How much does it cost to develop a DEX?
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Despite the decentralization promise of crypto, the crypto market has been mostly represented by centralized exchanges (CEXs) until recently. Operating on CEXs came with particular privacy risks; users still needed to go through the KYC/AML process and submit their documents for identity verification.
This situation changed in 2021, witnessing the rise of decentralized exchanges, such as Uniswap, Pancakeswap, Curve Finance, Sushiswap, and the like. The change didn’t come out of the blue, following the stronger government control of CEXs and tightening the KYC policies. The new requirements made CEX development and launch costlier, while DEX’s appear more profitable and efficient in the modern crypto space.
Steps of DeFi Exchange Development
The development of DEXs is not unique from the processing point of view. It is similar to the delivery of complicated projects that require detailed planning and stages to succeed in the final outcome. Let’s consider them in chronological order:
Discovery – a critically important stage that contributes to the platform’s smooth development and efficient human/financial resource use. It involves planning the detailed architecture, creating a detailed roadmap and a feature list for MVP, and further stages to minimize the risk of sloppy resource management. The aim of this stage is the cost-efficient engagement of resources. At 4ireLabs, we recommend making Discovery before rendering the blockchain development services of complicated platforms like DEXs, P2E Games, NFT Marketplaces, etc. The experience of multiple project deliveries proves the necessity of this stage. It ensures the delivery process’s augmentation due to the careful planning done by the team of Business Analysts and Solution architects. This approach of simultaneous analysis of both technical and business parties is key to the success of the future platform and low-risk development.
Prototyping – an essential part of the decentralized cryptocurrency exchange app development, it is mostly based on the initial requirements from either a client or potential user to prepare the high-level model of the desired outcome. It reveals the uncovered parts of the product and provides a deep understanding of its relevant features. It can be done simultaneously with the Discovery stage, while the team is working on the architecture and business analysis. The designer prepares the interactive wireframes based on the technical specifications from the client to reflect the user flow and the platform interoperability. Later it is presented as a prototype to match the provided requirements. Having a minimum viable product (MVP) is vital for any project as it speeds up the time to market and enhances product awareness before the final launch.
Development – this stage is the core one in the DEX creation process. Careful and consequent building of decentralized exchange relies on the successful completion of the previous stages as well as the experienced management and micromanagement of the dedicated team. This stage has to be thoroughly managed to match the deadlines of the sprints and delivery plan within the agreed timeline. However, the challenges the team faces during the process of decentralized cryptocurrency exchange app development might require the allocation of additional resources or a timeline extension.
QA – testing of the product is part and parcel of the development process and should be done throughout the development and after it. The optimal code coverage of the automated and manual testing should be 90% (80% at a bare minimum) to provide a functional, ready-to-launch product solution.
Maintenance is often skipped when planning the development timeline. However, this stage is crucial due to the vital value of the product’s technical support after launch. The development team or support team needs to be readily accessible 24/7 in case of any unpredictable situations or bugs overlooked during the test phase. Usually, platforms provide maintenance to assist the customers or to transfer the knowledge base to the technical support team.
Read Also: Crypto Exchange Architecture
Key Features to Integrate into Decentralized Exchange
New user registration – the more users the platform has, the more profitable it is. User-friendly and easy registration is needed to contribute to the user experience and enlarge the customer base. In most cases, it presupposes the connection of your wallet to the decentralized exchange platform.
Digital wallet – since it is a digital vault where users store the cryptocurrency/ digital assets, the security protocols and authentication are key to user safety.
User interface (UI) – an intuitive understanding of the platform flow depends on the user interface. So, the interface should be well-designed, ensuring a frictionless user experience.
Payment gateway integration is a significant feature as the accessibility of different payment gateways contributes to the user experience and safe interaction within the platform.
Trading analytics – having analytical tools that reflect the current market state in real-time makes the trading process easier and more efficient due to continuous tracking of the market tendencies.
Security features – When dealing with digital assets, one has to ensure that the security measures and private data are fully encrypted and inaccessible to third parties.
Multilingual – providing a multilingual interface expands your DEX’s outreach and guarantees better UX.
Liquidity – probably the weakest point of many decentralized exchanges is a low liquidity pool. Thus, it should be carefully pre-arranged before the market launch. This feature is fully dependent on the client’s available liquidity.
Automated Market Maker – the automated protocol to provide liquidity and define the price for crypto tokens according to the mathematical formula. Smart contracts control the market depending on the given conditions and contribute to safe, predictable trading transactions with low slippage.
Buy/sell cryptocurrencies – the core feature of any cryptocurrency exchange is the ability to buy/sell cryptocurrencies. By the way, please find out how much it costs to make a crypto coin.
Multi cryptocurrency support – crypto space is booming with different currencies. Therefore, the broader the range of cryptocurrencies the exchange is working with – the better.
Notifications – a simple tool that gives a significant boost to user engagement and contributes to the user experience.
Support tickets – maintenance and problem-solving should be an integral part of any complicated project, especially the one dealing with digital assets.
The key DEX features have been highlighted above. Still, there is one more important set of functions that defines the platform’s interoperability and impacts the DEX’s maintenance – admin features. Since a DEX has no centralized authority or storage, the administrative functionality is critically significant. It helps to run the project and set up the rules for the client’s side. We’ve enumerated a few to be included:
Secure dashboard: The dashboard is used as a tool to manage the decentralized exchange application from the backend by its admins. Data security is a critical point here; therefore, it should be highly secure from all types of cyber threats.
Widgets: The complexity of the inner system requires constant control over a considerable number of metrics, which is provided by the presence of widgets to keep track of them.
Transactions: Since the DEX transactions are not controlled by a central authority, it is indeed important to manage the flow of information between multiple parties. This information has to be transparent and accessible.
Adjust trading fee: Market fluctuations are inevitable; thus, the platform should be responsive to market dynamics, adjusting the trading rates quickly.
List cryptocurrencies: as a peer-to-peer trading platform, a DEX enables the support of multiple currency options, which is reflected in the supported cryptocurrencies list.
Respond to tickets – correction of issues that occur during the interaction with the platform is critically important and therefore needed to deliver a smooth user experience.
Benefits of DEX
Let’s quickly recap three existing types of exchanges:
- CEX (Centralized Exchange)
- DEX (Decentralized Exchange)
- Hybrid Exchange
So, what are the benefits of DEX over the other two?
Highly secure: Since a Decentralized Exchange is based on a peer-to-peer transaction model without sharing any personal information and enhanced by storing private keys on the client side, the whole control over the private transfers belongs to the final user. It eliminates the leak of the client data and ensures user funds’ safety.
No involvement of middleman: The transactions and all the platform’s governance are made by smart contracts, which ensures secure and stable platform operations with no human involvement. Therefore, we can also expect strict compliance with the DEX rules, as the code executes the transactions only if it is in alignment with the smart contract’s terms.
The funds are not transferred to any third party: As we mentioned before, decentralized exchanges use peer-to-peer transactions, which means the money is transferred from the seller to the buyer directly. It leads to quicker and cheaper transactions due to the absence of an intermediary.
Can’t be compromised or hacked: Smart contracts require audits before launching the platform. This security measure proves the level of smart contracts’ safety and prevents hacker attacks. However, security loopholes are still possible on the side of either frontend or backend, as well as via sharing personal data on scam websites. Please, do not share your private keys with anyone!
No need for KYC or AML: having no centralized authority, DEXs do not have KYC or AML procedures, which simplifies and speeds up the user onboarding process. However, Decentralized Finance applications are still relatively new, which is often reflected in the poor user interface.
Anonymous transactions: Transactions are made between two parties with encrypted private data or no data at all, which reduces the risk of a phishing attack and fraud.
Highly transparent: all the transactions are easily tracked on the blockchain, and everyone has access to them. Therefore, you can see the assets’ flow even though you can’t identify wallet owners. The implementation of such a transparent model contributes to market monitoring and helps to avoid artificial inflation.
Consider developing a Decentralized Exchange?
Contact us to schedule a meeting with our CTO to discuss project milestones, budget, and technical requirements. Let’s make your project more manageable and understandable together.
Though DEXs have numerous benefits, there are also downsides like low liquidity, the platforms’ limited functionality, no refund in case of private key breaches, etc. These issues are getting more and more covered by the latest technologies, though using DEXs still comes with certain risks.
Our Experience in Decentralized Exchange Development
The 4ireLabs team has been working in the field of blockchain and Defi (Decentralized Finance) development for more than 6 years. We’ve been involved in many projects connected to lending protocols, DEXs, Neobanks, E-wallets, and others as a blockchain software development provider. We also specialize in delivering consultancy services, such as Security Audit, Business and Technical Consultancy, Code Review, etc.
The development of decentralized exchange requires a highly experienced core team with an extensive background in web3 projects as well as a clear understanding of the business processes such a project involves. We come up with optimal technical solutions to equip all created platforms with cutting-edge Defi and blockchain technological innovations.
As an experienced developer of DEXs and DeFi apps, we recommend covering all the above-mentioned stages to achieve a successful product solution. The timeline of projects like these is not 2-3 months; for example, it took us 10 months to complete the full cycle of development for Contractland (Decentralized Exchange for the client from the USA) from scratch. Still, you need to keep in mind that the development timeline is individual for every project, depending on the required functionality and technical complexity.
Following the line, we also provide improvement, optimization, and troubleshooting services for already existing projects. One of our clients was Ondo Finance – a US-based company that delivers its services via Ondo Protocol. Ondo Finance contacted the 4IRE team to write smart contracts for their protocol to enable smoother and safer liquidity provision on various DEX platforms. 4IRELabs created an additional set of smart contracts to ensure Ondo’s interoperability with a greater number of existing DEX platforms, thus optimizing the allocation of invested crypto assets and increasing the returns and option diversity for its clients while at the same time maintaining a high level of the system’s security.
Decentralized Exchange Development Cost
As a rule, software development companies don’t have a universal price for a DEX project. The final quote is determined by multiple factors influencing the project’s cost and the time and human resources to be allocated.
There are a few approaches to the decentralized cryptocurrency exchange app development:
- Development from scratch – you get an application fully customized according to your requirements. It includes all desired features and possesses a unique UX/UI design, but the duration and resource intensity of such projects is considerable. Judging from the experience of our team, the price range here starts from 80K, and the timeline starts from 3 months.
- White label solution – using the core White label solution of an already existing DEX is a way out if the budget and timeline are tight, though the risk of limited functionality is relatively high here. The pricing usually depends on the provider and starts from 50K for a lifetime license or monthly payments from 5K.
- White label + custom development – combines the benefits of both previous versions, such as relatively affordable pricing and customization to the client’s needs. However, the software provider’s expertise is the key determinant of success in such projects. The price range starts from approximately 75K and can go up to $200,000.
Let’s dig deeper into the cost breakdown for a DEX project. If we use DEX development from scratch as an example, here’s what you will need to pay for.
|Market research and idea validation||$10,000-$25,000|
|UI/UX design and features||$15,000-$50,000|
These are the costs of development only, bringing your business idea to life in the form of a functional DEX platform. Additional costs that you should also factor in include the marketing campaign to increase your DEX’s visibility and attract customers and the post-launch maintenance of the project, which is an ongoing process.
Building a decentralized exchange is a promising investment that will quickly expand and bring profit to all involved stakeholders. Despite the market’s saturation with already existing DEX projects, many companies are looking for new solutions to obtain greater benefits and better terms. Thus, DEXs are still a cutting-edge technology that is constantly evolving, ensuring that there is enough room for new great DEX platforms in the crypto market.
The best about DEXs is their decentralization and lack of third-party control. As a rule, these are peer-to-peer lending and exchange platforms that allow non-custodial operations. Therefore, buyers and sellers collaborate without a centralized intermediary, thus preserving full freedom and anonymity of transactions. Another valuable feature is the users’ full control over their assets. There is no need to transfer funds to the DEX’s wallet; all operations occur to and from the users’ personal wallets.
The simplest way to ensure that your chosen DEX is secure and functional is to study its smart contract audit report. An audit by a reliable, famous company is a good sign of DEX’s security, though it’s still not a 100% safety guarantee. Next, you should check the SSL/TLS certificate of the DEX’s website. Many DEXs also establish a bug bounty program, giving rewards to coders who find bugs and vulnerabilities; if you see such a program on the DEX website, it means that it’s dedicated to user safety and continuous quality improvements.
CEXs are centralized exchanges. The most famous examples are Binance and Coinbase. They exercise centralized oversight over users’ transactions and urge users to deposit funds from their anonymous wallets to the platform’s accounts to conduct transactions. All new users need to go through a KYC/AML check, so CEXs are not about anonymity at all. DEXs, on the contrary, allow p2p transactions between private, non-custodial wallets and combine zero centralization with maximum privacy.