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What is 0x? A short guide to the protocol shaping the DeFi ecosystem

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If you’re even slightly active on Crypto Twitter, you know there’s one word that’s being thrown around a lot these days: DeFi, short for decentralised finance. It’s been hailed as the next big thing in cryptocurrency, and with good reason — it promises to decentralise access to financial systems, wresting control of them from authorities like governments, banks and large corporations.

The 0x (pronounced ‘zero x’) protocol token is playing a big role in the DeFi mission. It’s an open protocol that enables the peer-to-peer exchange of assets on the Ethereum blockchain. Matt Taylor, Marketing Lead for 0x described it as “a pipeline of open-source smart contracts that serve as foundational exchange infrastructure and the networked liquidity layer for several crypto verticals including DeFi and blockchain gaming”.

What this means is that 0x is laying down the groundwork for a range of DeFi projects (lending services, for example). These projects are benefitting from 0x’s networked liquidity pool, which according to Taylor, has the lowest slippage on the most popular trading pairs in the DeFi space, including ETH/DAI.

0x has also led the way in incorporating blockchain technology into video games. Currently, it helps facilitate the exchange of one of the largest crypto games, Gods Unchained.

How the 0x token works is actually a combination of centralised and decentralized exchanges. It draws from the best of both worlds: it cuts out third parties through smart contracts which ensure users are in control of their funds, yet maintains the lower costs associated with running centralised exchanges through something called off-chain relays.

With decentralised exchanges, transactions are executed on the main chain from start to finish. This doesn’t come cheap; users have to pay fees in Ethereum to ensure that these transactions are processed on the blockchain by its miners. Off-chain relays are used so that the trading and exchange of assets can happen off the blockchain, with the main chain coming into the picture only for the actual value transfer.

0x tokens (ZRX) are used to pay the relayers. They can also be used to vote on 0x protocol improvements. 0x also recently launched Matcha, its own decentralised exchange, which offers secure wallet-to-wallet transactions with no deposits and withdrawals.

0x’s mission is to ‘create a tokenized world where all value can flow freely’. ZebPay is proud to bring it to India.

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