Crypto Pick: 0x (ZRX)
If you have been following my newsletters or the crypto space, you would have seen that ZRX has risen significantly over the past 2 months. This is mainly because it has been listed on CoinBase, which makes it more accessible to retail investors.
For reference, ETC (Ethereum Classic) shot up by 20% right when it was listed by CoinBase, and BCH (Bitcoin Cash) also saw a huge pump of 70% when it got listed. News? Or just pump-and-dump? Probably both.
So what is the significance of 0x (ZRX)?
Picture this: Where do you buy your cryptocurrencies from? CoinBase? Gemini? Kraken? Bitfinex? As an exchange selling cryptocurrencies to a lot of customers, what do the exchange possess?
Data of trades, which means they have an idea of which cryptocurrencies are more popular.
Power over you, because you might not be able to sell off your cryptocurrencies without them.
A lot of money, which makes exchanges a target for hackers.
These are the problems of centralisation. You trust the exchanges entirely but what happens when they fail? Or when they make use of their power over us?
0x: A Step Towards Decentralisation
0x (ZRX) is an API layer built on top of the ERC (Ethereum Request for Comments) layer. It aims to allow peer-to-peer swops of ERC20 and ERC721 tokens without going through a centralised exchange like Binance, HuoBi, or Kucoin. So you can easily swop your BAT (Basic Attention Token), GNT (Golem), ZIL (Zilliqa), and other ERC20 tokens from one to another, assuming there is someone looking to for the swop.
Whilst traditional coin exchanges matches orders between customers, decentralised exchanges (DEX) does the same but without storing or controlling any of that information.
0x: How Does It Work?
ZRX uses an “off-chain order with on-chain settlement” system, so different buy and sell orders for ERC-based tokens are submitted to these DEX, which matches them and charges a small fee in ZRX. When there are orders that matches, they then get filled on the main chain.
The off-chain orders ensures that they do not clock up the main chain. On another hand, building an API layer outside of Ethereum means that it is compatible with Ethereum protocols but not subjected to the hacks and forks on the Ethereum main chain.
There is an assumption, however, that ERC-based cryptocurrencies will be prevalent in the future i.e. there is a need and demand to switch across tokens to use them. This is also a limitation of ZRX because only ERC-based tokens are compatible. The ZRX tokens itself is a token to pay for fees when trading and exchanging tokens across ZRX-based DEX.
0x: The Technicals
ZRX hit highs of over $2.60 in January 2018 when the cryptomarket was still in a boom. After it sunk to $0.36 in March 2018, it climbed back to almost $2 in May 2018 and hit around $0.50 again in September 2018.
The $0.48–0.53 is a key support region, followed by the $0.65–0.70 region. Following the CoinBase listing, ZRX barely hit $1, before sinking back into the $0.80 region. As ZRX hovers around $0.70 region this month, and the BTC charts look all bearish, I would suggest waiting for the lower support region of around $0.55 before getting in.
As ZRX only started trading in August 2017, it is quite possible that this entire region of $0.50–2.00 be entirely obscured by higher prices when we move into the next bull run. This would also mean that anytime that you get in now, is a good time.
Source: Tradingview, ZRXUSD (Binance)
The reason for selecting ZRX is because there is legit work being done here, with partners building on ZRX. Check out the Relayers like Ethfinex, Radar Relay, and Paradex amongss many others. ZRX will be a token that will be so prevalent that it will have value in future.
To put things into perspective, BNB (Binance Coins) are tokens issued by Binance so that traders can use it to offset their trading fees. As a user of Binance, I bought $100 worth at $2.50 to offset my trading fees. I did not see it as an investment per se.
Little did I know that Binance will go on to take the Number 1 spot on coin exchanges with extremely high trading volume. BNB rose to over $25 during the bull run but has held steadily at around $10 even across this bull market. Why? Because there is a demand to trade whether it is in a bull or a bear market.
Similarly, ZRX is the fuel for DEX. Right now, there may not be a demand to exchange from one ERC token to another, or to trade them. Centralised exchanges are still functioning ok, so there may be less a need for DEX. Moving into the decentralised future, when people do realise that there is a better way to exchange coins, there will be a use for ZRX.
Nonetheless, keep in mind the assumptions and limitations with regards to the ERC-based tokens.