How to Create Your Own DEX?

If you did market research about the DEX perspectives before, you’ve probably noticed dozens of decentralized exchange solutions on the market. Wherever created from scratch or forked from the existing projects, many startups keep on trying to catch the hype of Uniswap. 

And that’s no wonder since the perspectives of DEX are quite appealing: as of 2023, the total number of crypto users worldwide has overpassed 420 million and as the technologies evolve, these figures are expected to grow over the next decade.   

So, where should you start to create a DEX project for your business? What benefits does it have compared to centralized exchange (CEX), and what challenges do you expect when building a custom DEX solution? In this article, IdeaSoft crypto experts uncovered the essentials every entrepreneur MUST know about!

Table of content:

1. Future of DEX: What Are the Most Promising Areas?
2. Why Turn Investments Into Decentralized Finance in 2023?
3. Evolution of DEX Platforms: Main Takeaways
4. What Should You Know About Uniswap v.4.0
5. How to Create Your Own DEX: A Complete Guide from IdeaSoft
6. IdeaSoft Experience in DEX Development
7. Summary

Future of DEX: What Are the Most Promising Areas?

Before you dive into product development, it’s always great to start by learning the market trends and most prospective areas of decentralized exchange. This will provide you with a better understanding of the future of DEX, yet can give some helpful insights and ideas for your upcoming cryptocurrency project.

As of 2023, some of the most popular features offered by DEX include trading, crypto asset staking, lending services, yield farming options, bonus offers, and loyalty programs. Talking about the prospects and trends for 2023-2024 in decentralization exchange, IdeaSoft’s Chief Technology Officer Herman Stohniiev has outlined the following key areas:

1. Inclusivity – the popular DeFi platforms like PancakeSwap and Uniswap have set up the all-inclusivity trend, which means offering a wider selection of services (applying additional strategies for staking, yield generation, referral programs, etc.) to make the trading more accessible, profitable and attractive for both existing customers and new users. 
2. Cross-Chain DEX – this solution is focused on enhancing asset trading across different blockchain protocols. Typically, these imply the use of cross-chain bridges or validators, which act as intermediaries and ensure secure asset transfers.
3. Algorithmic Trading – the integration of algorithms in custom DEX solutions provides a wide range of opportunities for traders and liquidity providers: automated trading, cost-efficiency and arbitrage opportunities, risk reduction, data-driven insights, and in-depth market analysis.
4. Liquidity Aggregation – refers to the process of creating a unified and deeper liquidity pool from multiple sources (other DEXes or liquidity providers). When building a DEX exchange, this feature is among the best solutions that can maximize the efficiency of your DEX platform by consolidating liquidity, improving price discovery, and expanding the range of tradable assets. 
5. Central Limited Orderbook (CLOB) – in a CLOB-based DEX, traders can buy and sell orders for various trading pairs, which are aggregated and displayed in a single order book. This enables improved liquidity, better price transparency, fair order matching, higher automation, and flexibility in trading. 

Along with that, Herman Stohniiev indicates that the DEX solutions are currently not ready for integration with traditional finance: they’re still at the early stage of formation and have to complete a lot of challenges to become more mature. 

Why Turn Investments Into Decentralized Finance in 2023?

The easiest way to better understand the trend for custom DEX products is to analyze the lucrative benefits it provides upon launch. 

Among the primary advantages of decentralized finance is the exposure to the growing DeFi market and its potential for innovation, disruption, and financial transformation.

Additionally, investing in decentralized finance provides greater network security and transparency, reduced counterparty risk, access to a diverse and decentralized pool of liquidity, participation in governance and token economy, opportunities for token listings and fundraising, and more. 

With the right strategy and professional development team on the board, it’s possible to create your own DEX solution that is efficient, competitive and fully aligns with your business objectives and needs.  

Evolution of DEX Platforms: Main Takeaways

Increasing interest in decentralized finance investments has driven the attention of governmental authorities and became a subject of concern in large CEX providers, such as Binance and Coinbase. As the decentralized exchange solutions continue to evolve, the US Securities and Exchange Commission (SEC) reassured to increase oversight of the DeFi ecosystem as a whole. Our experts at IdeaSoft believe that the recognition and governance from the regulatory institutions will become a great boost to the decentralized exchange industry. At the same time, we’ll see deeper and more fruitful cooperation between SEC and DEX. 

Nevertheless, despite the great reputation of centralized platforms, why do businesses still consider how to create a DEX exchange? 

If you take a look at both CEX and DEX segments, it becomes more than clear that the latter option seems to have more perspectives compared to a centralized platform. 

What Should You Know About Uniswap v.4.0

Being one of the leading DEX solutions in the DeFi world, Uniswap has achieved wide recognition for a reason. Since its launch in 2018, it has more and more features rolled out in the new versions of the platform. 

The last version, Uniswap V4, which was announced in June 2023, seems really promising in terms of the DEX functionality and user experience. It exposes the concept of “Hooks” – contracts that run at specified points in a pool action’s lifecycle, which include but are not limited to the pool setup date, information on when liquidity is added or removed, trade’s data, and so much more. Additionally, Uniswap introduced nice upgrades to the user experience through customizability, enabling pool creators to have greater control over the behavior of their pools. 

Another feature of Uniswap V4 is a singleton contract architecture – opposed to the previous model, where every pool had its own smart contract. This model results in greater cost-efficiency and accounting automation, which is important for users and the platform. 

The technologies and upgrades of Uniswap are an excellent demonstration of what aspects to focus on when preparing a custom DEX solution for your business.

In our Twitter account, we already discussed the key differences to be learned at Uniswap and are ready to come up with the powerful and competitive DEX platform that will help your business to stand out.

How to Create Your Own DEX: A Complete Guide from IdeaSoft

Along with investing in decentralized finance, it’s always good to know what the entire DEX development process looks like. 

So, once you’ve uncovered the general points about DEX, let’s now explore how you can build a custom decentralized exchange solution for your business. 

Below, IdeaSoft specialists explained the essential stages of creating any decentralized exchange solution for a business. 

Step 1: Conceptualization and Planning

Having a clear picture of your future product is critical, especially when it involves complex blockchain architecture and specific structures like in DEX. Complex, in-depth research is the first step that helps to visualize how your future product should be designed. Typically, it includes:

• Market and industry analysis;
• User research and interviews; 
• Pain points and potential problems;
• Product conceptualization and A/B idea testing. 

These are only a few components to be done during the research phase for building a DEX exchange. Not only it helps in creating a data-driven “backbone” of your project, but it also results in more efficient and effective decisions during the next development stages.

Step 2: Project Prototyping

After you learned how to invest in DEX and collected the essential information for the future project, it’s the right time to consider the structure and features of your DEX solution. 

In fact, the decentralized nature isn’t the only thing that distinguishes a DEX from CEX. Some other common decentralized exchange features are: 

• Trading Engine
• Decentralized Order Book
• Token Swapping
• Payment Systems & Crypto Wallet Integration
• NFT Marketplace
• Automated Market Makers (AMMs)
• Permissionless Access
• Transparency & Auditability

Based on the project’s tech stack, businesses can come up with the most powerful and effective DEX platform that aligns with all their objectives and user needs. At the same time, it gives a great understanding of what expertise they need to create the desired product. 

Step 3: DEX Development

Creating a DEX from scratch can be challenging and resource-intensive, as it requires a large combination of back-end development and a deep understanding of network architecture and cryptocurrencies. 

Based on our extensive experience from past projects, the actual DEX development consists of the following technical components: 

• Factory contract – used for the LP token creation, it builds an LP token for every pair of the swap;
• Routing contract – called by the user to interact with a Factory contract;
• Front-end development – a user-visible side of the DEX platform, which is responsible for how it looks and feels.

With the right team of tech specialists, like IdeaSoft, business owners can cover all aspects of DEX creation: front-end and back-end, UI/UX design, security safeguards, and cryptocurrency integrations to come up with the right product they need. 

Step 4: Quality Assurance (QA)

At this stage, your DEX development team makes a comprehensive audit of the platform, making sure it’s secure, efficient and bug-free. The reviews like performance and usability testing ensure your DEX solution provides a seamless and user-friendly experience for traders, while the compatibility checkup confirms a smooth platform operation across different environments. 

Step 5: Implementation, Maintenance & Improvement

During the final stage of a DEX creation, developers integrate the ready-to-go decentralized exchange platform and ensure it works as planned. 

At IdeaSoft, we also understand how critical it is always to keep your product up-to-date. So, for each of our projects, we provide ongoing support to help our clients always stay ahead of the competition in the DEX industry. 

IdeaSoft Experience in DEX Development

Ideasoft company has a deep experience across multiple domains of blockchain development, in particular with web3 and decentralized exchange projects. Our tech-savvy developers create powerful DeFi strategies and yield-generating solutions to come up with profitable and efficient protocols for different business needs. 

As one of our greater achievements, we should underline the development of Orderly.Network – an infrastructural layer for DEXes within the NEAR blockchain ecosystem.

It’s a powerful NEAR-based solution with enterprise-grade liquidity and an order-matching engine on the board. This ecosystem has generated over $240 million in total trading volume and has great development potential in the DEX industry. 

No matter how challenging is the project, our team will provide you with the most efficient and profitable solution for your business!

Summary

With more and more successful examples presented on the market, creating a custom DEX today is surely worth it. Despite a complex and resource-intensive architecture, a powerful decentralized exchange platform can offer a wide range of opportunities for businesses and their clients.

At IdeaSoft, we provide a wide range of DeFi services to help companies enhance existing blockchain projects or create DeFi-based DEX from scratch. Our specialists build a custom development strategy for DEX or any other crypto solution based on the goals, needs, and current challenges of your business.