0x (Ethereum) [Part 2 of 4] (How it Works)
In my last post, I tried to cover the basic and fundamental issues of 0x exchanges. This is completely decentralized and offers many features from other decentralised exchanges as well. This is a bit special and different from others which I will try to share today because today I am going to share how it works. From the step-by-step mechanism, you will find that this is a very much secure and different system from not only the centralized networks but also decentralized exchanges as well.
DEXs is an updated system for its increased security and censorship resistance. Major problems with the system are low liquidity and poor user experience. But this 0x is different from all other DEX. This provides a set of open and permissionless smart contracts. 0x enables developers to build DEXs with shared liquidity. This way users can trade directly from their Ethereum wallets without giving up custody of their assets. 0x is a protocol composed of several smart contracts that govern the exchange process. In this system, users can create and sign orders specifying the asset they want to buy or sell. At the same time, they can ensure the desired price and quantity.
These orders are then broadcast to the 0x network. Relayers are decentralized applications (dApps) built on top of the 0x protocol. It collects and aggregates orders from users. They maintain order books and match buy and sell orders based on predefined rules and parameters. Once orders are matched, 0x smart contracts handle the settlement process. This involves the transfer of assets between the buyer and seller directly on the Ethereum blockchain. Relayers can charge fees for facilitating trades on their platforms.
These fees are paid in native tokens. The native token is ZRX. Mainly this token is used to incentivize liquidity providers & relayer operators. This way automatic swap ensure trust and security.
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VEIGO (Community Mod)
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