0x Protocol

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0x Protocol

The 0x (pronounced “zero x”) protocol was an open-source Ethereum protocol designed to enable peer-to-peer exchange of ERC‑20 tokens. Rather than being a single decentralized exchange (DEX), 0x provided the building blocks—smart contracts, message formats, and an order-relay model—that developers could use to create decentralized trading applications.

History and context

  • Founded by Will Warren and Amir Bandeali in 2017, 0x raised capital via an initial coin offering and later fundraises to support development.
  • In 2021 the project launched a decentralized autonomous organization (DAO) to allow token holders to participate in governance.
  • In 2023 U.S. regulators (the Commodity Futures Trading Commission) took enforcement action against ZeroEx, Inc., concluding the project had operated an unregistered exchange and ordering fines and a cessation of exchange services. Following that action, development activity and community engagement largely waned.

How the protocol worked

0x combined off-chain order relay with on-chain settlement:

  • Makers: participants who created and posted orders (providing liquidity).
  • Takers: participants who filled existing orders (removing liquidity).
  • Relayers: services or applications that hosted order books and broadcasted orders off-chain, reducing on-chain costs and latency.
  • Exchange proxy: a smart contract interface that enabled applications to route trades and interact with 0x contracts.
  • Message format: orders included structured data fields—token addresses, amounts, expiration, signatures and counterparties—used to validate and execute trades.
  • Smart contracts: on-chain contracts enforced trade settlement, token transfers, and other business logic.
  • ZRX token: the native token used for governance and staking; holders could vote on protocol upgrades and stake tokens to earn liquidity rewards denominated in ETH.

The design aimed to balance decentralization, cost-efficiency, and composability for DeFi applications by keeping order discovery off-chain while guaranteeing settlement on-chain.

Current status and outlook

After regulatory enforcement limited the protocol’s ability to operate as an exchange, official development and community momentum slowed significantly. The 0x codebase remains an influential reference in decentralized exchange design, but the project’s future depends on legal compliance, community revival, or a pivot in strategy. Trading of the ZRX token continues on secondary markets, but without active development or clear regulatory clarity, long-term prospects are uncertain.

FAQs

  • What was the 0x protocol?
    An open protocol for peer-to-peer trading of Ethereum tokens that provided smart contracts and an off-chain order-relay model for building decentralized exchanges.

  • What is a 0x exchange proxy?
    A smart-contract interface used by applications to route and execute trades through the 0x protocol’s settlement contracts.

  • Is ZRX still traded and what is its outlook?
    ZRX remains listed on various exchanges, but value and adoption have generally declined in the absence of active development and with unresolved regulatory constraints.

Bottom line

0x introduced a widely cited architecture for decentralized token trading—separating order relay from on-chain settlement and enabling modular DEX development. Regulatory action curtailed its operation as an exchange, leaving the protocol’s practical role diminished despite its technical influence on decentralized trading design.