What is 0x?
A popular alternative to centralized crypto exchanges (e.g. Coinbase) are decentralized exchanges, or DEXs, which facilitate crypto trades between wallets directly. DEX-powered transfers do not require intermediary custody of assets, which means users don’t need to have an account with the platform and there are fewer “steps” that could potentially be vulnerable to hacking attempts.
0x is a product launched by ZeroEx Inc., a company founded in 2017 by CEO Will Warren and CTO Amir Bandeali, and the 0x Core Team has grown significantly since. In 2018 the founders published their mission, “Create a tokenized world where all value can flow freely,” and they continue to quote that mission today.
0x is a a DeFi—decentralized finance—protocol that helps create DEX systems. DeFi project teams can leverage the open-source documentation and code hosted on 0x and integrate it into their protocols. 0x has created the infrastructure and smart contract technology to support the creation of an exchange, find liquidity to fund trades, and connect off-chain messaging (where matches are made) to the smart contracts that tell the blockchain to execute and transfer ownership of assets.
Off-chain messaging allows trades to be paired up prior to being mined on-chain, and this process is powered by 0x nodes or relayers. If using the 0x protocol, DEX users interact with nodes to make, fill, or cancel transactions, and pay small trading fees in exchange for this service. Node hosts are paid in ZRX tokens.
What is the ZRX token?
As with most DeFi protocols, 0x is a community-led project. ZRX is an ERC-20 token that serves primarily as the governance token for the 0x protocol. As mentioned above, relaying node operators earn ZRX, but the token can also be purchased and staked in order to participate in the voting process. A recent protocol proposal passed and added a delegation functionality to ZRX, meaning holders can delegate their ZRX tokens to market makers in order to also earn passive rewards from trading fees.
Initial distribution of the ZRX token happened when ZeroEx Inc., the entity behind 0x, held a public sale to raise funds to support the development of the project. In exchange for ETH, supporters received ZRX tokens.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.
No securities regulatory authority or regulator in Canada has evaluated or endorsed the Crypto Contracts or any of the crypto assets made available through the platform.
Wealthsimple has performed an assessment of whether ZRX can be supported by Wealthsimple’s platform, including whether ZRX is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.
We evaluated ZRX based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of ZRX, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created ZRX;
- The supply, demand, maturity, utility and liquidity of ZRX;
- Material technical risks associated with ZRX, including any code defects, security breaches and other threats concerning ZRX and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them;
- Legal and regulatory risks associated with ZRX, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of ZRX; and
- Statements made by regulators or securities regulatory authorities in Canada and other jurisdiction regarding whether ZRX, or generally about whether the type of crypto asset, is a security and/or a derivative.
Wealthsimple monitors ongoing developments related to crypto assets available on its platform for significant changes that may affect Wealthsimple’s original assessment of those assets, including Wealthsimple’s assessment of the application of securities and derivatives laws. Any significant changes relating to ZRX may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support ZRX.
Like all other crypto assets, there are some general risks to investing in ZRX. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Please review the Wealthsimple Crypto Product Risk Disclosure for additional discussion of general risks associated with the crypto assets made available through the platform.
Additional Risks / Information
In September 2023, the United States Commodity Futures Trading Commission (CFTC) settled charges with ZeroEx, Inc. The settlement order found that the 0x Protocol and front-end application called Matcha developed by ZeroEx, Inc., allowed users the ability to trade certain tokens, developed by third parties, that were leveraged or margined retail commodity transaction and could only be offered on a registered exchange in accordance with applicable U.S. laws and regulations. According to the settlement order, ZeroEx has taken steps to prevent leveraged tokens from being traded using Matcha.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading ZRX. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
Wealthsimple is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Investments Inc. dated December 18, 2023 (the Decision).
The statutory rights of action for damages and rescission in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under securities legislation of other jurisdictions of Canada, do not apply in respect of this Crypto Asset Statement to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.
Last updated: January 1, 2024