Thread by @AntonioMJuliano

Long thread on the state of @0xProject after their 0x Instant launch. Read on if you’re interested in the real state of 0x and open DEXs today👇

Overall I’m a huge fan of 0x and their team, and dYdX is in part built on some of the ideas of 0x as well as integrates with their buy/sell liquidity. They’ve built many dev tools which make it easy to integrate with 0x, and Instant is another great step in this direction

0x Instant will definitely help improve the demand / taker side, but doesn’t improve the supply (maker / relay side). I believe the maker side is much much more important for the overall success of 0x

It’s really not difficult for a legitimate dev team to integrate 0x into a dApp, the much bigger problem is that there is barely any liquidity on 0x

Currently there is 1 single open orderbook relayer with any liquidity at all (@RadarRelay). So the shared liquidity pool is basically just a way for other dApps to plug into Radar’s liquidity (this is what expo does)

I’m going to ignore matching model relayers (@ddex_io, @ParadexIO) because they don’t benefit the rest of the network at all, and are basically just arbitraging that 0x put out some useful smart contracts and libraries for free. Both are taking fees using spreads and not ZRX

In theory Radar could benefit from charging fees when external apps use their liquidity, however because the 0x contracts force fees to be paid in ZRX all Radar orders currently have 0 fees

Users do not want to pay fees in ZRX as it’s a terrible UX. On expo we ignore any orders with taker fees because we don’t want to have our users know / care about ZRX

I know you can use fee abstraction to atomically buy ZRX to use in fees, but this is unnecessarily complicated and requires you to cross the spread twice leading to worse prices for users. We wouldn’t implement this on expo unless there were a huge amount of liquidity on 0x

Next, the spreads on 0x / Radar are quite bad (~2% regularly for the biggest market ETH-DAI). This makes it hard to build any kind of serious trading app on 0x. IMO the main reason spreads are bad is that canceling an order requires sending a slow and expensive on-chain tx

This is less of a big deal when you’re just buying a small amount of tokens to use for an arbitrary dApp, but when you lose 1-2%+ on every single trade it’s hard to profit from any trading strategies

OasisDEX - a DEX with a supposedly outdated on-chain orderbook - currently has way more liquidity as well as tighter spreads on ETH-DAI. Expo integrates with both Radar and OasisDEX and chooses whichever has the best price. It’s almost always OasisDEX

There is 1 market maker - @MakerDAO themselves - which is responsible for almost all of both Radar and OasisDEX’s ETH-DAI liquidity. We’ve seen a few incidents where they have stopped making orders and the available liquidity drops from ~$400k -> $2k

Another huge problem is trade collisions / failures. Once you submit an order in a transaction, it could fail if it has already been taken of if the maker cancels it

This has been a massive problem for us on expo, as about 10-20% of our trades fail because the maker cancels the order before our transaction confirms. It’s much worse in times of volatility, because market makers cancel more frequently during these times

This is even worse because traders most want to trade during times of volatility, and their trades frequently revert during these times. This problem will only get worse as more people start to use 0x. Any current order-based open DEX (including OasisDEX) has this problem too

So there is effectively only 1 liquid relayer, and 1 provider of liquidity on the biggest market, and non-immediate trade finality is a huge problem. Where can we go from here?

1) 0x should not enforce that fees are paid in ZRX. This will allow open orderbook relayers to actually get paid, because more dapps such as expo would use orders with fees of they were in the tokens already being traded

2) 0x should focus on solving the hard problems such as getting immediate trade finality, as well as anything else that improves the maker experience. If there were liquidity on 0x, tons of dApps would integrate 0x - it’s not difficult

3) 0x should focus less on governance in the short term. It’s way more important to first build something with a large amount of adoption that’s worth governing

Most users (relayers, dApps, traders) don’t care how the protocol is governed, they only care that the product is the best. If 0x were worse than another open DEX, people would just use the other DEX. Competition, not governance will naturally arrive at the optimal solution

It’s also not that important to have one canonical version of 0x. It’s easy to abstract which open DEX you’re trading on. @dydxprotocol / expo does this with exchange wrappers - contracts that give any DEX a standard interface. This makes it easy for dYdX to use any DEX

Overall I’m super excited for the future of 0x. They have a top team that is well positioned to solve all of these problems

Decentralized finance is progressing extremely fast. It won’t be long until we have products that meet and surpass their centralized counterparts

Until then, we’ll keep building

@DharmaProtocol @SetProtocol @compoundfinance @RadarRelay @MakerDAO @ParadexIO @ddex_io @0xProject