On Discord there have been many questions lately about 0x’s plans with regards to the expansion beyond of Ethereum.
The overall strategy was shared back in October, so it’s perhaps useful to have a check-in here on what happened in between.
Quoting the blog post:
before investing heavily in productization, we will look at market signals that tell us with a fair amount of confidence that that’s what the ecosystem needs to continue the process of tokenization of value.
We also have informal conversations with 10+ teams building L1/L2/Ethereum Sidechains and learnt more about their progress and roadmaps.
0x being about creating a tokenized world where value flows freely, we obviously made sure there were no obvious blockers, within the progressive decentralizations framework. That is, we are generally more lenient towards early days centralization, as long as a path for decentralization exists.
We formalized rough metrics litmus test for what we would consider a valid candidate for a 0x expansion:
- Volume: roughly 10% of Ethereum DeFi volumes before making a move
Adoption : at least 10K active addresses
- In absence of that, sustained growth of active addresses - think 20+% W/W over 4 consecutive weeks, or 2X m/m
- liquidity MVP path: existing liquidity and protocols (better if AMM)
What does the data tell us?
Talking hard data, we have observed a steady growth in adoption by a few key players, across $ volume (when applicable), blockchain wallet # and # transactions.
This data is made of weekly snapshots taken manually by a curated list of data sources, so it could be incomplete or not 100% accurate. However, it paints a pretty clear picture.
We also started formalizing a lean product/engineering path to expand 0x into new blockchain venues. Porting over the entire 0x infrastructure (onchain and offchain) is very costly, so it made sense for us to create the following smaller, sequential milestones:
- Plug in Matcha on existing chain+protocol+liquidity
Assess taker demand (usage, volume). If significant growth, proceed
- Deploy 0x protocol (better if EVM compatible)
- Update 0x API, aggregate existing AMM liquidity
- Update RFQ quote server, work with MMers to build RFQ flow
- Update Mesh, unlocks OO
- Connect tokeneconomics (how the current ZRX token governs 0x across multiple chains)
The more we go down the list, the more complicated the puzzles around engineering and network dynamics, but also (assuming the first milestones have been cleared), the more visibility we will have on the relevance of the blockchain venue.
In other words, this lean approach will make it possible to invest progressively in an expansion while gaining signals on the prospective ROIs.
Note that the entire process would likely take months of development.
What about the DEX blockchain hub?
As discussed in the blog post, we have researched internally solutions to power trustless, efficient, p2p exchange of assets belonging to different blockchains.
Similar to what expressed in the blog post, we concluded that it’s probably very early to invest in research and implementation before testing the waters with supporting 0x in other blockchains natively.
Taking a 30k feet view, there are two macro approaches:
- inside-out (left): design and implement a DEX blockchain hub venue, then plug that in into different blockchains where 0x is present
- outside-in (right): expand 0x in other blockchain venues first, then design a DEX Hub able to orchestrate network liquidity and token economics.
Our current thinking is that the ‘outside-in’ strategy makes the most sense right now. The ‘inside-out’ strategy would likely take us to a research-heavy path with not enough market signals, risking to diverge from real world adoption dynamics.
Also, based on what we have seen out in the wild, there are real challenges in ‘bringing up the stack’ tokenized value where existing network effects are in place (see L2s), and it feels more prudent to collectively research solutions on these hard problems (e.g. bridges) and see how these experiments unfold.
Therefore, we parked that specific research area for now (informally referenced as 0xChain on Discord), while we start paving the way along the MVP path described above.
It would be great to get the community’s take on the above.
What do you think about the MVP path? Any thoughts on what blockchain venue should be prioritized?