Is 0x (ZRX) A Good Investment? In-depth Analysis and Near to Longer-Term Expectations.

By DoYouEvenCrypto | DYEC | 8 Nov 2019

$5.25 tipped


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0x is trying to transform the idea of decentralized exchanges on top of Ethereum blockchain. Not only that, but 0x is also trying to improve the features of lending and margin trading on their decentralized exchange protocol. 0x is actually doing really well, and they have received a lot of positive feedback regarding how the 0x-based decentralized exchanges work. 

This article will guide you on whether 0x native token (ZRX) is a worthy investment in the long term or not. To know ZRX's worth, we need to talk more about the project, the team behind the project, and the use cases of the token. Let’s begin right away!

0x Summary

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0x protocol was created precisely to solve the issues that have been haunting cryptocurrency exchanges for many years. First and foremost, we must acknowledge that the biggest issue in the crypto exchange world is centralization. Most crypto traders often choose convenience over security. 

Not only that, many decentralized exchanges face the classic liquidity problem with very few trading volumes. It creates a “chicken and egg” situation where people keep going back to centralized exchanges due to larger amount of trading volume as well as better convenience and faster servers.

The thing is, centralized crypto exchanges often trade security in the name of convenience. Many big crypto exchanges have been hacked, and their crypto coins getting stolen. Even the biggest name in crypto exchange, Binance, was a victim of hackers due to a flaw in their API. 

This is where decentralized exchanges shine. With DEXes (decentralized exchanges), the users control their own private keys. There is no centralized hot wallet that “combine” everybody’s crypto tokens in one place. No single point of failure = significantly better security, as everything is processed directly on the blockchain.

However, of course, DEXes themselves have problems with the lack of user-friendly interface and sometimes with transaction costs. Most DEXes are built on top of Ethereum, and it’s no longer a secret that Ethereum transaction gas fees often go up significantly higher whenever the network gets clogged.

This is where 0x comes in. The protocol is trying to solve the problems with DEXes to make them able to compete with traditional centralized exchanges. With 0x, they have what they call as state channels and automated market makers (AMM). With AMM, a third party can do the transactions if the token price reaches a certain threshold. 

That means AMM will be able to act as a facilitator and counterparty. Meanwhile, state channels are able to take the transactions off-chain. Thanks to the ability of state channels, 0x-based DEXes won’t affect Ethereum gas fees that much.

0x team hopes that the protocol will be adopted by various DEXes and eventually, it will become the default solution that DEXes have been craving for. 0x-based DEXes often have a really user-friendly UI and have the ability to process smooth and fast transactions thanks to the technologies provided by 0x protocol.

Analyzing 0x Team

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When we want to invest in a crypto token, we need to know who are the faces behind the project. More often than not, “having faith” in one crypto token is also about trusting the ability of the team to deliver on their promises. So, what about the 0x team? 

Well, the 0x core team is mainly based in the San Francisco area. The co-founders are Will Warren (CEO) and Amir Bandeali (CTO). There is not much impressive background story about the two except for the fact that they co-founded 0x. 

Will was a technical advisor for the Basic Attention Token for a few months before he started 0x. Prior to that, he had no history related to cryptocurrencies.

On the other hand, Amir was mainly a trader. He was a trader at Chopper Trading before he joined DRW. The moment he co-founded 0x, he stopped his trading job. From Amir’s background, we can see why 0x is heavily focused on the decentralized exchange industry. 

Because, apparently, he himself had vast experience in the trading world. But once again, the co-founders do not have much background history with big corporations before their time with 0x.

However, the Director of Operations looks like he’s a veteran in the tech world. Alex Xu was a partner lead at Google for one year and seven months. He was also the marketplace manager at Amazon for four months. In 2013-2015, he was the account manager at General Mills. 

Another important figure is Tom Schmidt. Before he joined 0x, he was the founder of the nugget app and the product manager of Instagram. He worked for Instagram for almost a year. With 0x, his position is Product Lead.

As for the engineering manager, Fabio Berger is the man. He was the software engineer for Airtable and Teleborder. Prior to his time with these two companies, he was the co-founder of WealthLift and ShelfRelief.

Based on these key figures, we can see that the 0x team is decent and capable but still lacking experience with big tech or cryptocurrency industry itself. Some critics believe the co-founders never had experience in managing a big project. And to be fair, the criticism carries some weight.

0x Future and Potential Roadblocks

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The main question around 0x future is regarding the future of decentralized exchanges itself. 0x is mostly known for its approach to DEXes on top of the Ethereum main chain. Let’s take a look at their “success” example. One of the most famous achievements from 0x was DDEX. 

When it was launched the first time, there were many praises and positivism. DDEX was seen as a “superior” experience compared to the likes of IDEX and ForkDelta (both of them were popular DEXes or semi-DEXes on Ethereum). 

DDEX could significantly cut transaction costs and waiting time due to its usage of the 0x protocol. However, DDEX itself never really took off. Competition in the crypto exchange industry has always been very hard.

And keep in mind that DDEX itself has “parted ways” with 0x protocol after it created its own protocol, which is called Hydro. The thing is, Hydro was a fork of 0x, but they decided to go with Hydro because it’s tokenless. 

Meanwhile, 0x protocol has its native cryptocurrency, which is the ZRX token. DDEX team believed the usage of ZRX token limited their ability to expand. In other words, DDEX forked the 0x protocol because they don’t have faith in ZRX.

For your information, at the moment, DDEX has a very low trading volume. At the time of this post writing, DDEX's daily trading volume was less than $400,000 USD. For comparison, IDEX still has slightly more trading volume, despite supposedly “inferior” technology and the less-friendly user interface.

Apart of DDEX, however, there’s not much “success story” of how 0x protocol was or is being used for. While 0x development keeps on going (for example, they are developing more trading features to embrace the future of DeFi), but still, it lacks adoption at the moment. 

If they want to be relevant in the future of DeFi and blockchain, they need to find a big company or exchange who wants to use their protocol. 

0x future is still questionable. If 0x protocol gets adopted by more than one big exchange with deep liquidity or by a new company that wants to build its own DEX, it would be much easier to be optimistic about 0x protocol. 

But looking at the current situation, everything is still very “grey” and hard to predict. That being said, 0x has made some great news recently. They had some type of partnership with Bluzelle (which, by the way, doesn’t mean the 0x team enters a formal partnership with Bluzelle).

And by the way, even when it comes to the future of DEXes, we still don’t know yet if they will ever become mainstream. Until today, most big traders still prefer to trade on centralized platforms like Binance or Bitmex or Huobi.

ZRX Token Use Case In 0x Ecosystem

0x native crypto token is the Ethereum-based token called ZRX. There are two primary ZRX use cases. First of all, ZRX is needed to pay trading services to the Relayers. For your information, relayers are the entities that operate and create exchanges using the 0x protocol. 

If an entity called “John Doe” operates an exchange on top of 0x protocol, that means John Doe is the relayer in this scenario. The second use case of ZRX is to be used as a governance token. That means ZRX token holders have the authority to decide how to develop the protocol in the long run. 

Bitcoin, Altcoins, And Their Impact On ZRX Price

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To talk about the worth of one coin or token as a long-term investment vehicle, first and foremost, we must acknowledge the importance of the crypto industry as a whole. Unfortunately, Bitcoin still dictates the price of most altcoins nowadays. 

Most of the time, when Bitcoin falls in its valuation against fiat currencies, most altcoins fall as well. It doesn’t matter whether one altcoin has really strong fundamentals or not, most likely, it won’t be able to survive a crypto bear market.

Unfortunately, this same logic can be applied to ZRX's future price as well. ZRX’s peak moment in the crypto market happened in January 2018, at the peak of altseason, just a month before the start of 2018’s crypto bear market. At its peak, ZRX was able to reach around $2.37 USD per token. 

No doubt, 2020 and 2021 will be important for the future of cryptocurrencies. If Bitcoin can repeat its past history, most likely, ZRX price will also go up. In 2016, Bitcoin's price went up significantly when they had the Bitcoin mining reward halving event. Next year (2020), Bitcoin blockchain will experience another mining reward halving event.

Many crypto analysts predict Bitcoin would eventually break $20,000 in late 2020 or early 2021 following this mining reward halving event. Nobody knows the future, but ZRX price might go up drastically if Bitcoin can repeat its past history.

Unfortunately, the opposite scenario might happen, as well. If Bitcoin falls in 2020, ZRX's price might fall even harder. Altcoins typically have a much riskier position every time Bitcoin price falls against the USD and other fiat currencies.

Conclusion

0x protocol is a promising protocol to build decentralized exchanges and to help DeFi achieve its true purposes. While 0x has a strong technology behind it, but its adoption rate is somewhat slow compared to many other crypto projects. ZRX token future price will be decided by multiple factors, mainly by 0x future adoption and Bitcoin price against fiat currencies.

 


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