0x is a protocol for decentralized exchange of tokens on the Ethereum blockchain. What that means is that 0x provides the infrastructure to external companies to build a decentralized exchange (DEX).
0x was founded in October 2016 by Amir Bandeali and Will Warren. They released 0x’ white paper in February 2017 and in August launched their ICO.
The motivation behind the creation of the 0x protocol is based on the vision of the founders that anything that can be assigned a value in the world eventually is going to be tokenized and moved onto an open financial network. They believe that the Ethereum blockchain will give birth to thousands of different tokens.
0x vision is that things like traditional currencies, stocks, bonds, loyalty points, video games items, airlines miles and many more will find their way onto the Ethereum blockchain and when that happens there will be a need for low friction transfer of these tokens.
And 0x will be there to provide the tools for a quick and easy solution to this problem.
We can say that the team of 0x is tightly knit. It consists of around 20 people, distributed around the world – in the US, Poland, Switzerland, Australia. The entire team gets together once every few months in order to see how the land lies.
Decentralized vs. centralized exchanges
In order to understand better what problem 0x is trying to solve you should know the main difference between centralized and decentralized exchanges. Basically, the primary reason for people to choose a DEX over a centralized exchange is security.
When you deposit cryptocurrencies to a centralized exchange like Coinbase, Kraken or Binance, you give up the full control of your funds. When your funds arrive at the exchange, you basically have to trust it that it will keep them safe for you. However, if the centralized exchange gets hacked or goes bankrupt your crypto will be gone.
On the other hand, decentralized exchanges are peer-to-peer and allow all order functions and trades to take place through smart contracts, directly on the blockchain. This means that there is no middleman. People are trading directly with each other and are always in control of their funds.
However, the higher security comes at a cost. Currently, decentralized exchanges are a lot slower and with limited liquidity compared to their centralized counterparts.
So, 0x is basically trying to provide the infrastructure technology for building decentralized exchanges that can match the performance of their centralized competitors.
Existing approaches to decentralized exchanges
At the moment there is a handful of existing decentralized exchanges and decentralized applications (DApps) that require exchange functionality in order to operate. However, the problem with all of them is that they make their own proprietary and custom smart contracts from scratch which obstructs the interoperability between any of them and leads to low liquidity and high latency.
- On-Chain Order Book
The very first decentralized exchanges that were created on the Ethereum blockchain kind of took the same functionality of a centralized exchange and pulled it into a smart contract onto the Ethereum...
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