0x is a decentralized exchange, designed for trading ERC 20 tokens. It has become one of the most popular decentralized cryptocurrency exchanges in 2021, offering audited smart contracts and a range of developer tools. It has its own token ZRX, which is used as a governance and staking token.
In this guide, we will cover the fundamentals of 0x and ZRX, including their advantages, disadvantages and how you can invest.
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0x is a decentralized exchange for Ethereum-based tokens. It is referred to by the founder’s as the “Craigslist for cryptocurrencies”. Using smart contracts in place of a shared infrastructure, it combines two different strategies (state channels and automated market markers (AMMs) to overcome the high fees associated with Ethereum. State channels achieve this by taking transactions offline, whilst automated market makers (AMMs) introduce a third party to simplify the process of trading.
0x is relatively new within the crypto market. It was launched in October 2016 by Will Warren and Amir Bandeali as an open-source protocol. It was created with the aim of helping individuals build exchanges or products that enable the trading of crypto assets. They wanted to create a world in which assets (fiat, gold and digital gaming items) could be represented as a token on the Ethereum blockchain. In 2017, 0x held an ICO for their token, ZRX, raising a total of $24 million dollars.
This new protocol initially had a significant impact on decentralized exchanges. With 0x allowing Ethereum tokens to be exchanged over any decentralized exchange, usability improved significantly. In only a few years, several new decentralized exchanges have been built on the foundation of 0x, including Radar Relay, Nuo, DeFi Saver and Zerion.
As of August 2021, ZRX has a market cap of $704,619,021 with 850 million tokens in circulation. It has a maximum supply of 1 billion tokens with a fully diluted valuation of $833,531,699. Each token is priced at around $0.85, with the token reaching highs of $2.32 in April 2021. The token has been fluctuating since, with the price now steadily on the rise.
Automated market maker smart contracts are used as an alternative to the usual on-chain order book. The benefits of this include availability, with AMMs always available to act as a counterparty and ease-of-integration with external smart contracts.
Another benefit of 0x is the use of state channels. State channels take transactions offline, which reduces the transaction fees involved in trades. This is seen as a huge benefit amongst the cryptocurrency community, with ETH fees being a pain point for many investors.
One of the downsides to AMMs is that the spot price offered may be worse than what a trader could get from a traditional exchange. This, combined with slow transaction times means it can be difficult to jump on opportunities that spring up in the market.
Another big issue with 0x is that it doesn’t interact with fiat currency. Unlike coins such as Bitcoin and DOGE, users need to own Ethereum in order to use the exchange. This creates a barrier of entry for new investors, who may not yet understand the fundamentals of cryptocurrency.
At the moment it’s difficult to determine how important ZRX will be in the future. The biggest concern in regards to its long term sustainability is the increasing competition within the market. Should 0x fail to innovate, they could fall behind other exchanges.
During its initial launch, ZRX was famously supported by Coinbase and can now be traded on most exchanges. However, they are not commonly used for trading. Instead, ZRX tokens are used for the staking pools found in the ZRX Portal, with stakers earning ETH as a reward. This is supported by a staking wizard, which makes the process easier to understand.
How does 0x work?
0x is different from conventional tokens and involves two different parties. The ‘maker’ who creates a buy or sell order. And the taker’, who fills that order. Through 0x, order makers can initiate a transaction using digital signatures. For the trade to occur, someone is needed on both sides of the trade. This will be a counter-party or relayer.
Once an 0x order has been filled, the makers digital signature will be verified to ensure all conditions of the trade have been met. If the conditions are met, the tokens will then be traded. Currently, 0x supports trading for ERC-20 fungible tokens and ERC-721 non-fungible tokens (NFT), which has sparked interest amongst the gaming community. Gamers now have the opportunity to tokenize in-game assets that can be traded within the community.
The ZRX token plays two main roles within the 0x exchange. It is used for paying fees to relayers for their services. It is also used for governance. Holders with more tokens have greater influence over the protocol. ZRX is not mineable like traditional coins due to being based on a proof-of-work mechanism.
How to buy 0x online
Buying 0x online is relatively simple. It can be found on several leading cryptocurrency exchanges including Uniswap, Coinbase and Gemini.
Start by signing up to one of these, or if you already have an account, make sure your account is funded.
Search for 0x on the exchange. It’s important to note, ZRX will be the name of the token you buy. If you can’t find 0x, search for ZRX instead.
Choose the number of tokens you want to buy. Confirm your purchase and your ZRX will be available in your wallet.
How to Trade 0x
In general, ZRX is not used for trading. Instead, tokens are used for staking in the ZRX Portal. By staking them in the portal, stakers will earn ETH as a reward. Therefore if you’re looking for a cryptocurrency to trade, 0x may not be your best option. However, if you want to trade 0x, here’s how you can get started.
Begin by creating an account with an exchange that supports the token. The most popular option is Coinbase due to its strict security measures and established reputation.
Buy 0x and you’ll see the tokens in your exchange account. It’s important to note unless you’re actively trading you should always keep your cryptocurrency in a secure wallet. Popular wallets include MetaMask and Ledger Nano S.
For trading purposes, send your tokens to your chosen exchange and choose the token you want to buy. Confirm your trade and your chosen tokens will arrive in your wallet.