What Is ZRX (0x)? Is ZRX (0x) Worth Buying for Long-Term Investment?
There have been a lot of rumours that ZRX is going to be made available on Coinbase and investors started to pay a close attention to this crypto asset. What exactly is ZRX (0x)? In short, 0x is an open, permissionless protocol allowing for ERC20 tokens to be traded on the Ethereum blockchain and it will be used for powering decentralized exchange. In this article, we are going to find out if ZRX is worth buying for long-term investment.
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What Is ZRX (0x Protocol)?
0x is an open protocol that allows token to token trading on decentralized exchanges and relayers. It is a protocol that allows for the decentralized exchange of ERC-20 tokens- basically any token that runs on the Ethereum blockchain.
Let’s take a few steps back and look at the problem of the decentralized exchange.
Most decentralized exchanges function using smart contracts powered by the Ethereum blockchain. This means that all order functions and trades take place within these smart contracts, and users are always in control of their funds, rather than trusting them to a third party like they would with a centralized exchange (e.g., Binance and Bittrex).
The concept of exchanging Ethereum-based ERC20 tokens (many of the tokens we see today fall under this umbrella) without third-party involvement is being explored by several teams and has already been proven possible with some examples such as EtherDelta. However, decentralized exchanges can’t escape the congestion on the Ethereum blockchain.
How Does 0x Protocol Work?
ZRX, or the 0x protocol, offers a solution to some of the issues outlined above. It aims to reduce transaction congestion and improve reliability while operating within the decentralised exchange (DEX). The 0x protocol is essentially a bridge between decentralised apps (dApps), and it enables links between digital currencies for the sake of trading. For example, 0x is compatible with Ethereum, one of the leading cryptocurrencies.
When trading on an exchange that runs on the 0x protocol, users begin by broadcasting their intent to enter into a trade in a message format. This “message” is a chunk of data with parameters such as: tokens they’d like to exchange, buy/sell price, expiration time, and whether or not they’d like to trade with a specific counter-party (point-to-point order) or leave it open to anyone (broadcast order).
In short, 0x is a message format and suite of smart contracts. The message format can be thought of as a package of data that signals what you want to trade, for what token, at what price, expiration time and with whom you want to trade (if anyone specific).
Relayers aggregate these cryptographically signed 0x trade orders and present them to the world in the form of an order book, hosted off-chain. Off-chain order books decrease trading costs but require a mechanism to match orders to their counter-parties, and this is where relayers come in. Since 0x orders are just chunks of cryptographically signed data, a relayer’s job is to host a database of orders and sort them according to price, expiry time etc., and serve them to anyone that comes to the site looking for a counter-party. Once the parties have been matched, the trades are then settled on-chain.
In a simpler illustration, 0x works something like this: A “creator” communicates his or her request. A “relayer” at that point posts that request in an off-chain arrange book and a counterparty (called a “taker”) acknowledges the request by pushing the exchange into the task’s DEX brilliant contract.
What really defines 0x protocol is a lack of any rules about how you choose to pass these cryptographically signed chunks of data around the blockchain. Transport layer is arbitrary, so you can generate one of these cryptographically signed orders and send it to the counterparty in an email or over Facebook, or you can write it down on a piece of paper and send it to them using a carrier pigeon. It does not matter, the cryptographic signature just needs to be valid.
Is ZRX (0x) Worth Buying for Long-Term Investment?
There are rumours that ZRX will be added to Coinbase and Gdax sometime this year. While Coinbase’s CEO Brian Armstrong recently tweeted that the exchange has no specific plans to add new assets, there are compelling reasons to believe that ZRX will be added. (Including the fact that Brian made a similar statement a week before Bitcoin Cash was added to Coinbase).
Furthermore, there are simply a lot of connections between the two entities. Three of ZRX’s four advisors are former Coinbase employees, and all three of them still have close associations with Coinbase. (Olaf Carlson-Wee, Fred Ehrsam, and Linda Xie). Additionally, the ZRX team has been to Coinbase headquarters several times in recent months.
In the recent news, both 0x and Coinbase filed for Form D paperwork with the SEC back-to-back within two (2) weeks time. 0x has a passionate community around it, and expectations are high that it is the next big thing in cryptocurrency.
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