0X PROTOCOL: TRADING ETHEREUM TOKENS WITHOUT AN EXCHANGE

This blog post, among many others, is also available to read on my blog: The Blockchain Era.

Say goodbye to Ethereum tokens on cryptocurrency exchanges. While regulators have been bearing down on exchanges, as can be seen with Bitfinex in the U.S., blockchain developers have been cooking up a way to keep any central authority from interfering with the exchange of Ethereum based tokens. The resulting protocol is known simply as 0x (pronounced: zero-ex).

One of the major concerns surrounding cryptocurrency is that despite the decentralized nature of blockchain technology exchanges are still subject to the will of central authorities. Whether it be regulators, hackers, or the exchange owners themselves, exchanges just don't have the same trustless nature as blockchains do. This is where the 0x protocol shines.

The 0x FAQ describes it to be "decentralized and trustless; there is no central party which can be hacked, run away with customer funds or be subjected to government regulations."

The 0x protocol only supports Ethereum tokens that follow the ERC20 standard. Because of the ever increasing amount of Ethereum based tokens, a tokenization movement of sorts, the 0x protocol has plenty to work with. Another point worth noting is that it's not a front facing exchange, although an exchange can be built on top of the 0x protocol.

Even if you do trust centralized exchanges with your funds (you really shouldn't), the 0x protocol rises above a typical exchange in the way of fees. While exchanges such as Poloniex and Gemini may charge you a hefty fee for trading, 0x removes much of this inconvenience. Order books operate off chain, ensuring that the only time the blockchain is used is during trade settlement. Hosting order books off chain is done by Relayers, who can charge fees. However, these fees are expected to be low, as Relayers must compete for traders' business.

The 0x protocol is being built on by projects such as District0x, Melonport, and Augur.

You can read more about 0x on their website HERE. More information on this and many other projects will appear in my upcoming book: The Blockchain Era.