Why 0x

Last week, 0xLabs sponsored an AMA with members of the 0xDAO. Though I couldn’t attend, I was able to spend some time catching up through Brent’s awesome recap of the event. And, while I agree with the vast majority of the sentiment my fellow Bootstrap Delegates shared, I kept thinking about one relatively simple question:

“Given your busy schedules, why did you agree to be a Bootstrap Delegate?”

The direct answer is pretty simple — I’ll get to it later. But, it got me thinking: Why 0x at all? I mean, really…why?

Why I got involved with 0x

As someone who’s both crypto and tradfi native, much of what I’ve read since 2016 has been cringe-worthy…on both sides. Many crypto-maximalists shout from one corner: “Crypto is going to rule the world! Down with the old guard!” and root for economic collapse, while on the other side traditional finance “experts” continually dismiss cryptocurrency for being a “scam” with “no inherent value,” driven only by “speculative fervor.” In reality, both sides are wrong. We’re headed towards some sort of hybrid world where much of the complexity of crypto is abstracted away and public blockchains are absorbed into new and existing business models. Did you see what Visa just did? More of that. Those who adopt will make it…those who don’t, well, are ngmi.

This is why the 0x whitepaper made so much sense to me from the getgo. Released in February of 2017 — before ICOs were cool — Will and Amir laid out a vision for a protocol that would facilitate low-friction, peer-to-peer exchange of ERC20 tokens on Ethereum. The vision itself was fascinating to read and ground-breaking at the time, and I still have my highlighted copy that has sketches of how dApps would interact with the protocol and questions I had for the team. It didn’t take long to become absolutely convinced 0x would provide the plumbing for a world in which hundreds of billions in value would be transacted over countless decentralized apps and exchanges, daily. I, too, believed — and still believe — that eventually the entire world would be tokenized. My tradfi experience tells me that the world of decentralized exchanges is still much too small, but as the space grows and there’s money to be made, market makers at all levels will search for the best price, period, and the 0x Protocol will be in the pole position. The only other time I had such conviction on a crypto-project was after reading the Ethereum white paper in 2014.

Why I stayed in 0x

It’s easy to say, “I’m in it for the long term.” It’s way harder to be in it for the long term, especially when you’re not involved in the day-to-day and don’t have true skin-in-the game outside of token price. There are many things I wish the team did differently, but I’ve always appreciated the team’s willingness to hear and act on feedback from the community. Up to now, I’ve stayed with 0x for three reasons: people (team), protocol, and price potential.

People

I once wrote a working application in Python, but my technological knowledge stops there. I rely on giga-brains in crypto to tell me what teams have true technological prowess.

From what I understand, the 0xLabs team is best-in-class.

I also value leadership, and for the last four years I’ve listened to every podcast or video talking about 0x. There are certainly flashier founders, but the steady hand of Will and Amir was exactly what I was looking for as a “long-term investor.” I once heard that the best leaders do two simple things 100% of the time: they do the best they can do, and they do the right thing. Always. I truly believe this to be the case with Will and Amir. They’re always doing the best they can do, and they’re always focused on “the right thing.” Even when things in the DEX-space looked rough, they stuck with their conviction and set 0x up to capitalize on a future world, not this one. They never speak ill of another project or competitor, and they seem to listen to and reflect on feedback and criticism. I’m not surprised they had success raising a $15M round four years into this endeavor — the hard work, dedication, and outstanding reputations they’ve built over time enable them to grow 0x the right way. And, most importantly, when they say they’re going to do something, they do it.

I also value the community. 0x’s community is admittedly small, but it attracts people who are like-minded and dedicated to 0x’s long-term mission and organic growth. Many members of 0xLabs are actively involved in the Discord and willing to answer questions on anything from community engagement (Brent) to product (Theo, Fulvia) to vision and roadmap (Will)…and technical questions are addressed by the larger team relatively quickly. We also have Nikita, one of the most engaged and supportive community ambassadors I’ve seen over the last eight years. I’m proud to be an ambassador, and I love being part of a such a great crypto-community.

Protocol

I’m not going to pretend to know the intricacies and nuances of how 0x operates, but I do know one thing: it works. 0x consistently offers the lowest prices, and with the v4 it has taken gas prices down even lower. 0xLabs has also built an amazing proprietary product: the DEX aggregator Matcha. It’s now cheaper to go through Matcha than direct to Uniswap.

Think about that for a second. It’s cheaper to go through Matcha than directly to the source. That’s incredible. And, while other competitors may quote one price and give you another upon execution, what you see on Matcha is what you get. Unlike others, they don’t pocket positive slippage, they give it back to users. Again, this gets back to the team ethos of “doing the right thing.”

This all may not matter that much to crypto-degens, but it’s going to matter a lot once institutional money starts pouring into DeFi.

If you want to learn more about the differentiated value proposition of 0x, check out this now-famous twitter thread from Danial. Now that 0x is officially “multi-chain,” the moat is only growing.

Price

Our entire financial market is built on the premise that companies should have a monetary value that mirrors their financial health and long-term value proposition. Unfortunately, many projects in crypto are built on speculative fervor or price promises that create a regulatory landmine, especially in the U.S. So, I completely understand why 0xLabs can’t ever comment on price or do anything that could remotely be perceived as price manipulation.

But I can. So what will ZRX be valued? I have no idea, but this is my personal bull case for how this could play out:

…BTC exceeds $8T during the next cycle (~2025). Anchoring the crypto market cap to gold is too low — there are hundreds of trillions of dollars in the global financial system, which itself is a positive sum game and growing rapidly.

…ETH surpasses BTC during the next cycle. In fact, I think there’s a chance for it to happen this cycle. The last time I’ve seen such a mass rush of capital and talent was during the 95–98 era of the internet bubble, and the Ethereum network will capture the lion share of this capital and talent entering crypto. It has something special cooking, and EIP-1559 and the impending move to PoS may be the catalyst to push this thing into the stratosphere. If ETH gets to $8T, that’s ~$50K a coin. Not a typo.

…the rest of the crypto-sphere makes up at least $7–8T in assets. This takes the entire space north of $25T

…we’ll see the rise of cross-chain, middleware protocols that can successfully navigate crypto’s technological and political landscapes (i.e., can develop a working product without alienating any particular side). It boggles my mind when founders take strong stances for or against a particular project…no one knows how this will play out, but those teams who deliver the goods without pissing people off will eventually rise to the top.

…out of these middlewear protocols, those that appeal to large-scale retail and institutional players, have a differentiated value proposition, can evolve rapidly to stay ahead of competition, and are able to maintain a strong community will win the lion share of adoption. We’ll may see a few of these tokens valued in the $100–300B range.

…if that happens, ZRX will be one of these tokens. 0x’s native liquidity and underlying infrastructure will create a flywheel of better pricing and more trades, establishing a giant moat. I expect hundreds of market makers to flood in. We’ll see volumes explode by another order of magnitude, more and more fees will be passed to stakers, and supply will be driven out of the system as APY skyrockets. Additionally, I expect many market makers and active community members will place an increasing value of voting right, and the combination of these things has the potential to create an incredible price shock.

So what will ZRX be worth? Or, another way to pose the question, in a world where the total crypto cap is $25T+, what’s a fair market cap for a token that underpins this decentralized financial system?

Why I’ll stay in 0x

It’s fun to talk about people, protocol, and price, but I’m most excited about the 0x Community DAO. After four years of being an “investor” rooting for price, I finally have a different type of skin in the game. When introducing the 0xDAO last month, Theo laid out that decentralization of this treasury “reduces risks and transfers ownership and decision-making authority to those who contribute to or use the technology or network.” More importantly, it creates a new level of responsibility and accountability.

We, the community, have 2M ZRX (~$4M+…and growing…) to deploy at our discretion. This is an amazing opportunity — it’s like being given the treasury to a working business that has a strong team you don’t need to pay, a best-in-class working product, and no debt. If used wisely, we should be able to grow awareness and adoption while continuing to grow the treasury over time.

I was speaking with an older family member yesterday who was reminiscing on the days of the early internet and how similar it feels to where crypto is now. He said he had a front row seat to the internet, and he realizes that crypto may be the last time he gets a chance to witness the world go through a massive paradigm shift. I’m younger, but this may be the biggest thing I ever see as well.

So why be a Bootstrap Delegator? I have no idea how this will play out, but I have absolute conviction that the 0x Protocol will be front and center for the next decade. And I want to be a part of it.