8th October 2020

0x: The world’s liquidity protocol

In this episode of DeFi Download, Piers Ridyard talks with Clay Robbins, Head of Growth at 0x Labs. 0x is an open protocol that enables the peer-to-peer exchange of assets on the Ethereum blockchain. The 0x team is focused on creating new markets in the 0x ecosystem.

0x: The world’s liquidity protocol

At its core, 0x is a decentralised non-custodial exchange protocol. In other words, it is an infrastructure layer that facilitates the exchange of crypto assets between individuals without them needing to custody their assets with a specific exchange venue.

0x has launched their own crypto trading platform, called Matcha. Matcha aims to provide a safe, easy, transparent and educational platform for users to trade assets, as well as access additional functionality within DeFi that goes beyond trading. On Matcha, users retain complete custody of their tokens throughout the entire trading process.

The nuances of regulation 

Clay recounts some of the things the 0x team has learned about operating without friction in a global environment:

  • By educating themselves early on about the different regulatory challenges they could face while developing their technology, they acquired valuable insight on the freedom to operate. Furthermore, they created open communication with regulators.
  • By holding open conversations with regulators, they managed to avoid the dangers of stepping into areas that they should not be focused on and functionality that they should not be developing. 

What is the 0x protocol?

0x is an open-source protocol, a service that provides developers with the infrastructure they need to build exchange interfaces and to provide liquidity and access to all types of assets.

0x differs from protocols like Uniswap and Kyber that solely offer on-chain functionality. Orders on 0x occur off-chain and trade settlement on-chain, a process that is more gas- and price-efficient.

Matcha makes exchange more approachable

Matcha is a front-end platform that functions as an aggregator that guarantees the best prices. Access to any market on Matcha is currently available simply by connecting a MetaMask, a Hardware Wallet or a smart contract mobile wallet like Argent.

Matcha is a prospective alternative to Coinbase and similar large retail centralised exchanges and aims to serve users by offering a more educational experience and improved price efficiency.

Matcha’s user interface has been designed to provide a great consumer experience and has been well received by users.

The 0x team created a very small closed beta during the early days of development and invited the largest traders on decentralised exchanges. Based on the incredibly useful feedback that these users provided, the 0x team modified and optimised Matcha, earning their loyalty to the product and the interface in turn.

Offering access to Matcha via API is something that the team has taken into consideration. The 0x team recognizes that the core competency of Matcha is exchange and they want to move cautiously and methodically in extending its functionality.

TAM

The prospective customer base of 0x is traders who currently use decentralised exchanges. 

0x provides the ability to access any type of market that has tokenized value. This includes simple ERC-20 exchange but also things like non-fungible tokens (NFTs), and prediction markets. There is a nascent yet growing ecosystem of third-party developers, who are attempting to build these types of marketplaces: 

Since 0x introduced the 0x API (a step towards aggregating additional liquidity beyond just 0x) there has been increased adoption from various DeFi applications like: 

ZRX, the 0x token

The ZRX evolved from a governance and fee token to also being a staking and work token for liquidity providers. It plays a significant role in ensuring that liquidity remains on the 0x platform, by providing market makers with a perpetual incentive to participate within the 0x network.

Future predictions

As products like Argent and other smart contract wallets improve, Clay expects that one day users will prefer having one or two of these applications to store their assets.

From the viewpoint of the regulatory landscape that concerns DeFi, Clay believes that the stance of regulators will wax and wane. For this reason, he emphasises the necessity of remaining informed and understanding the prospective risk vectors. Clay also stresses the importance of having good in-house counsel.

From the perspective of the broader ecosystem, Clay feels that recent developments, such as the launch of the DeFi Alliance in Chicago, have helped integrate the various services offered across the ecosystem, which also provides regulators with a holistic view.

Nevertheless, as awareness grows, there will be a growing need to implement adjustments, yet again, Clay states that it is essential to be a conduit for education for the different bodies who might prospectively look at what is being built and developed within the DeFi space.

Further resources