0x0x is an open, permissionless protocol allowing for ERC20 tokens to be traded on the Ethereum blockchain” and will be used for powering decentralized exchange.
What is 0x?
0x is an open, permissionless protocol allowing for ERC20 tokens to be traded on the Ethereum blockchain” and will be used for powering decentralized exchange. 0x is creating a protocol using Ethereum smart contracts for anyone in the world to operate a decentralized exchange. It is important to note that 0x itself is not a decentralized exchange but a protocol.
How does 0x work?
Most of the decentralized exchanges today face the problems of liquidity and speed. As the concept of a decentralized exchange is peer-to-peer trading, all new orders and their adjustments would need to go directly through the blockchain which is slow (depending on the blocktime) and costy (fees to run the contract on blockchain). 0x is trying to solve this problem through the development of a protocol to relay the orders offchain and only go through the blockchain when the trade actually settles.
0x aims to create a standard protocol on the Ethereum blockchain that allows any Ethereum token to be traded and for anyone to operate a decentralized exchange. These parties building on top of 0x are referred to as relayers as they host off blockchain order books and can charge fees for their services. In the 0x ecosystem relayers are very important. They are responsible for broadcasting orders. The participation of relayers bring liquidity to the network by hosting order books and charge a fee in return for their service. The settlement however is not done through the relayers but instead directly on the blockchain. By going offchain for the order matching, the protocol has the benefit of speed which we enjoy in centralized exchange. Users also enjoy the benefits of a decentralized exchange as settlement is not done through any middleman and is directly settled onchain.
0x has its own native token known as ZRX which could be used to pay for trading fees to relayers. Owners of ZRX tokens could also vote for future protocol upgrade and have a say in how the protocol should be improved over time.