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0x Protocol

Project Description

What are the purposes, goals, or scope of the project? If there are metrics to measure success, what are they?

0x’s mission is to create a world where tokenized value can flow freely. To achieve that, we are
building the DEX infrastructure for the Internet. Our primary success metrics are number of users
transacting, $ volume, number of trades.

What, if any, are the coordinating entities, and what are their functions? (For example, a foundation, software development corporation, DAO, etc.)

0x has been lead primarily by the 0x ‘core’ team that raised ICO in 2017. After bootstrapping the
effort, the team transitioned in 2020 to a for-profit entity called 0x Labs, pursuing its own business
objective while being the main contributor of the open protocol - with the intention of progressively
being ‘one of many’ contributors. In 2021 0x Labs deployed funds in a community Treasury entirely
controlled by ZRX holders. The ensemble of ZRX holders have been labeled as the “0x DAO” since. A
couple of groups were created out of the DAO Treasury, leading specific activities (projects, grants
programs).

How are participants and users of the project identified? (For example, by public/private cryptographic keypair, wallet number, government ID, etc.) Are there restrictions on who can participate? If so, how are they implemented?

0x governance is practiced by ZRX holders. 1 ZRX = 1 vote. ZRX can be delegated to 3rd parties. There are currently 3 types of votes: temperature check (min 1k ZRX to create one), ZEIP (protocol updates, no minimum voting required but operations are led by 0x Labs) and Treasury Votes (funding requests, 100k ZRX required to initiate vote, onchain binding).

Stakeholder Groups

Does the project’s software code delineate groups with particular functions? (For example, those who can propose changes, arbitrate disputes, or vote tokens on behalf of others.)

There are no specific groups encoded in the system. As far as governance is concerned, ZRX voting
power is the only controlling factor. ZRX can be delegated to 3rd parties.

Protocol updates are coordinated by 0x Labs. The votes are run off chain, and displayed in the main
voting portal. If accepted, the proposals are executed onchain by a designated multi-sig that controls the contracts.

The Treasury isn’t controlled by any multi-sig. Its funds are controlled via onchain binding voting. Polygon foundation and Celo foundation contributed to the Treasury as 0x deployed on their network, with the intention of providing funds to support development in their corresponding venues.

A group funded by the Treasury called 0xEVE spun off (via onchain voting) in Q3 2021 with the purpose of running a investment program to grow the network. It is controlled by a multi-sig of individuals running the program. Some of them are retributed by the collected funds.

There are not mechanisms to add or remove groups, apart from the aforementioned multi-sigs. They have not been codified in the governance process.

An exception to that is the group of bootstrap delegates. This group of teams and individuals was
delegated voting power by 0x Labs in Q3 2021 to give them enough voting power to administer and
support the first steps of the DAO. The ZRX delegated can be modified at 0x Labs discretion. The group has not been changed yet, but we might be running refreshers based on activity and new applications.

Are there other important groups either constituted informally, specified through contractual arrangements, or based on geography/choice of law?

Refer to previous question.

Goals and Implementation

What behaviors does the project seek to encourage, or discourage? How are such behaviors incentivized?

The project seeks to encourage the creation of technologies aimed at supporting the decentralized
exchange of assets. The removal of points of failure enabled by blockchains is the underlying requirement in the software developed. Apart from the hard technology, the project aims at growing the network of participants: applications with their users, and (when applicable) liquidity providers, in whatever form (professional firms, AMMs..).

In order to support these efforts, funding is necessary and was bootstrapped via ICO and by the business opportunities seized by the firms participating in the network. Special programs aimed at growing user participation can be designed and executed.

(For operational projects): How well are the incentives and governance mechanisms functioning in practice? Are there metrics to measure the effectiveness of governance?

In 2019 0x launched a staking-based incentives system that aimed at distributing governance power to liquidity providers on a specific subset of the 0x network. Over 80M ZRX worth of voting power got
distributed to such participants (liquidity providers), allocating governance power to entities actively
involved in the healthy functioning of the network. ZRX holders were allocated rewards based on their
delegated voting power and the performance of the liquidity provider.

The model grew disconnected from the evolution of the network, which privileged other types of markets, and it’s been paused in October 2021. It is being redesigned.

Are there systems to pay for infrastructure, protocol upgrades, development work, network enhancements and/or other work deemed to be in the interest of the network? If so, how do they operate?

In 2021 0x Labs deployed funds in a community Treasury entirely controlled by ZRX holders. The
ensemble of ZRX holders have been labeled as the “0x DAO” since. A couple of groups were created out of the DAO Treasury, leading specific activities (projects, grants programs).

The Treasury isn’t controlled by any multi-sig. Its funds are controlled via onchain binding voting. Polygon foundation and Celo foundation contributed to the Treasury as 0x deployed on their network, with the intention of providing funds to support development in their corresponding venues.

A group funded by the Treasury called 0xEVE spun off (via onchain voting) in Q3 2021 with the purpose of running a investment program to grow the network. It is controlled by a multi-sig of individuals running the program. Some of them are retributed by the collected funds.

Governance Powers

What makes a governance decision associated with this project legitimate or illegitimate?

Voting power should determine what’s legitimate or not. 0x Labs can ultimately weight in (hasn’t so far) with its voting power (~10-20% of entire supply) to sway votes that are considered harmful for the project goal.

We haven’t reached highly contentious votes so far. Temperature checks are somewhat subject to spam or not entirely relevant voting (like this), but they are not binding.

Who has power to introduce governance proposals, and how does that process operate?

0x governance is practiced by ZRX holders. 1 ZRX = 1 vote. ZRX can be delegated to 3rd parties.
There are currently 3 types of votes:
• temperature check: min 1k ZRX to create one. Snapshot space here.
• ZEIP: protocol updates, no minimum voting required but operations are led by 0x Labs. Example vote.
• Treasury Votes: funding requests, 100k ZRX required to initiate vote, onchain binding. Example vote.

Who has policy-setting (“legislative") power to decide on proposals, and how does that process operate?

ZRX holders. However, the purely legislative of creating proposals was lead by 0x Labs (fwa ‘0x Core’ team). ZRX holders mainly showed support or veto-ed proposals. The interesting aspect of governance for smart contracts objects is that the act of voting is ‘Post Ante’ the proposal itself, which is the full code update itself. This creates asymmetrical risks in whatever party wants to embark in a complicated protocol upgrade, and why ‘temperature checks’ are useful to gauge early support.

In other words, an entity wants to make sure their work (which incurs costs, including auditing) will be
accepted by the community before starting it! Or other mechanisms to reduce risk could be introduced. Here’s a rough diagram from an internal document discussing the issue.

Who has implementation (“executive”) power to execute proposals once decided upon, and how does that process operate?

The Treasury is controlled by its own smart contract, that coordinates the votes. There’s no central party controlling it.

For protocol updates, 0x Labs controls a multi-sig that deploys the onchain protocol updates. It will be
transitioned to a model akin to the Treasury in the future. A security multi-sig might be introduced that has only ‘veto’ power or ability to stop temporarily operations in case of issues.

Who has interpretive (“judicial”) power to resolve disputes over application of a policy to a specific instance, and how does that process operate? What can the interpretive power be used to mandate?

Nothing set at the moment.

What checks and balances, or systems of accountability, exist among these governance powers?

Discussions are held in the public forum.

Governance Procedure

Governance Procedure

Are there systems for non-binding signals or binding votes on governance decisions? If so, please describe them in detail.

Yes, snapshot votes. Snapshot space here.

Are there distinctions between decisions made by ordinary processes (for example, majority votes) and those which require extraordinary processes (for example, supermajority votes)? Or are there non-standard processes you would, or have, used in emergency situations? Explain as appropriate.

No

Are there aspects that can never be changed through governance processes, short of a contentious hard fork of the network? If so, how is that ensured?

Nothing is off the table at the moment.

Are there mechanisms that make changing the project easier or harder?

Generally speaking the need for extra security and decentralization slows down the deployment process by 4-6 weeks on average. This is because of the need of 3rd party audits (it would be seen as a conflict of interest if 0x Labs reviewed internally the code it developed), and security time locks

What revisions to governance mechanisms have been made, or are under consideration, and why?

We might consider transitioning to a lighter delegation system utilizing GovernorAlpha. That remains to be designed.

If there are any significant aspects of the project’s governance that you have not described, please provide details here.

If interested, we prepared a soft evolution of 0x DAO in this deck

https://docs.google.com/presentatio/d/1LJMoP_s42HTSKetxoL8Wu1283OyKpSFmbnYRkRG83GU/
edit?usp=sharing

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