0x Protocol (ZRX)

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## Basics

* Based in:
* Launched mainnet 8-2017
* Liquidity protocol
* Network Layer, one of the building blocks on top of the Ethereum blockchain. Can be used to trade ERC-20 tokens.
* Short explanation: An open and non-rent seeking protocol that facilitates a trust-less, low friction exchange of Ethereum-based assets. Developers can use 0x as a platform to build exchange applications on top of. For end users, 0x will be the infrastructure of a wide variety of user-facing applications.

* Longer explanation: *"From a high level, 0x is a collection of smart contracts deployed on the Ethereum blockchain, which specify the order format and trade execution process. In simple terms, the protocol tells you what these smart contracts know and how to execute a trade using them. 'On-chain order books are costly and slow, so 0x relies on a relayer model. In 0x’s lexicon, the Relayer  is a process that hosts order books in a centralized database and matches orders between two traders. There are a number of Relayers to choose from— Radar Relay, ERC dEX, Paradex, DDEX, and more. In effect, these are the apps built atop the 0x protocol."*
* Beta version of the 0x P2P order sharing network is out (7-2019). *"The long awaited killer 0x feature is finally in beta! Relayers and traders can spin mesh nodes and receive/share orders throughout the 0x ecosystem, leading to greater networked liquidity."*

## Audits & Exploits

* Bug bounty program can be found here. Max payout is $100,000 (29-6-2020).
* Blockchain Security DB (29-6-2020) shows 7 audits. The latest was in 10-2019.
* From their blog (18-3-2021):

*"0x protocol v4 is now live on BSC. The 0x v4 smart contracts on BSC are identical to those on Ethereum, which have been audited and adopted by the 0x community."*

### Bugs & Exploits

* The 0x core team hard forked within 1 day after a bug was found.

* The 0x core team disclosed that a potential exploit (12-7-2019) was found in one of its smart contracts; the exploit would have allowed an attacker to fill certain orders with an invalid signature leading the team to shut down the impacted contracts and redeploy them overnight. This shows the team has not decentralized the project yet. *"* *The APOwner contract is capable of executing an emergency shut down. It can also execute upgrades, pending a mandatory 2 week grace period. In the future, APOwner will be replaced by a DAO. ... Putting this all together, we need to see liquidity providers controlling a significant percentage of voting power before it makes sense to make governance binding on-chain. If approved in early Q4, the incentives proposed in ZEIP-31 should begin to shift the token distribution and voting power towards active liquidity providers."*
* This was found by Sam Sun.

## Governance

* Works closely with the Aragon team on governance.

* *"Putting this all [the protocol upgrades mentioned below] together, we need to see liquidity providers controlling a significant percentage of voting power before it makes sense to make governance binding on-chain. If approved in early Q4, the incentives proposed in ZEIP-31 should begin to shift the token distribution and voting power towards active liquidity providers."*

### DAO

* Since the 0x core team hard forked within 1 day after a bug was found, the team wonders if a DAO would be quick enough to fix similar issues:

*"a DAO would not be able to rapidly respond to a security incident in the same way that our team was able to because (1) coordinating tokenholders is time-consuming and (2) the vulnerability would need to be disclosed to tokenholders before they could be convinced to use the emergency shut down mechanism, but disclosing the vulnerability to tokenholders is equivalent to full-blown public disclosure.*

*A reasonable compromise might be for tokenholders to elect a small technical committee whose members control the emergency shut down mechanism. The committee would need to be nimble, the members deeply familiar with Solidity, the 0x contract architecture and tech stack, but also sufficiently distributed so no government could target a quorum of committee members simultaneously. The committee would serve as the first point of contact for the 0x bug bounty program, respond to vulnerabilities, and payout rewards to hackers that disclose vulnerabilities."*

* They envision a decentralized organization (DO):

*"because the system will control a pool of capital (community treasury), rely on humans at the edges of the network (makers, takers, relayers, developers, tokenholders), and social consensus will play an important role in directing the protocol’s upgrade path and the allocation of community resources.*

*In short, staked ZRX tokens (see ZEIP-31) will be eligible to cast votes on technical upgrades and to elect representatives onto committees that serve the ecosystem. Peter Zeitz’s presentation from Devcon4, “Building self-sustaining ecosystems through governance”, describes a committee-based approach to funding ecosystem development. This will be revisited once ZRX staking has been live long enough for liquidity providers to have significant voting power. It is important to note that this represents our current understanding of the best path forward. There are a number of Ethereum projects experimenting with innovative governance systems that we are closely following and that we hope to learn from. And, ultimately, the 0x governance system will be able to evolve with the needs of the community."*

* Despite above mentioned ideas, the team now talks once again about the 0x DAO (13-3-2021):

*"We created an on-chain binding governance system able to perform arbitrary actions on a 2M ZRX community-owned Treasury, seed-financed by 0x Labs. Voting rights are exercised by holding ZRX, 0x protocol’s governance token, at the time of the vote. Alternatively, one can receive additional delegated ZRX by a third party holder, through the staking system. Our goal is to get to full open governance by early next year, according to the roadmap. Our governance forum has polling functionality currently being used to signal community support on different topics (example), but this may evolve to include using platforms such as Snapshot.*

*If a majority and at least 10M ZRX in voting power are cast in support of the proposal, it is queued in the (optional) Timelock. The proposal can be executed immediately or in any subsequent epoch, depending on the `executionEpoch` parameter. The proposal can perform any arbitrary operation, including utilizing its controlled funds (the treasury).*

*Over the past few weeks, a few individuals and teams offered to help to shape 0x DAO’s first steps. As a result, we formalized a group of 0x DAO Bootstrap Delegates. The initial group of 0x DAO Bootstrap Delegates will be:*

1. *nikita, sonofpegasus (0x Community Ambassadors)*
2. *sha-2048 (BUILD and Metric)*
3. *joaocampos89 (DexKit)*
4. *nenadp, nikola\_j (DeFi Saver)*
5. *volleyfire (KeeperDAO and 0x market maker, VolleyFire)*
6. *gabririgo (RigoBlock)*
7. *evgeth (Zerion)"*

* The 0x DAO went live (12-4-2021):

*"The 0x DAO contract address has been deployed to mainnet and funded with 2M ZRX (~$4.1M at time of publishing).*

1. *Initially, the DAO will only control the community treasury and not upgrades to the core protocol.*
2. *The treasury’s purpose is not enforced and ZRX holders will control what to do with treasury funds. The suggested usage, however, is the funding of projects that benefit the 0x ecosystem and provide positive effects to ZRX holders. Some examples of past activities led by 0x Labs include: introducing stakeholders incentives (such as Market Maker programs and ZRX staking), funding development efforts like 0x Tracker and Gitcoin bounties, and growing 0x protocol awareness through events and marketing campaigns.*
3. *A group of bootstrap delegates from projects building on 0x and the community will help guide the DAO.*
4. *While anyone can share their ideas for DAO treasury use on the 0x forum, at launch, there will be a requirement of 100k ZRX to move a proposal to a public vote.*
5. *Anyone holding any amount of ZRX will be able to participate in public votes. Since voting will occur on-chain, it will cost approximately 80k gas to cast a vote."*

### Treasury

* From Cointelegraph (12-2-2021):

*“Managing a community treasury is the natural first step. It will enable ZRX holders to get familiar with the governance system and fully experiment while still having some safe boundaries in place,” he said. “The next step is to expand the system’s reach to all aspects of the protocol, including upgrades that have just been made easier with the recent 0x v4 launch.”*

* From their blog (13-3-2021):

*"We created an on-chain binding governance system able to perform arbitrary actions on a 2M ZRX community-owned Treasury, seed-financed by 0x Labs."*

## Token

### ICO

* 0x issued an ICO on August 15th 2017. 0x completed the token sale on Aug. 16, 2017, after raising $24 million in ether (ETH). The sale was planned to extend to Aug. 18, 2017, but ended after the purchase cap was reached in the first 24 hours.

### Token allocation

* 1 billion tokens were created, of which 500 million were sold in the ICO. The remaining 50% of supply is allocated between the 0x company, a developer fund, the founding team, and early backers & advisors. Tokens allocated to founders, advisors, and staff members are locked-up according to a 4-year vesting schedule with 1yr cliffs. The project retained 15% of supply (150 million ZRX) for ongoing expenses and allocated another 15% to a developer fund to help grow the 0x ecosystem. The remaining tokens were split among the team, which received 10% of supply (100 million ZRX) with a four year vesting schedule, and initial advisors and investors, which also received 10%.

### Utility

* Market fees are distributed to ZRX tokenholders/liquidity providers.

### Token Details

* The founders talking about their token model:

*"We initially explored having traders place ZRX security deposits that could be slashed in the case of accidental or intentional overcommitment by makers (placing orders for more funds than they have available) by enforcing a 1:1 correspondence between open orders and security deposits. If a maker assigned two orders to the same security deposit or if one of their live orders became unfunded, their associated deposit would be slashed. This mechanism would not only help us avoid some race conditions, it would also ensure traders accrue tokens in proportion to use. Eventually we determined that the implementation would add significant complexity to the smart contracts and lead to a mediocre user experience. It was also unappealing to force liquidity providers to lockup a scarce resource that could become expensive with adoption; it doesn’t make sense to put an upper bound on the number of liquidity providers that can exist simultaneously.*

*Given practical constraints, the only feasible mechanism we could identify that would ensure ZRX tokens end up in the hands of traders (at least the heavy users) was to require ZRX be used to pay fees to relayers. From an implementation standpoint, this was by far the simplest solution. On the other hand, forcing new users to acquire ZRX tokens can feel like an unnecessary point of friction when getting started. Ultimately, we believe this to be the most reasonable mechanism to date, and we believe that the community should be involved in evolving token mechanics if a better approach becomes feasible in the future."*

* From this post by Token Tuesdays (29-1-2020):

*"With 0x’s v3 launch on Ethereum mainnet in early January 2020, the decentralized liquidity protocol features a small fee for takers on each trade. Market makers (MMs) receive a liquidity reward in the form of ETH proportional to the protocol fees generated from their orders and the amount of ZRX tokens staked.*

*Similar to PoolTogether’s sponsored Dai, the 0x team is subsidizing the liquidity rewards pool with $5,000 worth of ETH for the next few epochs to test out the new economic model. The 0x team will continue to add $5,000 into the liquidity pool every epoch as an incentive to encourage early beta testers with the last subsidized liquidity rewards pool ending with Epoch 9 and a total of $25,000."*

* From Formal Verification (23-6-2020):

*"One of the new additions to V3 is the integration of 0x API which allows applications to pull liquidity from several sources (e.g. 0x Mesh, Uniswap, Kyber). All ‘bridge’ trades that funnel through the 0x API still pay protocol fees."*

### Token Economics Update after implementation

* From Bankless (12-2-2020):

"*ETH-denominated fees are generated from token exchanges and distributed pro-rata to liquidity providers who stake ZRX."*

* From Our Network #7 (6-2-2020):

*"Among the changes enacted in v3 of 0x is a new system of token economics. ZRX is the governance token of the 0x protocol, but it also serves additional economic functions in the ecosystem. In previous versions, the ZRX token served as the unit in which users would pay fees to 0x relayers. Under this new incentive system, there is a small protocol fee associated with each trade, which are then distributed to market makers in proportion to:*

1. *the protocol fees generated from their orders*
2. *the size of their ZRX stake relative to all ZRX staked*

*Market makers can accrue staked ZRX beyond their own balance by creating staking “pools” and sharing rewards with third-party stakers. There is now 11.8M ZRX (~$3M) staked (source). This represents ~1.1% of the total supply and 2.9% of all ZRX holders with a balance of >1K ZRX. Around 51K ZRX were provided by market makers themselves. The rest was provided by third-party stakers, most coming in after the introduction of a frontend to interact with the staking contracts on January 9.*

*The stake-based incentive system also has big implications for governance of the 0x protocol. The 0x ecosystem is driving toward binding on-chain governance for the ZRX token. "*

## Tech

* Whitepaper can be found here (21-2-2017).
* Code can be viewed here.

### Implementations

* Built on: Ethereum and BSC (18-3-2021); *"There is no new ZRX token on BSC. There has been no change in how the canonical ERC20 ZRX token functions on Ethereum."* It also mentioned it will move towards multiple other chains as well.

### How It Works

* From Crypto Briefing (14-10-2020):

"*According to 0x, there are two levels to a trade: Order matching and execution. Order matching is done off-chain and only executed on-chain once the order has a clear maker and taker. This mediation occurs in the 0x network between relayers, of which there are many. Any open order on any relayer is eligible for fulfillment by any other order on another relayer.* "

### How decentralized is it?

* Explanation by Messari:

*"0x is building a decentralized exchange for the Ethereum blockchain. The team envisions this protocol as a way to facilitate permissionless transfers of value across the Ethereum blockchain. Initially, the project will focus on the exchange of ERC20 with plans to build capabilities to allow for the exchange of any Ethereum based asset.*

*Decentralized exchanges have the potential to offer advantages over centralized systems such as real-time settlement, reduced counterparty risk, censorship-resistant transactions, and transparent technology. 0x is not managing a decentralized exchange itself but is instead building the infrastructure to enable the creation of these platforms.*

*Unlike earlier decentralized exchanges 0x does not use on-chain order books, but instead uses “relayers” to manage order books through off-chain messaging. The team believes this reduces costs related to updating orders and offers a faster process. Transactions are settled on the blockchain based on quotes from the off-chain messaging service.*

*Integration of the 0x protocol will happen through two primary methods. First, partners will integrate the technology to power various services, such as marketplaces in District0x or prediction markets in Augur. Second, users can create decentralized exchanges that facilitate the swapping of ERC20 tokens. This includes services like Radar, The Ocean, and Paradex. The goal is to create a venue for decentralized exchange with an open protocol supporting as many relayers as possible. So a sufficiently sized pool of liquidity can be aggregated for the efficient trading of tokens amongst participants."*

* In simple English as by Multicoin Capital:

*"0x utilizes off-chain matching of orders and on-chain execution of trades. This allows for a large number of individual trades to take place quickly without bloating the blockchain with unfilled/cancelled orders.*

*0x accomplishes this through a novel form of private key-signed messages. Users who wish to conduct a trade create a message that includes specific parameters about the trade—which tokens they’d like to trade, the price, and the order expiry. This message is signed by the user as authorization and broadcast to the network. Once broadcast, this order is open and can be filled by counterparties. Alternatively, the user can name a specific counterparty and send the order directly to that party to fill. The order can only be filled according to the parameters set by the user that generated the order. When the taker signs the order, it is submitted to the Ethereum blockchain, where the trade is executed trustlessly by the 0x smart contract. This means that the smart contract simultaneously takes balances from both the maker and the taker and sends them to the counterparty at the exact same time. No third party must be trusted.*

*Relayers offer the best traits of the centralized exchange model and the decentralized exchange model. Relayers can invest in high-quality user interfaces and charge additional fees for specialized services, but they are never in control of users’ funds. Furthermore, the barrier to entry for building a relayer is orders of magnitude lower than the barrier to entry for building a centralized exchange (primarily due lack of need to maintain an internal ledger of customer balances, build settlement infrastructure, and most importantly no need to conduct KYC/AML due to lack of asset custody)."*

* From the Token Economy newsletter: *"While they offer various products on top of their core protocol they are most known for having a range of relayers that keep order books off-chain and then the actual trades are settled on-chain. This is the model that looks most similar to traditional exchanges. Challenges with this model have been unclear regulatory environment and a lack of liquidity."*

* The following comes from a post (29-10-2019) by competitor Komodo (which is the creator of AtomicDEX), so should be read sceptically:

*"Let’s understand 0x architecture with an example. Bob creates an order using a Relayer GUI, which then goes to the relayer’s order book (centralized database). A relayer can share this to other Relayers so that more traders can see the order.*

*Now, Alice wants to accept Bob’s order. She executes the order using the Relayer’s GUI. Then, the relayer matches the request and sends it to a 0x smart contract to complete the order.*

*While creating/executing these orders, Bob and Alice allow 0x smart contracts to deduct the funds from their respective wallets. 0x smart contracts now verify the order and complete the token transfer on-chain.*

*The 0x protocol created the ZRX token, which is used to pay trading fees. So if you are using 0x Relayer, you need some ZRX tokens to make or take an order. The Relayer also collects some part of the fee to host order books.*

*The 0x protocol is one of the most widely-used decentralized exchange protocols in the industry today. Third-party projects can build atop the 0x protocol, meaning that a number of different DEXs and Relayers can all exist while sharing the same protocol and liquidity pool. This is a huge benefit to 0x.*

*However, the 0x protocol only works for Ether and assets issued on the Ethereum platform (ERC tokens). It is not compatible with Bitcoin protocol or the protocols of other blockchains, like EOS, Monero, Stellar, Cardano, NEO, or Tezos. This severely limits the utility of the 0x protocol and clearly prevents it from becoming an industry-wide solution."*

### Upgrades

#### ZEIP's and Protocol Upgrades

* Just like Bitcoin and Ethereum have BIP's and EIP's; 0x Improvement Proposals (ZEIPs) describe standards and protocol specification changes for the 0x protocol. For example in the July update of 2019 the team wrote the following:

*"The community also voted and approved two ZEIPs this month: ZEIP-24 (ERC1155 Proxy) and ZEIP-39 (Static Call Proxy).*

*Several new ZEIPs were created this month, including a proposal by the 0x Core Team to add another assetProxy that could bridge liquidity available on other on-chain exchanges (ZEIP-47 — ERC-20 AssetBuyer). We were also pleased to see the Augur team submit two proposals: ZEIP-48 (Custom Order Processor, MicahZoltu) and ZEIP-49 (Support for ERC-777, MicahZoltu).

More progress has been made towards feature-completion of V3 of the protocol, including the implementation of ZEIP-40 (New Order Matching Strategy) and ZEIP-41 (Batch Order Matching)."*

#### ZEIP-31, which proposes an upgrade to the 0x protocol to utilize new ZRX token economics:

* Under the proposal, takers pay a small protocol fee on each 0x trade.
* Market makers (MMs) receive a liquidity reward that is proportional to:
 — the protocol fees generated from their orders.
— their stake of ZRX tokens.
* MMs who do not own sufficient ZRX to collect liquidity rewards will be able to form a ZRX staking pool for third-party delegators.

#### 0x API

* From their blog (1-10-2020):

"*In January 2020 we launched v0 of 0x API, a public tool designed to make it simple for DeFi developers to tap into all DEX liquidity in a fast and reliable way. Since launch, 0x API has processed over 29K trades that in total represent ~$550 million in trading volume. 0x API v1 delivers market-leading gas efficiency. With a custom, highly-optimized architecture, accessing Uniswap’s liquidity through 0x API is now as cheap and often cheaper than going to Uniswap directly."*

#### 0x v4

* From the mainnet announcement (27-1-2021):

*"The 0x v4 governance vote was completed on January 23rd with the overwhelming majority of participants voting “Yes” to give users and developers access to major improvements in pricing, upgradability, and composability of the protocol.*

*It is the most gas-efficient DEX protocol. 0x users should expect more competitive liquidity from professional market makers (up to 70% gas savings for RFQ liquidity, 10% for limit orders). In addition to that, it is cheaper to trade on both Uniswap and Sushiswap using 0x v4 than it is natively on those platforms.*

*It is automatically upgradable. Thanks to this new architecture and to the 0x governance process, the protocol will be able to iterate more quickly based on what the market needs, without having to wait for the ‘next 0x version’. ZRX holders should expect more ZEIPs and governance votes on specific features in the months to come."*

### Staking

* From Our Network #7 (6-2-2020):

*"The stake-based incentive system also has big implications for governance of the 0x protocol. The 0x ecosystem is driving toward binding on-chain governance for the ZRX token. Under the new staking system, 50% of voting power of the staked tokens are transferred to the pool operators, the market makers themselves. So while non-market makers who have staked retain a large share of voting power (enough to cancel out the vote of the market maker if they choose), a great deal of voting power was transferred to market makers. The 11.2M ZRX currently staked is nearly double the largest amount of ZRX involved in past ZEIP votes (6.6M ZRX for the v3 protocol vote), and represents a major step forward for community participation."*

* From Our Network #7 (10-4-2020):

*"The 0x community just resolved its latest vote on April 5. The topic at issue was ZEIP 76, a meta-ZEIP for standardizing the ZEIP process itself. The issue was relatively uncontroversial, since it involved no changes to the protocol itself. It was, however, the first vote after the introduction of the new ZRX token economics in v3. In the new token economics, market makers that run staking pools are able to vote with half of the ZRX contributed by members of their pool, thus aligning governance with the interests of market makers. However, since half of the voting power remains with stakers, the stakers can collectively cancel out the vote of the operator should they choose to do so.*

*With 8.4M ZRX in voting power represented, the vote was the largest ZRX turnout for a vote yet, surpassing the vote for v3 of the protocol (which represented 6.6M ZRX). Most of the ZRX voting power represented belonged to staking pool operators."*

* From Our Network #22 (22-5-2020):

*"Market makers using 0x receive rewards in proportion to the fees generated from fills of their orders and the amount of ZRX staked against their addresses. If the market maker does not own sufficient ZRX to maximize their payouts, they can form pools to accrue stake from other ZRX holders in return for sharing a portion of their rewards. The proportion of rewards that are shared with pool members is set by the market maker and can be adjusted upwards.*

*In setting the percent of rewards to share, the market maker faces a maximization problem. A larger percentage of rewards shared decreases the market maker’s share of the eventual reward pot, but it also can make their pool more attractive to potential stakers, and more ZRX staked means the reward pot will be bigger. The latter effect depends on how attractive the pool is relative to other pools, so we should expect to see pools compete on rewards shared. Indeed, we’ve seen many pools increase the proportion of rewards shared to pool members, as shown in the chart below. Of the top 5 pools, Volleyfire has set this value most aggressively at 33%."*

* From Formal Verification (2-6-2020):

*"0x released their V3 in November 2019, where ZRX holders are now given the right to receive fees either by market making directly or by delegating ZRX to MMs for a portion of the MMs fees. These MMs decide the percentage. Note that <2% of the ZRX supply is staked to receive trading fee rewards.*

*What is interesting is that a decrease in annualised earnings has translated to an increase in ZRX price. This is particularly apparent in the last few week. The increase in ZRX seen in early May was largely due to the approval of ZEIP-77 which introduced shorter staking epochs (10 days to 7 days). Ironically, while shorter staking windows was warmly met by the community, the staking rewards were actually decreasing overall relative to the start of January."*

* From Formal Verification (23-6-2020):

*"Critically, rewards for MMs is dictated by a Cobb-Douglas function where rewards is based on both the amount of fees generated and size of the MM’s stake relative to its peers. What’s important to consider in the function is a constant in the function (α) in the range of 0-1 that determines the weight of fees vs stake. When α = 0, liquidity rewards is solely based on liquidity contribution. With α = 1, liquidity rewards is solely based on staking contribution.*

*Initial parameter suggestions in 2019 set α at 0.5 giving equal weighting to both liquidity and stake contributions in calculating rewards. However, before the launch of V3, α was revised to 0.75, meaning there is currently a greater incentive to contribute liquidity and a lower incentive to stake ZRX.*

*By looking at the aggregated total rewards across the 8 staking pools, there have been a total of 570 ETH has been paid in protocol fees to MMs with a large portion of this of course coming from the highly volatile mid-March period. In line with declines in volume, rewards have suffered since March with epoch rewards averaging just 21 ETH in May."*

### Interoperability

* From Paradigm (10-11-2020):

"*In this post, the 0x team goes through how 0x Labs’ mission will progress in a world where the tokenized value spans across multiple blockchains. To fulfill this mission, 0x Labs will pursue two strategies: colonize other blockchains with emerging tokenization of value, and build a p2p exchange blockchain hub."*

### Other Details

* From DeFi Weekly (11-3-2020). 0x uses Typescript (which provides integration guarantees) instead of JSON ABI files (which need to be updated).
* Uses Infura

#### Mesh

* From their 2019 recap (31-12-2019):

"*0x Mesh is a permissionless and censorship-resistant p2p network for propagating 0x orders; a global liquidity pool that can’t be taken down. This idea was originally proposed in the 0x white paper almost three years ago, but we couldn’t realistically kick off the project until early 2019.*

*One aspect of Mesh that is particularly exciting is that it is the first p2p network with a node that can natively run in the browser. Why is this so powerful? It allows any website to plug into p2p markets without hosting the markets directly and/or requiring users to download custom software. 0x Mesh will play a central role in Augur v2, supporting globally accessible prediction markets that can be accessed through a web browser, and with more liquidity than Augur v1 due to 0x protocol’s efficient off-chain design.*

*Browser-based Mesh isn’t without tradeoffs: spinning up a node, connecting to the network, finding peers, and pulling orders into the browser can take up to 30 seconds. And orders posted to Mesh may not persist in the network unless pinned to a node. So, for example, if you post an order to a local Mesh node running in your browser and then close the associated browser tab, your order may eventually be purged from the network, even if the order remains valid. Relayers can serve as persistent Mesh nodes that pin users’ orders and provide instant access to liquidity without warmup time."*

## Privacy Method

### ZK-Starks

* 0x is trying to use ZK-Starks to scale 0x and maybe Ethereum as a whole with what they call their 0x-Sidechain. They explain it here.

* From Proof of Work #79 (19-11-2019):

"*We introduced a new initiative OpenZKP, an open-source zk-STARK implementation."*

## Their Other Projects

### Matcha DEX

* Matcha is a DEX interface built on (15-4-2020) the 0x Protocol. Went live (30-6-2020).
* From a Kyber report (6-7-2020):

 "*Matcha pulls liquidity from Kyber, Uniswap, 0x, Curve, and Oasis and single order can be spread across multiple liquidity sources to get the best price for the end user."*

* Matcha crossed $20M in cumulative trade volume.
* From Our Network (1-1-2021):

*"Shortly after Matcha reached 1 billion cumulative trading volume, on Nov 18th, the team launched the“Power-Up” upgrade to open up token listing from ~60 tokens to an arbitrary amount of tokens, which doubled the daily active users instantly. It largely increased the diversity of traded tokens and pairs. Before the launch there were ~30 different tokens and ~60 different pairs actively being traded, while after, that number went up to ~100 tokens and ~120 pairs, respectively."*

## Roadmap

* A rough roadmap was posted on 3-2019 with the following phases:

1. Community Managed Token Registry
2. Community Veto Power.
3. Liquid Democracy
4. Cryptoeconomics Modeling
5. Off-chain Voting
6. Cross-blockchain Governance

When asked about the progress they responded with the following:

1. *Token Curated Registry - we decided that our resources are better spent focusing on other initiatives given that a number of other teams are already focusing on TCR development full-time*
2. *Community Veto - with ZEIP-23 (back in Feb.) we established a voting mechanism for the community to approve or veto proposals and we plan on continuing this process for future ZEIPs* - https://blog.0xproject.com/0x-roadmap-part-1-zeips-d5cb8458584e
3. *Liquid Democracy - still on our roadmap "*We are currently exploring liquid democracy, a delegative voting scheme, as a potential governance system for phase 3 of our governance roadmap. Liquid democracy has a few interesting properties that make it attractive for governance over the 0x pipeline." Is on the roadmap scheduled before 2020.
4. *Cryptoeconomics Modeling - while Peter & Weijie completed the crypto-economic modeling for ZEIP-31 (https://github.com/0xProject/ZEIPs/issues/31), we've realized that it doesn't make sense for us to build general modeling tools for the broader community at this time*
5. *On-chain voting - still on our roadmap* (on the roadmap scheduled for distant future)
6. *Cross-Blockchain Governance - still on our roadmap* (on the roadmap scheduled for distant future)

*- https://blog.0xproject.com/zeip-23-vote-post-mortem-311c9323e228 "*

* A new Governance roadmap (5-3-2020) has been posted. In this roadmap 0x wants to move towards community funding and developing in the next five years. With their focus for 2020 *"primarily to grow engagement in our community."*

### Protocol v3

* From their website (11-11-2019):

"*The v3 proposal concerns a major update to 0x protocol. The upgrades fall mainly into three buckets: the introduction of staking contracts, a new pattern supporting bridged liquidity across the DeFi ecosystem, and miscellaneous technical improvements.*

*A ZRX staking mechanism grants 0x market makers greater ownership in the protocol and encourages participation in governance by distributing monetary rewards (in ether) and additional voting power for providing liquidity. 0x v3 also introduces a powerful set of bridge contracts that aggregate liquidity from multiple sources including DEXs like Uniswap, Kyber, and Oasis."*

* The proposal got approved. In all, the community voted to approve four ZEIPs in 2019.

### Future

* From Paradigm (10-11-2020):

"*In this post, the 0x team goes through how 0x Labs’ mission will progress in a world where the tokenized value spans across multiple blockchains. To fulfill this mission, 0x Labs will pursue two strategies: colonize other blockchains with emerging tokenization of value, and build a p2p exchange blockchain hub."*

* Announced V4 (7-1-2021) with focus on liquidity aggregation, gas efficiency, automatically upgradable and plug&play liquidity.

## Usage

From the Token Economy newsletter (7-2019):

* *"After seeing Uniswap quickly outgrow their volumes the first four months of the year, 0x has had some fantastic summer months. It looks like 0x’s focus on improving liquidity is paying off as they’re closing in on Uniswaps weekly volumes and the most prominent DEX project of 2018 should probably get more attention again. What is also quite remarkable here is that a vulnerability was found in the 0x contracts on July 12th (week starting 8th of July). They shut down their v2.0 contracts, patched them and redeployed all their contracts as v2.1 on that same day. Some immutability maximalists might be disappointed by the fact that the core 0x team can simply shut down their smart contracts. Interestingly the metrics do show an impressive consistency in volume that week. Albeit a slight dip in volume the week does not even look like an outlier here!"*
* From their 2019 recap (31-12-2019):

"*Uniswap took the Ethereum community by storm, garnering significant mindshare, and driving a new narrative around dApp UX and composability. In less than a year, Uniswap captured 25% of DEX market share by $-volume. Kyber also focused in on dApp composability and integrations. **Despite this increasingly competitive environment, 0x market share by $-volume quadrupled in 2019.***

*While DeFi markets generated the most trading volume on 0x by $-value in 2019, when Gods Unchained cards were unlocked for trading, their official marketplace and the community-developed marketplace TokenTrove triggered a 10x spike in the number of 0x trades overnight. The launch also drove an increase in the number of unique traders on 0x protocol, many of which were using a DEX for the first time."*

* From DeFi Rate (26-5-2020):

*"0x is beginning to live up to its reputation. Since the v3 upgrade, the liquidity protocol has been competing with other major Ethereum DEXs while the whole sector is lifted by increased volumes across the board. With fundamental metrics like volumes, average trade size, and projected earnings all reaching all-time-highs within the past three months, ZRX tokens are slowly beginning to realize a fair valuation. At the start of the year, ZRX’s PE Ratio was astronomically high, sitting at around 7,750.*

*However, the surge in protocol revenues have brought the token’s PE ratio down to a more manageable number of 294. For reference, Kyber’s KNC holds a PE of 62.50 while Synthetix sits at around 152 as of writing.*

*All in all, 0x’s launch of ZRX’z token economic upgrade has served rather well. The addition of the 0x API is allowing the liquidity protocol to realize its potential as a sector-leading liquidity protocol. With ZRX tokens acting as one of the most valuable DeFi assets in the space today, it’s a positive sign to see the speculative and fundamental valuations reaching parity. "*

* From Formal Verification (23-6-2020):

"*Exchange volume on 0x occurs on essentially 2 protocols (V2 and V3) in parallel. It is at the complete discretion of market makers, relayers, and applications to choose which protocol to use. Overall, combined V2 and V3 volume has been respectable throughout 2020, climbing to new ATHs eventually reaching $133 million in March. In USD terms, V3 volume has made up ~20% of the combined 0x volume in USD, marking a decline from its peak in February where it had a 47% share. Trends in fees largely correspond to V3 trading volume (note epochs can carry over fees from previous month). Total protocol fees taken since the launch of V3 have only amounted to **~**$73k with the largest amount of fees taken in a single month being March (~$20k).*

*There are more than 17.3 million (~$6 million) ZRX staked which only represents 1.7% of the total ZRX supply. When we isolate V3 volume and compare this to other DEX projects, 0x only has 1.7% of total DEX Volume for June so far "*

* From Formal Verification (7-8-2020):

"*0x has now had $100 million in volume flown through the 0x API.*

*While end users have been kept happy, it's important to recognise the implications of this adoption on 0x network stakeholders (i.e. market makers and ZRX stakers). As highlighted in previous issues, 0x has introduced a reduced protocol fee (ZEIP-79) and FillNonNative Transformer. Critically, this transformer re-routes on-chain liquidity bridges (e.g. Uniswap, Curve) and effectively bypasses the V3 exchange and thus protocol fees entirely. **In other words, rewards for market makers and ZRX delegators are being continually sliced**.*

*While protocol fees have generally been climbing over the last 3 months, **they have yet to pass $5k for a single day**. For perspective, Kyber which has taken $150k in network fees so far in the current Epoch (giving an average of $16k per day in fees)."*

* From Our Network #44 (23-10-2020):

"*10 days in, with only ~10% of Metamask users being exposed to the swap features, Metamask has filled ~$2M volume through 0x API making it the 2nd largest integrator besides Matcha. At its peak, Metamask made up to 5% of 0x API volume share, with a daily total over $700k.*

*In the week of September 7th, Matcha’s weekly volume rocketed from 27.9m to 118.6m showing a 4.25X growth and stayed steady around ~80m per week after the spike. It is consistent with the user growth trend — with a 2-week lag — that in the last week in August, weekly user count grew by ~257%, from 157 to 404."*

* From their twitter (31-1-2021):

*"0x just crossed over $1M in protocol fees generated, with $450k+ just in the last 30 days! This growth is directly correlated with the explosion of 0x volume and is driving 10% APY for $ZRX holders who are staking via http://0x.org/zrx. In January alone, over 70 ETH were distributed to $ZRX stakers, roughly doubling returns in December."*

* From Our Network (6-3-2021):

*"The first 2 months' volume ($12.6B+) on 0x outperformed the entire year of 2020 ($9B)."*

* From Our Network (7-4-2021):

*"On March 18th, 0x API launched on BSC and so far has relayed over 155k trades, accounting for $478M in trade volume. On a peak day (Apr 18th), Dodo users alone accounted for $70m+ in trade volume. It now provides 14 liquidity sources to 7 applications. The expansion also attracted 25k new users with the 0x API now reaching ~85k MAU."*

* From Our Network (16-10-2021):

*"0x API now is on 4 blockchains, surfacing 47 dApps' customers' trading demands, connected to 39 liquidity sources, which also supports multiple asset types in 1 trade (ERC20, ERC721 and more)."*

### Projects that use or built on it

#### List of dapps that are (or will be) using the 0x protocol:

* Ambo (on the list as of 7-2019)
* Aragon
* Auctus
* Augur
* Balance (on the list as of 7-2019)
* Binance Smart Chain (18-3-2021)
* Blitz Predict (on the list as of 7-2019)
* b0x (not on the list as of 7-2019)
* Blocknet
* Coinbase Wallet (on the list as of 7-2019)
* CoinGecko (on the list as of 7-2019)
* ChronoBank (not on the list as of 7-2019)
* dex.guru; integrated (6-3-2021).
* DexKit (10-2020).
* Dharma
* District0x
* Dodo
* dYdX
* EasyTrade
* Emoon (on the list as of 7-2019)
* Ethix (not on the list as of 7-2019)
* FabrX (on the list as of 7-2019)
* Gods Unchained (on the list as of 7-2019)
* Hut34 Project (on the list as of 7-2019)
* LedgerDex; integrated (6-3-2021).
* Lendroid
* Maker
* MelonPort
* MetaMask; from this update by 0x (16-11-2020): "*MetaMask integrates 0x API for its new direct token swap functionality with over $13 million in volume sourced through 0x protocol so far."*
* MyCrypto (on the list as of 7-2019)
* Nuo (7-8-2020)
* OpenANX
* Paradigm Protocol (on the list as of 7-2019)
* Pixura (on the list as of 7-2019)
* Request Network
* RexRelay (on the list as of 7-2019)
* Set (on the list as of 7-2019) one of it's biggest users
* Settle Finance (on the list as of 7-2019)
* Totle; integrated (6-3-2021).
* Zapper Exchange; the DEX aggregator uses 0x (16-12-2020).
* Zerion (7-8-2020)

### List of relayers that will be (or are) using the 0x protocol:

* Amadeus (not on the list as of 7-2019)
* Bamboo Relay (on the list as of 7-2019)
* DDEX (not on the list as of 7-2019 since it forked itself out of the project)
* Dextroid (not on the list as of 7-2019)
* ERC dEX
* EtherBlockchain.io (on the list as of 7-2019)
* Ethfinex a matching relayer that mirrors the Bitfinex orderbook, spun off from Bitfinex and rebranded as DeversiFi.
* Instex (on the list as of 7-2019)
* IDT Exchange (not on the list as of 7-2019)
* Lake Project (on the list as of 7-2019)
* MobiDex
* OpenRelay
* Paradex
* RadarRelay
* Starbit (on the list as of 7-2019)
* SharkRelay (not on the list as of 7-2019)
* The 0cean
* Token Jar
* TokenIon (on the list as of 7-2019)
* Fordex (on the list as of 7-2019)

### List of 0x trade explorers:

* 0x Remote Hr (not on the list as of 7-2019)
* 0x Trade Viewer (not on the list as of 7-2019)
* 0x Tracker

### List of Integrators on 0x API

* From Our Network (1-1-2021):

Matcha (70%), DeFi Saver, Zerion, MetaMask, Prysm, DexKit, Zapper, Maskbook, Dodo.

## Pros and Cons

### Pros

* From Hackernoon (16-1-2021):

1. *"It supports both ERC 20 and ERC-723 tokens from the Ethereum network*
2. *Has comprehensive and unique applications including its possibility of being applied in marketplaces*
3. *Shared liquidity*
4. *Trustless exchange"*

### Cons

* From Formal Verification (23-6-2020):

*"One of the new additions to V3 is the integration of 0x API which allows applications to pull liquidity from several sources (e.g. 0x Mesh, Uniswap, Kyber). All ‘bridge’ trades that funnel through the 0x API still pay protocol fees. Digging deeper into the relayer distribution since the launch of V3, we can determine that the 0x API was responsible in sourcing most of the volume during the volatile period in March (67% at its peak).*

*While this is essentially good for MMs and ZRX delegators, we have started seeing the rise of DEX aggregators. For example, DEX aggregator 1inch has just surpassed $500 million in total volume. The risk here is that, instead of having a protocol fee applied for every bridge trade facilitated by the 0x API, applications might alternatively opt to plug into APIs from alternative providers like 1inch - seeking the lowest slippage and best price while only paying fees where they are necessary. If protocol fees for 0x API are considered the premium, what is the added value?"*

## Competition

* Has been forked by DDEX into Hydro, which removed the 0x token. However 0x is still continuing.

From their website:

* *“In 0x protocol, orders are transported off-chain over any arbitrary medium, massively reducing gas costs and reducing blockchain bloat. Relayers help broadcast orders and collect a fee each time they facilitate a trade. Anyone can build a relayer.*
* *The simplest example of a Relayer is a website allowing users to create, discover and fill orders. The Relayer must build out a UI and host a backend database to provide this functionality.*
* *To simplify the process of interacting with the 0x protocol, we have written a Javascript/Typescript library called 0x.js. This library helps relayers interact with the 0x protocol smart contracts through a higher-level, easier to use interface. In addition, it also providers many useful utilities for hashing, signing, validating and serializing 0x orders.*

* *Before getting started with 0x.js and the 0x protocol, it is helpful to introduce a few concepts. There are two parties involved in every trade, a maker and a taker. The maker creates an order for an amount of TokenA in exchange for an amount of TokenB. The makers then submits these to a relayer. Takers discover orders via a relayer and fills them by sending them directly to the 0x protocol smart contracts. The 0x protocol smart contracts performs an atomic swap, exchanging the maker and taker tokens.”*

* *“The 0x Protocol extends on this functionality by performing multiple balance transfers in a single atomic operation. If Alice wants to exchange 100 units of TokenA for 200 units of TokenB with Bob, Alice would want to make sure Bob was going to keep his end of the deal. Rather than Alice sending her amount of TokenA to Bob and hoping Bob will send TokenB to Alice sometime in the future, the 0x Protocol performs this exchange in a guaranteed atomic operation. So Alice and Bob will get exactly what they expect. The 0x Protocol is designed to minimize the amount of transactions (and fees) required for Alice and Bob to successfully exchange tokens. 0x protocol uses a process involving off-chain orders with on-chain settlement. You can find more information on the 0x Protocol by reading our whitepaper or the beginners guide to 0x.”*
* The registry serves as the official on-chain reference for settlement of transactions used by market participants to confirm the token addresses and exchange rates trades will settle at once executed. Going forward the team plans to introduce governance mechanisms that will give ZRX token holders oversight of the registry and allow for future upgrades to the network.
* Because the relayer system resides outside of Ethereum’s main chain one of the primary concerns the team is looking to proactively address is the potential for front-running. Theoretically, when transactions are delivered to the Ethereum main chain an order could be front run by adding extra gas to a transaction that could allow a user to have their transaction filled first. The team has indicated a number of ideas on how to tackle the problem and are engaging in targeted experimentation to identify the most promising solution(s).
* How it differs from KeeperDAO's off-chain mechanism (4-6-2021):

*"Founder Will Warren explains the difference between 0x and KeeperDAO, “KeeperDAO's hiding game is a trade execution coordinator (TEC)….0x protocol explicitly leaves trade execution up to the developer. This allows for distinct pools of off-chain 0x orders, each with custom rules around trade execution.”"*

## Team, Funding, Partners

* Partly created by ZeroEx, Intl.
* Warren, Will; CEO & Co-founder
* Bandeali, Amir: CTO & co-founder
* Alex Xu; director of operations
* 'Rahul'
* Has 33 team members as of 7-2019
* According to Will in a podcast there are 11 independent teams that are building DEX's on top of 0x (8-2018). Examples are Ken Alpha (built by 1 person in his spare time, and is live) and Radar Relay which does a couple of million dollars in volume a day.
* Alex Towle, "*a software engineer on our Protocol Team. He studied mathematics and computer science at UC Berkley. Prior to joining 0x, he was a Smart Contract Developer at Authio before becoming their Engineering Project Lead, where he worked alongside our own Paul Vienhage."*
* Alex Kroeger — Data scientist at 0x
* Have launched (22-6-2020) 0x Labs; *"0x Labs will focus on creating value in three key areas (1) surfacing better prices within existing markets (2) establishing new markets where none currently exist and (3) creating novel trading experiences that extend market access to a broader segment of users. To this end, we will soon launch our first end-user trading experience Matcha, which will come to serve as a liquidity search engine and launch pad for new markets."*
* Peter Zeitz; an economics researcher for 0x

### Advisors

* Has the same advisors as Numeraire

* Has three (ex) Coinbase advisors (Which is not entirely weird since the 0x office is around the corner of Coinbase and many 0x employees come from Coinbase as well, as does the wife of Will Warren, the 0x CEO)
* Ehrsam, Fred; advisor (still on the website as of 7-2019) Used to play online games together with Will Warren and his wife.
* Carlson-Wee, Olaf; advisor (still on the website as of 7-2019)
* Xie, Linda; advisor (still on the website as of 7-2019)
* Krug, Joey; advisor (still on the website as of 7-2019)
* David Sacks; advisor (On the website as of 7-2019)
* Jill Carlson; advisor according to Messari but not on the website (7-2019)
* Philippe Castonguay a former relationship manager for developers at 0x Project.

### Funding

* Had a seed round with Polychain which gave them the funds to get a professional team.
* From DeFi Weekly #57 (7-2-2020) giving a meek outlook on funding:

*"Another question which I'm slowly starting to wonder is how much runway does 0x have considering they've been operating for 2-3 years and had budgeted for a 4-5 year run way. Given the way their token has been trending negative since the bull market and 0 change from staking, there's not much which is going to turn investor's confidence around in the future value appreciation of the token unless the value capture mechanism is much stronger. It may be possible that they'll consider doing an equity round for a centralised order book should the money dry up, or they "decentralise" leaving all their contracts left open sourced. Their market cap is $162m, however there's still 40% more of the supply to be unlocked and any meaningful sell will further tank the price. Alt season could change things, assuming mania causes irrational speculating into 0x once again - however that may be unlikely given other more successful value capture tokens (and new tokens that would launch as well)."*

* According to Messari:

42 Fund, 8 Decimal Capital, Advance.Fund, Aenigma Capital, Amino Capital, Amplifi Capital, Asymmetry Asset Management, Block0, Blockchain Capital, Carnaby Capital, ChainRock, Coinbase Index Fund, cp0x, Galaxy Capital Partners, Kosmos Capital, KR1, Litmetless Crypto Investments, Midgard Ventures, Moonchain Captial, Mutual Coin Capital, Myriad Capital Management, Nirvana Capital, NueValue Capital, Pantera Capital, Parallax Digital, PECUNIO Cryptocurrency Fund, RocketFuel, Solidum Capital, The Hive Index, Tokenstack Partners, Torchlight Ventures, ValueNet Capital, VB Capital, zk Capital, ZMT Capital

* From this interview (17-12-2018) with Set's Felix:

"*One example is 0x where they raised $25M. They were smart in that they converted it all into dollars immediately but they still have some 0x tokens which they can use to compensate employees."*

* *"Closed a $15 million Series A equity round led by Pantera Capital."* (6-2-2021).

### Partners

* Works closely with the Aragon team on governance.
* Has something called "The Ecosystem Acceleration Program" which "gives teams access to a variety of services including funding, dedicated technical support, and recruiting assistance."
* Is a sponsor of Coin Center (as of 6-2019)
* Part of the portfolio of 8 Decimal Capital
* Has attended the program of Startup Studio
* Partners with Wyre (As of 28-10-2019 on the website of Wyre)
* One of the four sponsors of Week in Ethereum (1-5-2020).
* Member (21-5-2020) of the Chicago DeFi Alliance (CDA).
* 0x's Senior Counsel Jason Somensatto sits on the board of the Blockchain Association (22-9-2020).
* Is part of the DeFi for the People innitiative by Celo (31-8-2021).

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