Decentralized Exchange (DEX) Software Development

In this article, we will focus on Decentralized exchange software, trying to compare decentralized exchanges vs centralized exchange and make things easier for you to understand the differences.
But first, lets start with the Types of Cryptocurrency Exchanges.

Types of Cryptocurrency Exchanges

Centralized exchanges.
Decentralized exchanges.
Hybrid cryptocurrency exchanges

Centralized Exchanges

Lets put it this way, centralized means that theres a single point that does all the work involved in any given operation. Their platform needs all the data to enter and leave through a central. This means you cant send or receive any information without it going through a single point.
Centralized exchange are most known and traditional in the crypto sphere. They are governed by a company that offers the options of both crypto-to-crypto trading and fiat-to-crypto gateway. CEX is a place, where buyers meet sellers on some centralized platform, meaning that someone handles your crypto and is responsible for it. You can use the order books for your trades and in some advanced exchanges even some technical analysis tools.
The biggest advantages are that Centralized exchange is easy to use and has great UI and UX, which go along with the quick response. In some of them, you simply register with your email, write down your password, and you can trade.
Customer support, various trading pairs, and fiat gateways are often offered by Centralized exchanges, and most of the time you can benefit from additional services such as staking, savings opportunities, or IEOs (Initial exchange offers). They also add services known as DeFi. Some of you might ask, what is DeFi in crypto, or what is decentralized finance? In a simple way, those are decentralized instruments that you might know from the banking sector such as lending or borrowing of crypto, but without a middleman.
The most popular centralized exchanges are Binance, Coinbase, and Huobi.

Decentralized Exchanges

A decentralized exchange is a cryptocurrency exchange that operates in a decentralized way, without a central authority, without relying on a third-party service to hold the customer's funds. Instead, trades occur directly between users (p2p) through an automated process. This system can be achieved by creating proxy tokens (crypto assets that represent a certain fiat or cryptocurrency) or assets (that can represent shares in a company, for example) or through a decentralized multi-signature escrow system, among other solutions that are currently being developed.
Because the most advanced blockchain with the largest number of tokens (ERC-20 tokens) is Ethereum, most Decentralized exchanges operate using Ethereum and its smart contracts, most of them can't even handle Bitcoin for trading. This might be upgraded by arriving at decentralized finances (DeFi) on an interoperable platform. With their usage, the limits for trading will be much lower.
Because no company is responsible for the run of DEX, it's harder for governments and regulators to shut them down. But the price for decentralization is on most Decentralized exchanges low trading volume, small liquidity, lower speed, and poorer UI which makes them harder to use.
Some Decentralized exchanges are focused merely on experienced users. You cant contact customer support for help on DEX, and they dont provide a fiat gateway as CEX does.
The most known decentralized exchanges are Binance DEX and Uniswap.

Hybrid Cryptocurrency Exchanges

What is a hybrid cryptocurrency exchange? Simply, its the kind that is taking advantage of each Centralized exchange and Decentralized exchange. It is the combination of fast transaction speed you can find in centralized platforms and security assurance by still holding private keys. Hybrid types are a new generation of the crypto trading marketplace, but still underdevelopment. The most popular hybrid types are Nash exchange and Qurrex exchange.

Decentralized Exchanges(DEX) Vs Centralized Exchanges(CEX)

Lets compare the centralized and decentralized exchanges, as the result will be individual for each one of you. For better understanding, we used the comparison table.
Its up to you to decide, which type of cryptocurrency exchange will solve the best for your needs. If you are going to purchase your crypto with fiat, you will need to use CEX or HEX. The same thing is when you desire to trade many kinds of different altcoins because DEX is mostly limited to ERC-20 tokens or some limited number of cryptocurrencies.
Traders who want to handle their taxes and statistics about all trades can use some centralized exchanges that can easily help with that.
Decentralized exchanges and hybrid exchanges are rather focused on more experienced users, who use solely their hardware wallets and want to have every Satoshi under their full control. But they sacrifice some other qualities provided by centralized exchanges. User experience, high trading volume and liquidity, as well as additional services like Initial Exchange Offerings (IEO), DeFi products, and so on.
In conclusion, if you choose some prestigious and well-secured Centralized, you can even earn more crypto by using their features such as staking or lending so your crypto actually works for you even when you sleep and that counts.

Some of the Best Decentralized Exchange

Since the early days of Bitcoin, exchanges have played an important role in mediating between buyers and sellers of cryptocurrencies. Traditionally, centralized exchanges have been dominated in this area. However, with the rapidly evolving stack of available technology, more and more tools for decentralized trading have become available. For example:
Uniswap: Uniswap is a kind of decentralized exchange or, in short, DEX that is on the ascent. The Uniswap platform has been in existence since 2018, working on the Ethereum blockchain. It is the second-biggest cryptocurrency program in terms of market capitalization globally, making it viable with all ERC-20 tokens and frameworks, for example, wallet services.
PancakeSwap: PancakeSwap is a decentralized exchange that is similar to Ethereums Uniswap, but it runs on Binance Smart Chain instead. The DEX lets you swap tokens without an intermediary, as well as earn liquidity pool and staking rewards, enter a lottery, and other options.
Binance DEX: Binance DEX is a decentralized exchange created by Binance and powered by the companys Binance Coin (BNB). It offers lower fees and improved security over centralized exchanges. However, it also has a steeper learning curve and is best suited to experienced crypto users.
IDEX BSC: IDEX, a high-performance decentralized cryptocurrency exchange (DEX), today announced the launch of IDEX's trading infrastructure on Binance Smart Chain to provide efficient, cost-effective DEX trading.
Sushiswap: SushiSwap is a popular Ethereum-based decentralized exchange (DEX) that allows users to swap tokens, earn rewards via yield farming, and more.

How Decentralized Exchanges Do Work?

On some decentralized exchanges, everything happens on a blockchain, every order is recorded on the blockchain. This approach is considered the most transparent because users don't trust any third party to transmit the orders, and therefore they cannot be distorted in any way. This approach is also the most impractical. Because users are asking all the nodes in the network to permanently record their orders, they are paying a fee for doing so. Also, they have to wait for the miner to add their transaction to the blockchain, which also creates an inconvenience. Like digital currencies, decentralized exchanges were created in response to flawed and archaic financial systems that passed along risks of a centralized system to its users, including insufficient security, technical issues, and a lack of transparency.

What Can I Do with Decentralized Exchange?

You can make a new online marketplace for exchanging any digital crypto assets in a decentralized manner without having to spend dozens of thousands on development, asset security, and staff.
Send and receive any existing cryptocurrencies.
Issue and manage new tokens to digitalize assets - create, mint/burn, and freeze/unfreeze.
Create trading pairs between different tokens.
Send orders to buy and sell crypto assets through created trading pairs.
Watch the market charts to monitor prices and market activity for other market pairs, powered by Trading View, or any other trading chart API.
Explore the transaction history and blocks on the chain via different interfaces.
Run a full node to listen and broadcast chain transactions, blocks, and consensus.
Develop more tools and libraries to improve and enhance Open DEX.

Different Types of Decentralized Exchanges

On-Chain Order Books: For some decentralized exchanges, everything is processed on-chain, including modifying and canceling orders. Philosophically, this is the most decentralized and transparent process because it circumvents trusting a third party to handle any orders at any time. However, this approach is not very practical in execution.
Off-Chain Order Books: DEXs with off-chain order books are still decentralized to some degree but are somewhat more centralized than their on-chain counterparts. As opposed to orders being stored on the blockchain, off-chain orders are posted elsewhere, such as a centralized entity that governs the order book. Such an entity could exploit access to the order books to front-run or misrepresent orders, however, users funds would still be protected from the DEXs noncustodial model.

Advantages of Decentralized Cryptocurrency Exchanges

The ease of access: CEX makes it easier for users to create an account or buy their first cryptocurrency. This helped to bring new users into the system and has also made crypto markets more popular.
They have a license: Most of these centralized exchanges have licenses and runs under government regulations. This gives the trader an assurance if something goes wrong.
Use of escrow: As a middleman in trades, they hold the currency until both parties complete their end of the bargain. Thus, theres no need to worry about the transaction after the trade gets finalized.
Transparency: They make their address and location available to the traders. Hence, it helps the consumers to reach them if needed.
Offers and discounts: CEX also offer discounts while trading in large amounts. Also, the users can exchange fiat currencies to crypto and cryptocurrencies to fiat.
Privacy: Transactions made on DEX shares no data with the third party. Hence, it allows maintaining consumers information and privacy. Also, centralized exchanges ask for personal information such as email, identity proof, and phone number while signing up. DEX doesnt need any of that.
Security: The biggest advantage of decentralization is the enhanced security it offers. The cryptocurrency got introduced for this purpose, it gives the consumer complete control over their assets.
Decentralized servers: Most DEXs do not have a centralized server, they store data across various servers around the world. Hence, the data remains safe and is almost impossible to get hacked.
Funds are held by you in your personal wallet and not by a third party
Users are not required to disclose their personal details (except if the exchange method involves bank transfers, in this case only the buyer or seller from which you will buy\sell will only know your details)
No Hacker activity

Disadvantages of Decentralized Exchange

Users are at a loss if they are ever hacked for their passwords or private keys.
Low Liquidity
Only Basic features for Trade available

What is Decentralized Exchange Software?

In the world of digitalization, online transactions, and the utilization of virtual currency are gradually increasing day by day. Since the origination of the worlds first virtual currency, i.e., Bitcoin in the year 2009, most of the countries are choosing virtual currency over real currency for making their financial transactions. A secured and bug-free exchange development is much needed for the virtual transactions to stop the fraudulent activities across the globe.
The bitcoin exchange websites are completely based on decentralized servers that are spread around the world. It is also not restricted to one particular location, which becomes a drawback for hackers. Also, the platforms offer the ownership of cryptocurrency in the users hands just by serving as the bridge between the traders. For this reason, the use of decentralized exchange software is needed to launch your own crypto exchange. So you can get this product from cryptocurrency exchange website development companies.

How to Create a Software for a Decentralized Cryptocurrency Exchange?

Choosing A Development Company: If there is a desire to create an exchanger that will maximally meet the requirements stated by the customer, then the best solution would be to develop software with the help of an outsourced company. The result will be a unique solution, the quality of which will be guaranteed by the contractor.
Ready software: There is nothing easier and at the same time more convenient than an out-of-the-box solution, which is quite simple to choose and buy. Subsequently, the development company independently carries out installation, configuration and testing. An even easier way is to buy a ready-made site and rebrand it (renaming).
White label solutions: A white label solution is a product or service that is produced by one company and that other companies rebrand to make it appear as if they made it. Another way to think of a white label solution is you are renting software from the owner and passing it off as your own. Over the last few years, white label solutions have grown in popularity as businesses are reluctant to invest in developing their own technology and infrastructure. This has created a need for specialist companies to develop technology platforms that can easily be rebranded and presented to the end client under a variety of brand identities. A cryptocurrency exchange on a standard basis, as a rule, becomes either a temporary alternative or an additional service for customers. The main activity of a buyer of such a product is not related to cryptocurrency, but the topic is quite similar.

Last Word

According to the text above, Its up to the individual to choose the right exchange for themselves. Centralized exchange, provides ease of access and reliability, while decentralized exchange contributes to enhanced privacy. Both have their own benefits and concerns. But if you choose a decentralized exchange, then you should get the decentralized exchange software from the best cryptocurrency exchange development companies. They take care of everything from development, design, testing, and deployment, allowing you to focus on just the customization part. There are many advantages involved with purchasing and deploying a decentralized exchange software for your business.