What Is the 0x Protocol?
The 0x (zero x) protocol is a protocol that enables the peer-to-peer exchange of assets on the Ethereum blockchain. The 0x protocol was launched in 2017 by 0x Labs, an organization based in San Francisco focused on creating new markets in the 0x ecosystem. The protocol itself is not, by definition, a decentralized exchange; it allows for the creation of decentralized exchanges that can be used in broad applications.Key Takeaways
- The 0x protocol is an open protocol that enables the peer-to-peer exchange of assets on the Ethereum blockchain.
- 0x Labs, an organization focused on creating new markets in the 0x ecosystem, built the 0x protocol.
- Built on the foundation of Ethereum token standards, 0x protocol acts as the critical infrastructure layer for the growing number of financial applications implementing the blockchain technology stack.
Understanding the 0x Protocol
In the world of digital currencies, a protocol is a set of standard rules that can be used by a system (or by various transacting parties) to communicate with each other smoothly. The 0x protocol is essentially a standard messaging format that transacting entities can use to exchange digital assets or tokens.The standard SWIFT messaging system used in the banking industry is similar to a protocol (except that it is used in a different context). Banks across the globe use the standard SWIFT messaging system to communicate about money transfers.
The system has a standard set of message fields defined for all users; their corresponding values are used in the SWIFT system to securely convey details between two parties, such as sender, recipient, amount, currency, source branch, and destination branch, among others.Goals of 0x
The goal of 0x Labs is to make the necessary infrastructure for the emerging cryptocurrency economy and enable markets to be created that couldn’t have existed before.
The 0x protocol attempts to work similarly to SWIFT, but in the context of operating decentralized exchanges for trading digital tokens and assets that run on the Ethereum blockchain. Built on the foundation of Ethereum token standards, 0x protocol acts as the key infrastructure layer for the burgeoning number of financial applications and instruments being created using blockchain technology and trading in digital forms. With every passing day, tokens are becoming an increasing part of the world’s financial value. Consequently, the requirement to trade digital assets and tokens securely and efficiently is growing. With its clearly defined message formats and smart contracts, the 0x protocol attempts to answer this need.Special Considerations
The 0x protocol’s message format is composed of a set of data fields that carry vital information, such as the digital asset or token to be traded, the price value of the transaction, the expiration time, and the defined identities of the transacting parties. Smart contracts take care of the necessary business logic for generating, sending, receiving, and processing the data linked to the trading activity. It also allows room for essential upgrades, if any, in the future. The provisions for upgrades are required if any changes are necessary for adhering to the modified regulations or any modifications linked to the intrinsic working of the Ethereum blockchain network. The system also uses relayers, which act as order aggregators and broadcast orders from designated market participants to the marketplace or exchange.Can I Mine 0x?
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