As we know, the blockchain smart contracts that are run
As we know, the blockchain smart contracts that are run on the Ethereum blockchain, have immense potential in terms of use cases. A new protocol that is being developed around the basic premise of the Ethereum blockchain and its smart contracts technology is the 0x project (pronounced as “zero-X”). Being an intriguing project that demands a thorough explanation, this topic warrants a beginner’s guide of its own. If you have never heard of the 0x project before but would like to know more about technological innovations in the field, then this guide to 0x will start you out on your exploration of this topic.
What is 0x Protocol?
As its White Paper declares right at the outset, 0x is :
“An open protocol for decentralized exchange on the Ethereum blockchain”
The 0x protocol is meant to make it possible to exchange ERC-20 tokens on the Ethereum blockchain based on a peer-to-peer model. The aim is to keep the friction to a minimal level during such an exchange. It wishes to serve as a uniform standard that brings together several decentralized applications or dApps. Such a commonality between the dApps themselves will allow for the applications to interact with one another in their operations. The exchange function can work on all the trades implemented using Ethereum smart contracts. The protocol would be open to easy, public access so any dApp might make use of its functionalities. The DApps that make use of it can also maintain ties with public liquidity pools. Contrarily, they may also build liquidity pools of their own to be able to extract transaction fees on that. The 0x protocol itself makes sure it doesn’t discriminate: arbitrary cost impositions are not done in favour of some users or to the disadvantage of others. The principle of decentralization reigns supreme and consensus-oriented governance makes sure the protocol is continuously updated with all improvements without hampering the operability of the dApps themselves.
Working of 0x for Beginners
Envisioned and developed back in 2016 by Will Warren with Amit Bandeali, 0x attempts to ensure universal tokenization. The idea is to have every form of asset, be it gold or USD or anything else, represented by an ERC-20 token on the Ethereum blockchain itself. These tokens will then be exchanged seamlessly and trustlessly using the 0x protocol itself. Although many decentralized exchanges are already in existence, 0x takes the concept a step further by allowing for an intra-token tradability as well as heightened operational efficiencies. The ones who develop the layers above the protocol, are called Relayers. They host further applications and earn from the fees incurred for the same.
The 0x protocol has come up with a consumer-oriented product of its own, known as the 0x OTC. Using this, you do not need Relayers. Instead, you can simply conduct as peer-to-peer exchange of tokens provided you are able to establish a direct connection with the other token you wish to have a link with. The 0x OTC is available on the testing network of Ethereum, which is Kovan, and can be used by anyone since it is an open-source resource. The protocol’s own Ethereum token is known as ZRX.
The Road Ahead for 0x Protocol
This project, quite experimental and ambitious in nature, has seen its ZRX token find listing in major exchanges and has prompted a higher popularity of lesser-known altcoins. The 0x protocol has often been touted as the transformation that the field of crypto exchanges needed. Having said that, since its inception in 2016, it has merely made ripples in the crypto waters and not stirred up the storm it supposedly had the potential to. Even now, the top cryptocurrency exchanges, centralised and decentralized alike, continue to hold their niche. However, with better fine-tuning, we are sure we will see greater use and adoption.