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. At first glance, the payment generated by a single transaction may not seem like much, but looking at it collectively, the revenue generated for ten thousand transactions is profitable.
This profit model attracted investors and entrepreneurs to DeFi. And that, in turn, incentivized the further growth of DeFi. Entrepreneurs saw the potential and encouraged investors to provide liquidity to the system.
And hence, the second significant source of revenue for a DeFi exchange was born. Liquidity providers are investors who lend their crypto to the business to provide liquidity for a specific trading pair. The increased liquidity attracts traders. And the platform can charge up to 0.5% as LP fees for every trade done via that pair. Even as a significant part of the fee goes to the liquidity provider as passive income, the rest is for the exchange.
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.
Best choice to build a DeFi Exchange Platform
Building a DEX is an ambitious endeavor, and I wish you good luck with that, but before you start, there are some things everyone should know.
There are three main ways to go about building a DeFi exchange. The easiest option is to get the source code of the operating software from an open-source platform like Github. The second option is to use a dex software, and there are a variety of dex exchange script. The third one is difficult to build a platform from square one.
Getting the source code from Github might seem like a good idea at first look, but some problems come with it. Code scripts taken from an open-source platform will most definitely have bugs in the code, which you will need the expertise to resolve. The other most common problem is open-source code scripts tend not to be secure enough, as hackers know the code and how to reverse-engineer it.
Building a DeFi platform from scratch is a daunting task. The process requires several software experts and blockchain engineers working for at least twelve months to have a functioning platform. And it costs at least a hundred thousand dollars, perhaps even more. It is not a viable long-term option for startups.
A dex exchange script is a working exchange software that is ready-made and coded specifically for the one building the platform. It is a cost-effective option for starting an DEX exchange, and neither does it require too many resources.
Comparative to the other options, using a dex exchange script to start a decentralized exchange is the most efficient way.
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 exchange scripts, and here are a few.
- 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.
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.
So far, we have covered the vital basics of decentralized exchanges. We saw how DEX has grown since its conception, the features, and the types of dex exchange scripts. And we learned how to use a DEX software to build a DeFi exchange platform.
Now, let us see who provides the exchange scripts. Coinsclone is a professional DeFi Exchange Development Company that can help you build a robust, bug-free, decentralized exchange platform with our dex exchange 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.
We are your professional technical support partner. Remember, Coinsclone.