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Decentralized Exchanges (DEX) represent a giant leap in permissionless and transparent trading, and they exist as fantastic alternatives to centralized exchanges.
While DEXs make the process of registering new ERC-20 tokens easier and remove the need to pay high registration fees to a central authority, they still have the problem of high gas fees. This is precisely the problem that the 0x (ZRX) protocol aims to solve.
Protocol 0x (ZRX) ICO raised $ 24 million in August 2017 for 50% of its supply, with no presales. As an ERC-20 token, the permissionless protocol connects liquidity providers through smart contracts, thereby aggregating liquidity.
The protocol allows interoperability between different decentralized applications and DEX. Thus, ZRX should not be seen as a competitor of Uniswap, as it benefits from the increased liquidity of the sectors.
Although the ZRX token has been quite volatile over the past few weeks, an uptrend occurs as it attempts to establish a support level of $ 0.50 after a 22% price increase in the past 24 hours. .
Servers at the service
Initially launched as a voting mechanism for governance proposals, ZRX tokens received staking capabilities after its v3 update in late 2019. Market makers were then able to earn ETH rewards for liquidity services. Meanwhile, holders could benefit from delegating their tokens using pools.
In June 2020, the project launched a DEX liquidity aggregation service, called Matcha. After serving exclusively as a backbone for three years, 0x Protocol created an intelligent command routing service that encompasses DEX like Uniswp, Curve, and Kyber.
Community and DEX activities are probably the most vital metrics for measuring DeFi token growth. Data from Dune Analytics shows that Uniswap and SushiSwap both account for over 60% of the volume, but it’s important to remember that liquidity aggregators are not direct competitors of the 0x protocol.
Therefore, the general growth of the DEX market over the last year is actually a positive driver for the ZRX token. Looking at the usage of the 0x protocol, we can see that the weekly 0x volume has more than doubled from the October-November weekly average of $ 350 million, reaching 10% market share.
Taking a more detailed view of the activity of the 0x network, the graph above shows that several platforms are using the liquidity aggregation capabilities of the 0x protocol. These transactions can take place in many DEXs including Uniswap, Curve and Balancer.
Feedback from market makers and v4 update
On December 15, Theo Gonella, 0x Labs Product Manager, showed data from a market maker who made a 100% return in 2020 by providing liquidity on 284 ETH on 41,000 transactions. More recently, 0xTracker stated that 1,782 ETH was distributed to 0x market markers as liquidity rewards in 2020.
The voting process for Project 0x v4 will take place from January 16 to January 23 and aims to reduce gas cost quote requests by 70%. According to the 0x Labs blog, this release allows customizable modules to perform atomic operations, including token encapsulation and unwinding.
Frontal problem
For those unfamiliar with front-running, the problem is with on-chain data. Savvy arbitration offices monitor Ethereum’s main chain for transactions, then add additional gas on a similar transaction and buy (or sell) the asset before the other party. This will allow the higher fee transaction to initiate executions for other users.
While this is not exclusively an 0x problem, it certainly limits the use of DeFi aggregators.
Data from TheTie shows that the recent price spike has been accompanied by increased activity on social media. Nevertheless, the indicator remains 50% lower than the previous highs in May and August. Therefore, judging by the social media metrics, there may be a huge upside to the ZRX’s price.
Protocol 0x could see further success as the DeFi industry continues to grow and mature. As long as it is necessary to reduce gas costs and offer multiple price providers, liquidity aggregators will have a void to fill.
To conclude, for those who believe the v4 update will be a game-changer, there is room for strong growth in DEX market share, and therefore price potential.
The views and opinions expressed herein are solely those of author and do not necessarily reflect the views of TBEN. Every investment and trading move involves risk. You need to do your own research when making a decision.
