Decentralized
Exchange (DEX)
from Decimal

DEX Development by Decimalchain makes decentralized exchange trading to investors' doorsteps through its white-label platform solution

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DAO

What is Decentralized Exchange? (DEX)

A decentralized exchange is an on-chain marketplace that allows the exchange of cryptocurrencies using a peer-to-peer transaction model. The key elements of this definition that set apart DEXs from the centralized exchanges that most traders have been using all these years are the following:

Transactions are on a peer-to-peer level. There are no intermediaries, and the exchange is not the counterparty to any transactions.

Transactions are all fully on-chain.

The counterparties to the transactions can integrate their wallets into the exchange and keep 100% custody of their assets and funds.

They are safer and more secure, providing more anonymity in the transaction process.

What does a decentralized exchange from Decimal bring to the fray? Some of the so-called decentralized exchanges out there are not fully decentralized. Some of them may appear to be decentralized but still have some flaws of CEXs, such as not being fully on-chain, maintaining off-chain order books, liquidity issues, and inability to provide full client-based funds custody. A true decentralized exchange should:

1. Provide a trustless environment for users' data and funds.

2. Have an order book, transaction history, and trading engine that is fully on-chain.

3. There is also an ongoing shift to provide automated market-making engines

4. Be able to support a marketplace for non-fungible tokens (NFTs).

5. Crypto wallet integration.

Not surprisingly, many traders are migrating from centralized exchanges to decentralized ones. A 2021 report by Block Research indicates that trading volumes on decentralized exchanges had crossed the $1 trillion mark.

DEX vs Traditional Exchanges

CEX

Trading

Must place trust in a centralized intermediary

Structure of Operation

Centralized exchanges are owned and operated by a single entity

Chain Location

Operations are typically off-chain

Trading Cost

Intermediaries will include trading fees

Anonymity Factor

Traders must undergo KYC verification

Custody of Funds

Assets are held in hot wallets

Security

Prone to hacking and security breaches.

Liquidity

More liquid

Transaction Speeds

Usually faster as the exchange itself is the counterparty/market maker

Graphical User Interface

More user-friendly

DEX

No need to put their trust in a third party

Smart contract technology powers the DEX

DEXs are on-chain, and keep records of all transactions.

There are no intermediaries

Participants remain anonymous

Traders maintain full custody of their wallets and assets.

More resistance to security breaches.

Less liquidity

Takes more time to complete transactions

A bit too complex for beginners

Features of Decentralized Exchange Development

Lending/Borrowing

A peer-to-peer-based system that allows users to lend and borrow crypto assets without an intermediary is a hallmark of a decentralized exchange. Traders who want to earn interest on their crypto holdings can decide to lend these tokens to others who want to borrow them. The lender earns the interest paid by the borrower. Unlike a centralized exchange, there is no intermediary, which reduces the borrower's cost.

Staking

Decimal's staking protocol allows users who want to earn from their holdings to stake these in return for holding Decimal's DEL token for an annual percentage yield (APY) of 20%. Think of staking on a DEX as putting money in a savings account and earning interest. Successful staking requires a proof-of-stake mechanism, a consensus algorithm that discourages attempts to undermine the network. Compatible PoS tokens are to be used for this activity.

Launchpad

A crypto launchpad is a platform for crypto startups to get their project across to potential investors. The Launchpad was born as an attempt to sanitize the crypto fundraising industry after the initial coin offering scams of the past. A launchpad can create a life-changing opportunity for early-bird investors. It can also help crypto startups get instant and robust funding for their crypto project without going through rigorous traditional fundraising processes. A DEX team will screen a project before it can be listed on the Launchpad, giving such investments an improved safety profile.

Yield Farming

Yield farming is another means of generating an interest yield on crypto assets. It can only be performed on decentralized finance (DeFi) lending platforms. Investors participate in yield farming by staking crypto holdings through a decentralized app. Lending users are free to set their lending rates. Yield farming is akin to conventional finance's fixed deposit system of savings. The environment for yield farming is trustless and typically pays higher than any commercial bank's interest on savings products.

Liquidity Pools

An aspect of online trading that makes it attractive is the ability to match buy and sell orders and get settlement instantly at the lowest possible cost. This is only possible with sufficient liquidity. Sufficient liquidity means that for every buy order volume, there must be a corresponding volume of sell orders to fulfill the buy request. Centralized exchanges do not have a problem with liquidity as the exchange is the market maker and can provide counterparty settlement. However, this comes with a conflict of interest challenge. Decentralized platforms tend to suffer from a lack of liquidity as no central authority makes the market generate the required liquidity. This could widen spreads, encourage slippage, and increase trading costs, which go against the principles of decentralized crypto trading. Rather than have a centralized authority to provide such liquidity as a market maker, a decentralized exchange has to create liquidity pools to solve the problem of liquidity scarcity. Enter the automated market makers (AMMs) as an integral component of DEX platforms. Using an AMM, users can supply tokens to form the liquidity pool at a price determined by the AMM protocol. There has to be an incentive for users of various platforms to supply such liquidity. These users constitute the liquidity providers (LPs), much the same way banks serve as the LPs for the interbank forex market. The LPs are rewarded using a portion of any fees generated by those who use the liquidity pools.

process

Decentralized Exchange Development Process

What processes involve turning a decentralized exchange from an idea on paper into an absolute platform with hundreds or thousands of traders?

Features

This is the stage where developers and project owners (with the assistance of a scrum master) come up with a list of the features of the DEX. The DEX will include:A trading engine, AMM integration, Order book, Crypto wallet integration, Transaction history, Marketplaces (NFTs, Staking, Yield Farming), Liquidity pool.

DEX Development: Decimal's Solution

Decimal's decentralized exchange software development services has developed a white-label solution to enable you to deploy a decentralized exchange app to your targeted market. Using Decimal's white-label solution, users benefit from fast deployment to the market without the time, hassle, and costs involved in developing a DEX from scratch. You can also build your own coin in a matter of minutes. The DEX platform from Decimal features a delegated proof-of-stake (DPoS) consensus mechanism that improves the speed and stability of the platform. It also allows faster transaction verification using specialized validators. The platform is robust enough to handle a large transaction volume. The DEX app supports a wide range of decentralized applications and features a robust marketplace for non-fungible tokens (NFTs). The DEX app also supports cross-chain swaps, permitting the transfer of tokens to and from Ethereum and the Binance Smart Chain.

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FAQs

How to Start your DeFi Token Development Journey?

Depending on their needs, projects can select any specific service. Nevertheless, we recommend them take our integrated package in order to save time and energy and to ensure their complete satisfaction.

How did DeFi solutions transform the finance industry?

It is a crowdfunding method that allows cryptocurrency projects to introduce their native tokens through decentralised exchanges (DEXs).

How does DeFi work?