The Edge Podcast - Matcha’s New Price Engine Powered by 0x V2

In this episode of The Edge Podcast, which took place on July 19, 2024, DeFi Dad and Nomatic hosted Will Warren to discuss the release of 0x V2, Matcha’s competitive advantages, innovations in DEX aggregation and security, and more! Read our notes below to learn more.

Background

DeFi Dad (Host) – Host of Edge Podcast

Nomatic (Host) – Co-Host of Edge Podcast

Will Warren (Guest) – Co-Founder at 0x/Matcha

Matcha – an on-chain DEX aggregator built by 0x

Will Warren on the Evolution of 0x and the Future of Decentralized Exchanges

DeFi Dad introduces Will Warren, co-founder of 0x, highlighting the release of 0x V2 and its flagship DEX aggregator, Matcha XYZ. He mentions that the new routing engine in 0x V2 enables winning 90% of trades against the competition for any trade size.
Will Warren shares his journey into crypto, starting with reading about Bitcoin in 2013. Initially seeing it as a novelty, he was intrigued by its potential. While studying mechanical engineering at UCSD and working at Los Alamos National Laboratory, he learned about Ethereum through his wife, Linda, who was working at Coinbase. Recognizing Ethereum’s potential, he dropped out of his PhD program to focus on the Ethereum ecosystem full-time.
Will meets his co-founder, Amir, in San Francisco. Amir, previously a trader at DRW in Chicago, also became fascinated by Ethereum. Together, they shared a vision that all forms of value would eventually become tokenized on public blockchains like Ethereum. This vision included traditional securities, fiat currencies, and even video game items.
In late 2016, following their thesis of the tokenization of everything, they felt it was crucial to have infrastructure for swapping these tokens. They aimed to build the first decentralized exchange protocol on Ethereum, leading to the creation of the 0x protocol.
The 0x protocol is an off-chain order relay with on-chain settlement DEX. Users cryptographically sign messages off-chain, which are then injected into a smart contract on the blockchain to settle trades and move tokens between wallets.
Will explains that these messages can be used in various ways: to create an order book, an RFQ system, or trade peer-to-peer privately. This flexibility set them on the path of building infrastructure for swapping tokenized assets, which remains their focus today.

Evolving the DEX Landscape: Will on 0x Protocol, Matcha, and the Growth of DeFi

DeFi Dad notes the early challenges of building 0x protocol, highlighting that DEXs were not popular and most trading was on centralized exchanges. He asks how building has evolved with DeFi’s growth and the rise of Layer 2 solutions.
Will says it’s been a challenging but exciting journey, reflecting on the early days when Ethereum’s community was small and focused on hobby projects. He notes that many early projects required exchange functionality, which led to fragmented liquidity due to different implementations.
Will explains that 0x aimed to establish a standard for swapping tokenized assets, addressing the need for standardized exchange functionality. He mentions that the ecosystem was grassroots with few paying customers, but now there are real companies and customers with specific problems needing solutions.
Will observes a cultural shift in Ethereum, from passion projects to more structured efforts with community standards and building blocks like Uniswap, which revolutionized tokenization by allowing easy creation of ERC-20 tokens and liquidity pools.
Will highlights Uniswap’s impact, noting it introduced significant innovation and competitive pressure in the DEX space. He describes how the ecosystem has become ultra-competitive, with advancements in AMMs, order books, RFQ systems, and MEV awareness.
Nomatic acknowledges the progress and challenges in the crypto space, expressing gratitude for core infrastructure builders. He asks Will to discuss Matcha, a DEX aggregator that will showcase 0x V2.
Will describes Matcha as a consumer product that searches for tokens across supported EVM networks, indexing and making them searchable within 15 minutes. Matcha finds the best possible price by tapping into various DEXs, aiming to simplify access to tokens and liquidity.
Will highlights Matcha’s user-friendly interface designed to be accessible to a mainstream audience while offering powerful features under the hood. He mentions that Matcha continues to improve and become more powerful over time.

Enhancing Web3 Trading: Will Explains Matcha’s Features and Innovations

Nomatic asks Will about the interface of Matcha, focusing on market swaps, limit swaps, and cross-chain functionality. He inquires about the usage patterns between market and limit swaps.
Will explains that Matcha offers a toolbox for Web3 trading, allowing users to perform market trades by aggregating liquidity from various decentralized exchanges to get the best average price. He mentions that a few billion dollars of trading volume go through Matcha’s swap functionality monthly. For specific prices, users can create limit orders, which occur off-chain and are filled by counterparties when the market moves. He also highlights the recent addition of cross-chain swaps, enabling easy access to various ecosystems and quick token exchanges.
DeFi Dad asks about differentiating Matcha from competitors like 1inch and CowSwap and hints at 0x V2 being a potential differentiator.
Will highlights trust, user experience, and competitive pricing as key differentiators for Matcha. He points out that Matcha supports a wide range of tokens across multiple blockchains, ensuring comprehensive coverage. Speed is another priority, with Matcha offering fast and snappy trade execution without sacrificing pricing. He contrasts this with other solutions that might involve waiting for batch auctions.
DeFi Dad brings up the issue of MEV and asks Will to explain how Matcha protects users from it during trades.
Will defines MEV as the discrepancy between the displayed price and the actual received price due to transaction sequencing by arbitrage bots. He mentions that MEV has extracted over a billion dollars from traders. Matcha combats this with 0xRFQ and Matcha Auto. The RFQ system provides fixed quotes from professional market makers, ensuring no slippage or malicious sequencing. Matcha Auto offers a gasless trading experience, with dynamic gas pricing to ensure fast trade confirmation and protection from MEV bots.
Nomatic expresses amazement at the complexity behind the scenes of these protocols and prompts Will to discuss 0x V2.
Will describes 0x V2 as a complete overhaul of their routing engine and technology stack. He highlights that V2 will significantly enhance pricing competitiveness through better utilization of on-chain and RFQ liquidity. The new routing engine will make both developer APIs and Matcha more powerful and efficient, aiming to provide top-tier pricing. He suggests demonstrating the power of the new engine to showcase its capabilities.

Exploring Matcha: Achieving Competitive Trades with Zero Fees and MEV Protection

Will talks about Matcha’s ability to find the best prices for over 5 million tokens across multiple blockchains. He demonstrates a large trade to showcase Matcha’s competitive pricing, showing a $1 million $DAI trade to Wrapped Bitcoin with minimal price impact and multiple liquidity sources, including professional market makers and AMMs like Uniswap V3 and Dodo.
DeFi Dad asks how trading on Matcha benefits from on-chain and centralized exchange liquidity.
Will explains that professional market makers on Matcha tap into various venues, including centralized exchanges, to offer competitive pricing. He highlights that Matcha’s RFQ system is MEV-proof, reducing the risk for market makers and allowing them to provide better quotes.
Will increases the trade size to $10 million DAI to Wrapped Bitcoin, demonstrating the scaling of liquidity pools and gas costs, showing how Matcha handles large trades efficiently.
DeFi Dad inquires about the largest trades seen on 0x protocol or Matcha.
Will mentions seeing trades of tens of millions of dollars, especially in liquid staked tokens like Lido staked ETH, and expects more large trades with the competitive pricing of 0x V2.
DeFi Dad asks for a simplified explanation of how Matcha offers competitive trades with zero fees and who ultimately pays the fees.
Will explains that Matcha offers zero-fee trading by earning revenue through a more reliable and consistent trading experience for less advanced users via Matcha Auto. Matcha Auto provides gasless trading with MEV protection, charging a 25 basis point fee for a smooth and secure experience, appealing to users who prefer reliability over navigating complex trade intricacies themselves.

Enhancing Security and Integration: 0x V2’s Impact on Major Platforms and User Experience

Nomatic asks how major partners like Coinbase, MetaMask, and Robinhood interact with 0x or Matcha.
Will explains that many large platforms offering swap functionality, such as MetaMask, Robinhood, and Coinbase, rely on 0x’s developer APIs. These APIs provide a powerful routing engine that taps into various liquidity sources to offer competitive prices. Integrators use the Swap API for a straightforward integration to provide users with easy and reliable access to tokens. Will highlights the importance of swaps as a business model in Web3, noting that MetaMask, for example, charges an 87.5 basis point fee for swaps, demonstrating a strong product-market fit and sustainable business model.
DeFi Dad shares his preference for using trusted platforms like Matcha due to their established reputation and security, contrasting it with the high fees charged by MetaMask Swap, which still sees significant volume.
Will highlights the importance of user security in 0x V2, specifically mentioning the introduction of Permit2. This feature allows users to set permissions for each trade without granting unlimited allowances to smart contracts, significantly reducing the risk of hacks. Permit2 ensures that only the amount being traded is accessible, enhancing security without adding significant gas costs. This approach, developed by the Uniswap team and relied upon by many projects, represents a more secure and hygienic pattern for Web3 interactions.
Will encourages users to explore 0x V2 on Matcha.xyz, experiment with different tokens and trade sizes, and review the routing diagrams. He also highlights the benefits for whales looking for top-tier pricing and seamless trading experiences. Will invites builders to integrate the 0x API into their products, promising a high-quality user experience and competitive pricing.

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Show Information

Medium: YouTube (Video)
Show: The Edge Podcast
Show Title: Matcha’s New Price Engine for DEXs, Powered by 0x V2
Show Date: July 19, 2024