Is there a good analysis anywhere explaining the need for the ZRX token? That is an article or Medium post or whatever where someone has responded to the critiques on this thread and elsewhere about the token being unnecessary, and adding friction etc?
1. you don't need to use zrx 2. it doesn't affect the user experience - i am not sure what ddex is talking about wrt friction. they will probably slot in their token (HOT) anyway... how will that be any different??
I don't understand why having token holders govern the protocol is considered a good thing? I'm pretty sure 99% of ZRX holders have no clue about the technology, game theory, etc... How can we expect them to make the right decisions then? Am I missing something?
> I don't understand why having token holders govern the protocol is considered a good thing?
I think mostly because the alternative is putting control of the protocol into the hands of a small group of developers. To some extent, control has to go somewhere, the question is where.
I run OpenRelay, which is an open source 0x relayer, so I'm not totally unbiased, but I am intimately familiar with the protocol, and my perspective is from outside of the core team.
The 0x protocol has a token transfer proxy that users grant allowances to, and it will swap tokens between users when the core exchange contract instructs it to. There are different proxies for different asset types, and new exchanges can be added to the asset proxies to support new functionality without requiring users to set new allowances. These sorts of upgrades are locked behind a 14 day timelock controlled at present by a multisig wallet.
Under this architecture, the key things that require governance are the addition of asset types to the existing exchange contract, and updated exchange contracts to the existing asset proxies. Right now these functions are centralized under the 0x project team.
The other factor is that 15% of the initially created ZRX was designated for ecosystem development. So far the 0x project team has been managing that, but there are plans to give the community the ability to vote on ecosystem development projects.
I think optimally, token holders would vote for protocol changes and development projects that promote the use of ZRX within the protocol, ideally increasing demand for ZRX.
I am totally fine with DDEX developing their own protocol that competes with 0x. Competition is always a good thing.
I just don't quite like the way the DDEX team convey their ideas to the public. An eye-catching title, some words against 0x, and some promise showing their determination. Any project can say such things. It is always easier said than done to create a product that is secure and attracted to users/developers. So far, the 0x team has gained tremendous trust and support from the community with regard to their competency in delivering code/tools constantly. The 0x smart contract has been deployed and running for 16 months (from Aug 14 2017) processing millions of trades. It has also been through a major upgrade (v1 to v2) smoothly. To me, all these are very solid evidence indicating that the 0x team will keep shipping more useful features in the future. On the other hand, the whole article posted by DDEX is basically saying that they are leveraging the current 0x codebase to develop a protocol that could potentially incentivize more efficient liquidity sharing. That's it. No roadmap, no technical details, no code. Such an announcement barely worth anything imo. Maybe it is their strategy to release more critical information later. But for the time being, they are still using the 0x protocol (according to 0xtracker).
Another point I would like to make is that the scope of 0x has expanded drastically since the establishment of the project. The decentralized exchange is only one type of products that can be powered by 0x. There are others like non-fungible token marketplaces and probably many more services will be built on 0x. The Hydro protocol, which is proposed by DDEX, focuses only on solving the liquidity problem. It is understandably an immediate problem to solve in the decentralized exchange space. The 0x has also expressed that they are currently working on or will work on solutions to resolve it through their short/mid-term tasks. The mission of 0x, "Create a tokenized world where all value can flow freely", implies much more than just solving the liquidity problem. And the ZRX token is designed with this mission in mind. If tons of services rely on the protocol, how to perform upgrades? Through governance using ZRX. How to ensure that the governance process is decentralized? Through a fair token distribution which will be fulfilled by collecting/paying fees in ZRX. Both governance and trading fee functions serve the long-term goal. Thus, to many people, in the near-term, the value of ZRX is mostly speculation. Some people sharing the same vision as 0x may evaluate the token differently. Back to Hydro, assuming they developed a successful protocol that is adopted by several relayers, will there be governance on the protocol development? Probably no, not on their horizon right now. If yes, how to ensure fairness, given that they are running a for-profit decentralized exchange themselves? These among others are open questions that seem not very urgent in the near-term but critically important in the long run.
Again, competition is always good for the ecosystem. It is too early to draw any conclusion or even make any comparison between the two teams. Time will tell which protocol could gain more adoptions. It is also possible that they both can tackle the issues in their own ways and coexist in this space with each protocol having multiple successful relayers built on top of them. Who knows...
0x protocol is open source, so anyone can fork it at any time. This move by DDEX makes perfect sense for a number of reasons. The only way I see to create a moat around the ZRX-linked smart contract is making it the one with the most liquidity. While you are correct that the contract has been running 16 months, which is commendable, there's still only one relayer participating in liquidity sharing afaik. I know there were technical limitations prior to v2 preventing Paradex and DDEX from implementing liquidity sharing but I thought that was sorted out and we'd see announcements from more relayers that they were going to implement it. So far, nada.
Relayers should be working on boosting liquidity on an individual basis. 0x team should be working on making sure every relayer can easily participate in liquidity sharing. Stating the obvious but I can't say I've seen much progress towards these goals.
>0x team should be working on making sure every relayer can easily participate in liquidity sharing. Stating the obvious but I can't say I've seen much progress towards these goals.
[https://paradigm.market/](https://paradigm.market/) is working on solving the relayer liquidity problem. Here they address the problem below:
>While the ecosystem seems to be making advances in regards to settlement and exchange logic, the order relay layer still remains relatively static. In its current state, this layer suffers from significant redundancies and artificial barriers, requiring developers to either source liquidity from a centralized venue, or to build a unique liquidity pool, relayer system and legal framework themselves.
>**Although 0x’s open relayer API has made some strides in this regard, the adoption and impact of the system remains relatively niche.** Many of the largest and most successful relayers still implement a closed order book, effectively maintaining proprietary liquidity pools. While this model is good for an exchange’s bottom line and, in some cases, helps with the current user experience constraints, the trader in this model ultimately suffers from market inefficiencies such as insufficient liquidity and price spreads between exchanges.
>Additionally, the current model makes exchange difficult for traders that are in crypto-antagonistic locales or are looking to trade non-traditional assets and instruments (such as options). These issues were the catalyst behind the development of Paradigm. Put simply, Paradigm unifies fragmented liquidity, and provides a platform for diverse financial instrumentation.
>What are we building?
>The core Paradigm team is developing a relay protocol and platform for hybrid decentralized exchange logic. At a high level, the Paradigm protocol can be thought of as a universal decentralized relay protocol.
>Our solution can be broken into two pieces: the relay network, developed around a network of order relay nodes built using BigchainDB, and the point-of-entry system, built on Ethereum.
>The **relay network** is an immutable event stream of orders. This order stream serves as the foundation for our entire system providing a decentralized, easily queryable and high-performing database system for order broadcast. While a normal relayer’s liquidity is capped by the amount of volume on their individual exchange, developers building on the Paradigm network can access a protocol-wide pool of aggregated liquidity.
>The second piece of our system, the **point-of-entry contract system** provides a platform and incentive structure for hybrid decentralized exchange logic, such as financial options or loans. Third party instruments can be easily implemented and traded though our protocol. This system also allows for a single point of entry for takers, simplifying our implementation for exchange systems.
>Together, these two systems create a decentralized relay protocol and platform that function to support a diverse and open decentralized financial ecosystem.