12 July 2022
3 min read
DEX liquidity and insights on 0x API

Decentralized Exchanges, better known as DEXs, are peer-to-peer marketplaces for crypto traders to directly transact, removing any intermediary to manage their funds. Such transactions are expedited through smart contracts, which are self-executing code agreements. As DEXs work on blockchain networks with smart contracts, every transaction incurs a transaction fee and trading fee. Solutions to solve liquidity-related problems, like AMMs (Automated Market Makers), attracted users to the DeFi space and encouraged its expansion. DEX aggregators and wallet extensions boosted DeFi platforms by optimizing swap fees, slippage, and token prices on top of presenting better rates for users. In essence, there are three main categories of DEXs, which are AMMs, DEX Aggregators, and Order Books DEXs, all of which permit users to directly transact with each other using smart contracts.

Amidst all this, 0x Labs, a global blockchain company designing DEX infrastructure for the internet, has introduced its 0x Liquidity Protocol in the market. 0x is an open-source, permissionless, DEX infrastructure liquidity protocol, built on Ethereum for designing DEXs that enables the exchange of tokenized assets on multiple blockchains, connecting liquidity providers, and incentivizing market makers to incite DeFi asset trading. At its core, the 0x protocol is a set of secure smart contracts that aid in the peer-to-peer exchange of Ethereum-based assets. Any developer who requires exchange functionality can take advantage of the 0x protocol, as it also offers developer tools customized for the ecosystem and open access to a shared liquidity pool.

0x API is a professional-grade liquidity aggregator, strengthening the prospects of DeFi applications. Their smart order routing divides your transaction across the DEX network to minimize the slippage as much as possible. Besides better pricing, faster response times, and lower revert rates than any other aggregator on the market, the off-chain order relay of 0x combined with on-chain settlement brings forth a highly gas-efficient structure to facilitate peer-to-peer token exchange transactions. The transposable nature of the protocol highlights the set of robust, audited smart contracts and flexible architecture by which the developers can directly plug their smart contracts into the 0x API. Hence, 0x has become a critical part of the expansion of the DeFi space, permitting businesses and developers to design products with native functionality for trading tokenized assets.

The developers can easily access aggregated, multi-chain DEX liquidity, using 0x API, so they can retain their focus and efforts on their product. It empowers the best DeFi applications on Ethereum, Binance Smart Chain, Polygon, Celo, Fantom, and Avalanche. Using 0x API, the DeFi developers can access the 0x Protocol. The protocol supports token exchanges for fungible tokens (ERC20), non-fungible tokens (ERC721), bundles of assets (ERC1155), and other Ethereum token standards. It has two major endpoints - /swap and /order book. Businesses fascinated to implement 0x API to run their applications can start designing at 0x.org/docs/api. Developers can easily integrate with the 0x protocol at the smart contract or application layer. There are three characteristic aspects within the 0x ecosystem-

1. Supply (Makers): This is the unit that creates 0x orders & imparts liquidity into the system (for the Demand/Takers). Liquidity is aggregated from multiple sources including On-chain (DEXs, AMMs, for example, Curve, Uniswap, etc.) and Off-chain (Open Orderbook network of 0x, Professional Market Makers, etc.).

2. Demand (Takers): This is the unit that consumes the liquidity of 0x, by agreeing to trade their asset for the Supply’s asset.

3. 0x Community DAO: This is the unit that is the collective governing call of the 0x protocol and the ZRX token.

With increasing tokenization of assets, public blockchains supply a more efficient, transparent, and equitable financial stack, as compared to any such structure before. The protocol automatically generates orders that can be passed directly through the smart contracts to be settled on-chain. 0x liquidity protocol shows a variety of applications, including coherent NFT trading for Web3 games and assets, order books for thousands of native utility tokens on Ethereum, token liquidity defining decentralized prediction markets, stablecoins, and lending markets. Since its onset, 0x API has paved the way for more than 29 Million trades from more than 2.4 Million unique traders that, in total, representing over $69 Billion transacted across Ethereum, Polygon, Binance Smart Chain, Avalanche, Celo, and Fantom blockchains.

With the mission to fabricate a tokenized world, where all value can flow freely regardless of the blockchain it lives on, 0x is the advanced infrastructure for building DEXs and linking liquidity providers across a variety of sources. Businesses are using 0x Protocol to smoothly integrate exchange functionality into their applications and design new markets for tokenized assets and cryptocurrencies. We believe that exposing the broadest assortment of users to smart contracts, self-custody wallets, and DEX markets is crucial to driving multi-chain adoption and bringing the world on the same track of development in this domain.

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