What is 0x? (ZRX)

The 0x protocol provides an infrastructure for the exchange of Ethereum-based digital assets using both on- and off-chain components.

Decentralized exchanges (DEX) provide places for users to swap their digital assets without needing to rely upon centralized intermediaries. The most popular DEXes operate either an automated market maker model, like Uniswap, or a decentralized order book model, like dYdX.

0x (pronounced “zero ex”) provides a similar service. However, instead of posting every transaction to the blockchain—which can be resource-intensive and quickly incur large gas fees—0x uses combinations of off-chain interactions and on-chain smart contracts to facilitate more cost-effective swaps. Built on the Ethereum blockchain and other EVM chains, 0x allows users to exchange both ERC-20 tokens and non-fungible tokens (NFTs).

The 0x protocol also aggregates liquidity from over 100 other exchanges (including those like Uniswap and Curve) to enable the swapping of assets at the best possible price. By doing this, the system aims to minimize slippage and execute swaps at optimal prices.

The ZRX token is used to fulfill two main purposes for the 0x protocol, including governance and as a medium for rewarding participants.

How was 0x developed?

0x was founded in 2016 by American entrepreneurs Will Warren and Amir Bandeali. Prior to founding 0x and its parent firm, 0x Labs, Warren studied multiple subjects including mechanical/structural engineering and robotics. He then spent time with several startups including Basic Attention Token and Brave. Amir Bandeali worked as a trader at Chopper Trading and other enterprises.

Warren and Bandeali published the 0x whitepaper in February 2017. The following August, 0x held an initial coin offering (ICO) that sold 500 million ZRX and raised $24 million. The 0x team has raised more than $85 million from venture capital funding, including a $70 million round led by Greylock in 2022.

0x has undergone multiple revisions over its lifetime. Notably, version 4 (v4) of the protocol was approved by the community in January 2023, voted on by over 2300 ZRX holders. 0x v4 introduced DEX aggregation with the goal of improving liquidity and trade pricing.

How does 0x work?

The 0x protocol is built using a set of audited smart contracts that operate on the Ethereum blockchain, layer 2 solutions (like Optimism), and other chains that use the Ethereum Virtual Machine (like Avalanche and Fantom).

Makers and Takers

There are two primary sides to the 0x ecosystem.

Makers provide the “supply” side of the market by providing liquidity to the order books and wait for their order to be matched.

Takers represent market “demand.” They use the liquidity provided by Makers to swap digital assets. Although Takers can be individual users, they can also be other DeFi protocols like dYdX or even centralized exchanges.

Trade execution

In an effort to reduce blockchain gas fees and minimize slippage on trades, 0x uses a combination of cryptographically secure transactions both off the chain and on the chain. This is called off-chain relay and on-chain settlement.

A trade begins with a Maker creating an order that details which asset they are willing to swap through the 0x protocol. This provides the necessary liquidity to the market. Meanwhile, a Taker submits an order off-chain that states which asset they wish to trade and for what price. At this point, no activity has occurred on the Ethereum blockchain—and thus no gas fees have been incurred.

If the Maker and Taker orders agree on a quantity and price of an asset, the Taker submits the order to the blockchain, and the trade officially settles on-chain. Importantly, 0x automatically aggregates the liquidity provided by all of the Makers participating in its infrastructure to optimize trade prices.

0x product suite

The 0x protocol makes use of several main products, including:  

• Swap API – Uses smart contracts to aggregate data from multiple DEXes for developers to integrate 0x into their decentralized applications (dapps).
• Orderbook API – Allows for the creation and execution of limit orders on Ethereum, BNB Chain, or Polygon.
• Matcha – A “DEX of DEXes,” allowing users to make trades powered by 0x’s DEX aggregator to find the most favorable (i.e., cheapest) trade execution.
• NFT Swap SDK – A multi-chain software development kit that allows developers to integrate NFT swap functionality into dapps.

By incorporating 0x’s flexible framework, developers have built decentralized exchanges, digital wallets, derivative platforms, and more.

How is the ZRX token used?

The ZRX token is used as a governance token, so that the community can vote on proposals to improve the protocol. It is also used to reward the relayers who communicate Maker’s orders to 0x’s order book.

Token distribution

At launch, there was a maximum total supply of 1 billion ZRX tokens. Of these, 500 million ZRX were sold during the 2017 ICO, while the other 50% were allocated as follows: 15% to operational and development expenses, 15% to the 0x developer fund, 10% to the team, and 10% to initial advisors and investors. At ICO launch, it was determined that the 10% team portion of the ZRX supply would be subjected to a 4-year vesting schedule (ending in 2021).

0x essentials

• 0x is a protocol that creates a framework for decentralized swapping of digital assets, which can be used by developers of decentralized exchanges and other financial products.
• Operating on the Ethereum blockchain and other EVM chains, 0x aggregates multiple sources of liquidity to optimize the prices at which crypto is traded.
• The native ZRX token is used to reward those who provide an important role to the protocol and for decentralized governance.

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