ZRX Protocol To Revolutionize The Decentralized Exchange In The Cryptoverse
What ZRX protocol is
0x is an open source infrastructural protocol but is not a DApp. ZRX is a universally shared order book for decentralized exchanges and a viable protocol that can be utilized for building other decentralized exchanges.
Although the protocol is free and easily accessible, the Dapps designed to run on it will obviously and expectedly come at a cost to the user.
Recent Post Regarding Exchanges
I recently wrote Centralized Exchanges Increase Trade Efficiency And Speed But Increase Cost And Risk, but neglected to mention any real world examples of how decentralized exchanges are improving the cryptocurrency scene.
Benefits Of ZRX
ZRX attempts to alleviate the problems associated with the centralized exchanges such as KYC and also solve the known problems with decentralized exchanges.
DEX and CEX Trade-offs
- Centralized exchanges offer speed and good customer experience although I have never been able to contact a human at Coinbase. Uphold CEX gave a much better user experience in my case.
- A CEX offers better liquidity and transaction speed but is a honeypot for anonymous hackers. Let the records show that I have never attempted to hack an exchange but know there are many competent hackers out there. I know from experience that any defense built is usually attacked by something more clever.
- Identity passports and government documents sitting on an exchange I have no control over would not provide me a sense of comfort.
- Decentralized exchanges on the other hand offer less liquidity, are slow and usually come with a horrible user interface.
- Mass adoption on the Ethereum network is difficult where decentralized exchanges use expensive DApps using their own tokens.
The ZRX Solution
ZRX protocol solution is a combination of CEX and DEX attributes intended to improve the user experience using off chain order broadcasting, order matching and a shared liquidity pool in an effort to speed things up and provide liquidity in a seamless fashion.
The resulting protocol was designed to facilitate a better way of handling digital transactions and is neither fully on-chain nor off-chain.
Ethereum smart contracts and relayers are the two things that makes the ZRX protocol work more efficiently than some of the other older and outdated protocols that bog down speed and increase overall cost.
During a transaction, USER X approves the decentralized exchange smart contract to access the balance of token CryptoX.
USER X initiates an order to exchange CryptoX to CryptoY adding pertinent transaction info along with the necessary private key validation.
USER X sends out the order over the appropriate channel.
USER Y allows the decentralized exchange access to CryptoY while receiving and accepting the order sent by USER X which is in turn submitted to the decentralized exchange contract.
The contract checks and confirms the validity and authenticity of the order and transfers tokens between USER X and USER Y at the agreed upon exchange rates.
To facilitate a much faster and less cumbersome transaction, relayers are used to relay the transaction information bypassing the Ethereum blockchain entirely.
DApps should find ease of functionality using the ZRX protocol since the entire process is open standard making it a desirable choice.
The fact that the ZRX exchange protocol even has its own token enhances governance and voting rights of those that hold on to the tokens for dear life. Voting rights will steer the future development and direction of the ZRX protocol.
DApp designers can easily use the functionality of the ZRX protocol as it is completely open source requiring less overhead for everyone involved.
Differences In The Three Major Blockchains
It may be beneficial for some to understand key differences of networks even if the main focus of this article is the XRP protocol on the Ethereum blockchain.
Bitcoin is the father of cryptocurrency and offers a single application using a peer-to-peer currency exchange system at a core level and basically nothing more.
Ethereum is a decentralized exchange system utilizing smart contracts capable of removing fraud and downtime, censorship or third party interference.
Ripple network is a friction-less experience offering unmatched speed real-time global payments at the lowest cost possible making XRP the most scalable digital asset and also my personal favorite choice of investment.
ZRX is showing great potential and has recently caught my eye. I am neither a wizard or fortune teller and can't predict how the markets will go but have decided to give ZRX my attention for the moment at least until things change.
Some of the existing decentralized exchanges based on ZRX protocol include DDEX, Radar Relay, Paradex, StarBitEx and The Ocean.
My personal investments apart from the largest being ZRX token include Bitcoin BTC, Ethereum ETH and of course Basic Attention Token BAT on the Ethereum network.
According to my Uphold dashboard, ZRX occupies 33.85% of my funds, BAT is equal to 26.97%, XRP is lower at 18.03% and ETH comes in 4th at 15.32% while Bitcoin lags at 5.83%.
The percentages change on each refresh so I will stop there!
Comments are welcome and thanks for reading!