRX being the official token of 0x, it is very clear that 0x is an Ethereum-specific exchange protocol. As such, you may want to give it a try provided you’re satisfied with being restricted to the Ethereum blockchain for your exchange of tokens.