It is a common observation that as the world moves towards full digitization, everything that has value will be tokenized. Tokens are unique digital assets that a person can own and store in a digital wallet, and in the future, the deed to a property will be a token stored in an online wallet rather than just plain paper.
We are already seeing fiat currencies and tokenized securities. For example, the US dollar is now available in digital tokens called stable currencies such as Tether (USDT), TrueUSD and USDC . By one estimate, there is a total of $ 256 trillion in assets in the world, from property to artwork to stocks and oil. With the help of blockchain technology, everyone can be tokenized.
The idea of tokens began to take shape during the 2017/2018 ICO boom. At the same time, one team believed that there will be thousands of Ethereum tokens in the future and they will need to be exchanged efficiently and reliably. That team, led by Will Warren and Amir Bandeali, created a protocol on Ethereum with a tokenized future in mind. The protocol is called Protocol 0x. In the following text, Crypto Economy will provide you with a brief overview of Protocol 0x.
What is 0x Protocol?
Whitepaper 0x describes 0x as an open protocol for decentralized exchange on the Ethereum blockchain . The project is the brainchild of Will Warren, co-founder and current CEO, and Amir Bandeali, co-founder and current CTO of 0x. The protocol is developed by 0x Labs and the team is based in San Francisco, California.
0x Protocol aims to boost decentralized exchange where all kinds of assets, stocks, currencies, precious metals could be publicly traded on the blockchain as tokens. Use Ethereum smart contracts for anyone in the world to operate a decentralized exchange. With 0x Protocol, 0x Labs is creating an open source infrastructure that will allow frictionless peer-to-peer (P2P) token exchange.
0x is primarily a network protocol that is used to facilitate signaling between buyers and sellers rather than a crypto protocol. It is a public access smart contract to which any dApp that incorporates the sharing functionality can connect.
What is Inside 0x?
Architecture:
0x refers to its model as an "off-chain order relay with chain settlement" that combines the efficiency of state channels with rapid on-chain order book settlement.
0x is implemented with Ethereum smart contracts. The main idea of 0x is for other projects to use it as a back-end transaction protocol. Therefore, the 0x protocol itself is independent of the application and helps to decouple the transaction protocol layer from the application layer.
The meaning of "off-chain order relay with chain settlement" means that the order books are hosted and maintained by independent entities called relays . Only transactions are settled on the Ethereum network.
DEX smart contract:
0x's decentralized exchange (DEX) contract processes the exchange on the blockchain. According to the whitepaper, the full 0x DEX contract has about 100 lines of code and costs about 90k gas to complete an order. 0x DEX has two relatively simple functions: complete and cancel.
Creators and takers:
At 0x, the one who creates the order is called the "Creator" and the person who completes that order is called the "Taker . "
By combining these things, workflow 0x can be explained as:
The "Creator" approves the decentralized exchange (DEX) contract to access your token balance.
The "Creator" creates an order to exchange token A for token B, specifying the desired exchange rate, the expiration time, and signs the order with his private key.
The "Creator" sends the order directly to the receiver or the transmission order to the relays.
The «Taker» intercepts the order.
The "Taker" approves the DEX contract to access their token balance.
The «Taker» sends the order signed by the «Creator» to the DEX contract.
Finally, the DEX contract authenticates the signature of the "Creator", verifies that the order has not expired, verifies that the order has not been completed, and then transfers the tokens between the two parties at the specified exchange rate.
How does the 0x protocol work?
The tokens in the 0x protocol are traded in two types of order: Point-to-Point Orders and Issue Orders.
Point-to-point orders:
These trade orders are like peer-to-peer messages that allow two parties to exchange tokens directly with each other using almost any communication medium they prefer to convey messages .
In Protocol 0x, if a "Creator" wants to exchange Etherem tokens with a "Taker" with whom he knows how to trade, he can simply send a 0x request by instant message or email. A "Taker" only has to accept the exchange and the exchange will be executed. According to whitepaper 0x, these orders are called point-to-point orders.
0x messages are similar to the SWIFT messaging system that banks use to communicate with each other about money transfers. This P2P token exchange is powered by a consumer-oriented product called OX OTC. Since 0x order messages are transmitted off-chain, the link can be sent via whatever method the ordering person prefers, from email to Twitter and even written on a piece of paper.
Each point-to-point order message contains order parameters and an associated signature. The order parameters are concatenated and encoded to 32 bytes using the Kekak SHA3 function . The order author signs the order hash with his private key to produce an ECDSA signature.
Transmission orders:
Broadcast orders are used when there are no direct recipients. In streaming orders, buyers and sellers post orders in decentralized markets called Relayers in protocol 0x.
If a direct receiver is not available, Creators can visit 0x Relayers . Relayers are marketplaces that connect buyers and sellers. At Relayers, anyone can place their buy or sell orders. Each order in these markets contains everything you need to complete a transaction. When a recipient finds an order they like, they just have to confirm it with their crypto wallet and Protocol 0x safely completes the exchange.
There are several types of Relayer in the 0x ecosystem, each with its different type of market. Any developer can create their Relayer using 0x's open source software. The benefit of these relays is that they can serve countless communities. For example, a music fanatic can create a market for concert tickets or a game broadcaster can create a market for in-game items. In this way, the 0x team hopes to create millions of unique global markets, thus enabling a truly global economy. Thanks to blockchain technology, it is now possible to create a more secure and efficient global economy.
Relayers host and maintain an off-chain order book in exchange for transaction fees.
0x (ZRX) Token
ZRX is a native token of the 0x protocol. It's primarily a governance token, but it's also used for relays to charge fees for hosting streaming orders. Transaction fees are moved from the Creator and / or Taker to the relay upon settlement of a trade.
Token holders can also participate in decentralized governance where they can vote on upgrade proposals. In October 2019, the team released version 3.0 of 0x which also featured a new ZRX engagement mechanism.
ZRX Stake
In ZRY STAKING , market makers can create stakeholder groups. Market makers at 0x are a special category of traders who provide a significant number of orders on the 0x order books. Its function is to make it possible to have liquid markets with tight spreads between bid and ask, and low slippage when executing large orders.
Market makers are entitled to receive rewards in exchange for their activity, which is essential for the smooth functioning of 0x markets. To collect these rewards, they must stake ZRX tokens. To do so, they create stake pools, which allow them to stake their ZRX and attract the ZRX of other token holders, provided they share a portion of the rewards with them.
The ZRX share mechanism offers market makers monetary rewards in ether and additional ZRX voting power for providing liquidity.
Important links
Website: https://0x.org/
Technical document: https://0x.org/pdfs/0x_white_paper.pdf
Documentation: https://0x.org/docs
Twitter: https://twitter.com/0xproject
