DeFi is a term that gets thrown around a lot. It stands for decentralized finance and is a relatively new sector in the crypto space.
DeFi is the supposed antithesis of traditional finance. DeFi intends to subvert the control of the financial-industrial complex over transactions and give the power back to the people. It plans to enable people to make their trades in a friendly peer-to-peer exchange and seeks to create an open financial system. This intention of DeFi stands to eliminate the influence of third-party institutions such as banks or brokerages.
This underlying idea of breaking free from the influence of centralized institutions led to the creation of the first DeFi exchange. That first DeFi exchange has since then increased into many as a way to meet the demand. And we have seen substantial growth in the last few years.
Growth of DeFi Exchange
Last year, the combined market cap of all DeFi exchanges crossed over a hundred billion dollars. A feat that no one expected. And this is significant growth from the first defi exchange launched in 2016.
But why? The answer is plainer than one might think.
DeFi exchanges are more accessible to regular people. All the average user needs is a DeFi wallet, and wallets are a free service online. DeFi requires no registration. Users can use it with complete anonymity. With automated protocols and smart contracts, crypto swapping has become so easy. Miners who mine the coins and mint tokens store their crypto on a defi wallet, connect their wallets to a DEX, and swap at will. This automation made it possible for even non-coders to participate in the market, which is a substantial percentage of the user base.
Entrepreneurs capitalized on this opportunity and paved the way with new business ventures. Since then, crypto loans, crypto derivatives, crypto credit, and the crypto debt market has grown unchecked mainly due to the lack of government regulations and oversight. And this has given rise to spectacular growth in a matter of years.
Revenue from DeFi Exchange
The primary source of revenue for a DeFi exchange is the trading fee. On average, a decentralized exchange nets over ten thousand transactions, and each transaction on the service brings a small portion of the transaction as trading fees. Other than this, many other modules are there to earn revenue. Let us see them below…
Swap Fees
By default, the DeFi exchange has a token swap function that enables users to generate revenue through automated liquidity pools. Whenever a token is swapped on the platform, there is an LP (Liquidity Provider) fee. This fee rewards the user who provides liquidity with LP tokens for staking. For instance, you could set the LP fee at 0.3%, with 0.15% going to the Liquidity Provider and the remaining 0.15% becoming your revenue.
Initial Farm Offering
Initial Farm Offering (IFO) is a popular crowdfunding method in the crypto space. Many new startups that have launched new tokens are using the IFO platform to raise funds. It assists new DeFi projects in obtaining funding by having them take part in pre-sale occasions that are held following rigorous project assessment by decentralized exchanges.
For example, PancakeSwap is the most popular IFO platform, and its users can directly profit from fundraising. If you develop a Decentralized Exchange like PancakeSwap, you can collect fees from those who conduct crypto token sales on your DeFi exchange.
Staking
This is a common revenue model that most people are familiar with. It allows users to earn rewards by locking their tokens for a certain length of time. In general, most DeFi exchange platforms use their native token for staking. If you have your own crypto token, you can use it for this staking process. This means that if anyone wants to participate in staking on your platform, they would need to purchase your token, which would help to increase profits and trading volume.
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This revenue stream is common and fits all types of business models in the crypto world. Once your DeFi exchange has reached a certain level with numerous active users, many third parties will want to connect with you to post advertisements on the DeFi exchange website. You can collect fees from them on a daily or hourly basis, which will help you acquire substantial profits.
The aforementioned revenue sources show the value and potential of the DeFi exchange business model. As a result, starting a DeFi exchange can help you succeed as an entrepreneur in the cryptocurrency space and make a lot of money quickly.
As a budding entrepreneur, you may have a lot of questions related to Decentralized exchange. In order to clear all that, we shall see the…
Most Asked Questions on the Internet Regarding DeFi Exchange Development
What is DEX?
DEX stands for Decentralized Exchange. It is a peer-to-peer marketplace for trading digital assets without handing over the management of the said assets to a centralized organization.
How does a DEX work?
A decentralized exchange is an online digital trading platform built on a blockchain network that serves as a brokerage firm that gives more freedom to its users. It operates via smart contracts and blockchain protocols.
What are the Benefits of a DEX platform?
Due to the lack of custodial wallets that holds all the funds, DeFi exchanges provide more security against hackers. And they are entirely anonymous as it does not require their users to provide their name or identity. Token availability is also a key benefit, as any token new or not, can be added to a DEX without needing to list them.
How do I Start a DEX Platform?
To start a DEX platform, you should choose the development method that suits your business and also the development company that shows your exact idea in the development of your platform. In this case, I will guide you with both the development and development company.
There are various development methods when coming to build a decentralized platform. But let us see the most often preferred methods by many startups in the crypto industry. One is development from scratch and another is using white-label crypto exchange software.
Development from Scratch
If you are a developer and you plan to build a decentralized platform as a business, then you can move ahead with the development from scratch method. Also, you should know it may take a long time to complete the entire development process and it also requires a high cost to afford the service from the development company.
Decentralized Exchange Script
Decentralized exchange script is the pre-built white-label software of the popular decentralized platforms. It holds all the necessary functions of the existing decentralized exchanges to start a decentralized platform. For example, If you want to launch a Decentralized Exchange like Uniswap, you can use the Uniswap clone software provided by the service provider. By using that, you can get a fully-functional DEX platform with all the features similar to Uniswap.
Also, the platform you create using the clone script can be highly customizable according to your business needs. The strong suit of white label crypto exchange is it can be deployed within the week to start your business quickly. Its cost is also low compared with the other development methods. Overall, From budding startups to popular entrepreneurs prefer this way of development method.
Features of Decentralized Exchange Script
Initially devised as a simple crypto-swapping tool, which evolved into what the modern DeFi exchange it is today.
There are many features for DEX scripts, and here are a few.
- Swapping
- Staking
- Liquidity Pool
- Yield Farming
- Wallet Integration
- API Documentation
- SSL Protection
- End-to-End Encryption
And the list goes on. These features come in-built into the source code of the dex software. And this eliminates the need to develop these features yourself, saving time, money, and resources.
There are tons of DEX software available for entrepreneurs, and each one of them comes with its unique features. Some are common to all, and some are not. Knowing every one of them is necessary when making an informed choice.
So far, we have covered the vital basics of decentralized exchange. We saw how DEX has grown since its conception, the features, and the types of DEX scripts. And we learned how to use DEX software to build a DeFi exchange platform.
NOTE: We have collected a list of Top DeFi Exchange Clone Scripts features and benefits in our latest blog in detail. You can refer to this blog before concluding your business path.
Why Should You Choose Coinsclone for Decentralized Exchange Script?
Coinsclone is a professional DeFi Exchange Development Company that can help you build a robust, bug-free, Decentralized Exchange Development platform with our DEX script for the best affordable price. We employ a variety of subject matter experts, UI/UX designers, software specialists, and blockchain engineers who specialize in smart contract programming and blockchain-based systems.
Our team of qualified blockchain developers can create a decentralized exchange script by using the most recent technology. Additionally, our development team continues to work after the client receives the product since we provide efficient 24-hour technical assistance. All these incredible benefits are yours if Coinsclone is your technological partner.