The script for decentralized exchange
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is a computer algorithm serving the exchange of digital assets between equal parties without the participation of third parties. Such algorithms are created for decentralized cryptocurrency exchanges (DEX)
, and they are usually quite complex because they link several elements together (site, trading terminal, wallets, liquidity pools, etc.).
A trader, like any other businessman, has a set of individual needs that generally fall into one of these categories:
- variety of assets.
When we talk about simplicity, we mean the ease and accessibility of the user interface. This interface is the face of the exchange and therefore plays a decisive role in the company's success. Accordingly, the developed exchange should have it not only pleasant but also unique, as well as thought out to the smallest detail.
The security issue affects the safety of funds. Hacking and leaks on cryptocurrency exchanges
are very common. In 2018, the total amount of stolen finance from stock exchanges is approximately $ 927 million. Accordingly, the approach to ensuring internal and external security must be completely professional.
The meaning of the term "asset diversity" is revealed as follows: it means the variety of tokens available on the exchange. Most traders prefer to have a well-trodden path where a step to the side threatens with the wreck. Some people choose to trade small-cap tokens, which leads to the annoying need to constantly switch between exchanges to exchange pump-ready, less common tokens.
By participating in the exchange on a decentralized exchange
, the user fully controls the process, his funds and personal data and does not pay a third party for the services of the guarantor. Integrity and reliability of transactions provide blockchain and smart contracts
How does decentralized exchange work
. The site generates a one-time key for entry, which will be valid for a certain period of time, after which the key becomes inactive. Logging in, the user can make the exchange. Some sites may require a KYC procedure if the amount of user transactions exceeds a certain limit. It is not necessary to register.
. Decentralized cryptocurrency areas
, as a rule, use atomic swaps to automatically exchange one cryptocurrency to another. Transactions are carried out in accordance with the concept of PLUG & PLAY, that is, everything happens here and now, without having to connect a cryptocurrency wallet
to the platform or transfer the required amount to the exchange deposit.
There are no intermediaries when trading on DEX
With such an exchange, a cryptocurrency exchange acts as a platform
where the parties meet, agree on exchange conditions and conduct a transaction. This happens with the help of trading orders
, in which users indicate the trading pair and the course, after which the system automatically compares these data with other orders and, if conformity is revealed, conducts a transaction (or transactions).
If the exchange on the selected trading pair cannot be carried out by means of atomic swaps, the exchange may conduct the transaction using bilateral depositing. This is done through a smart contract
that takes the assets of both parties and then exchanges.
How to create a script for a decentralized cryptocurrency exchanger
Hiring 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.
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
Adapting the finished product to a specific brand is often an excellent solution. 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. The presence of a cryptocurrency platform is dictated by trends and demand. This approach saves money and development time, since the script, in fact, has already been created, and its implementation is the installation, configuration and testing steps. At the same time, in contrast to the purchase of the finished product, the setting in the white label solutions is quite wide, so you can create a product that will stand out among competitors.
Development within the company
You can create software for a centralized cryptocurrency exchange
inside the company. To do this, you need to find good specialists
, buy equipment, rent (allocate) a room and organize the development process
. All this is very burdensome and far from always justified, especially if speed and quality assurance are important.
What to look for when developing
The engine is the core of the created exchange. It is it what connects buyers with sellers. The trading engine collects all the information, elements and functions of the site into one mechanism in order to:
- match orders to find counterparties;
- initialize smart asset swap contracts;
- make residual calculation.
The speed and performance of the exchange depends precisely on the trading mechanism. Typically, platforms use limit and market orders to ensure high levels of performance.
Some systems, for the sake of advanced traders, allow you to place stop-limit and stop-loss orders.
To create a trading engine
, you need immersed programming skills and an understanding of blockchain technologies, that is, creating it is long and expensive. But here you can save if you use open source software, which is spread on GeekHub. True, not the fact that this software will be of high quality and reliable.
By atomic swaps is meant a kind of peer-to-peer exchange of virtual assets without the participation of third parties, including exchangers. Usually, with their help, people exchange one cryptocurrency for another, but there may be options with the exchange of data, certificates and other.
An example of an atomic swap for exchanging bitcoins for air
By their nature, these are smart contracts that work with two blockchains
and use the Lightning Network protocol for exchange. Within such contracts, there is either a parallel simultaneous exchange algorithm or an algorithm using bilateral escrow.
Advantages of atomic swaps:
- Price. Atomic swaps use the Lightning Network, so the transaction fees for such operations are very low. For example, one dollar is enough for hundreds of bitcoin transactions in the Lightning Network. While the commission for a normal bitcoin transaction is 25 cents (February 12, 2019).
- Decentralization. Atomic operations are initiated by direct participants in the transaction, and no one can intervene or cancel them.
- Speed. If you do not take into account the time to wait for the confirmation of the transaction to close the contract, then we can say that the exchange operation is carried out almost instantly.
- Lightness. The fewer participants, the easier the transaction.
- Safety. The chance of data being stolen is minimal, since information flows directly from client to client without intermediaries such as a centralized exchange or third party.
Nevertheless, there are a number, if not drawbacks, then points to which attention must be paid. First of all, in order to carry out an exchange using atomic swaps, cryptocurrencies must be based on blockchains that use the same hashing algorithm (for example, SHA-256). Moreover, currencies must be compatible with HTLC and other programmable features. In addition, some researchers are worried about the problem of privacy: it is quite possible to track atomic trunks in the blockchain, thanks to which a technically competent person can easily link user addresses to each other.
, as a rule, do not like to use standard order books, instead they use Distributed hash table (DHT). As in the case of a decentralized blockchain, the information in such order books is encrypted and distributed among the nodes of the ecosystem. Therefore, in order to change or steal it, you need to find and crack most of these nodes.
Features of DHT order books:
- Decentralization. Use a system of independent, physically separated nodes that are controlled by users, and not by some kind of centralized structure (server).
- Scalability. The network works equally efficiently with both a thousand and a million nodes.
- Fault tolerance. The system as a whole will work even if many of its nodes turn off, constantly connect / disconnect or give errors.
This is how the user sees your exchange. The interface should be user-friendly, fault-tolerant and pleasant in appearance. The user should at a glance understand how to make a trade, what needs to be done and how to access other functions.
Sample DEX user interface elements
When developing a user interface, you need to be guided by such rules:
- Logical and consistent provision of information that will reduce the user's cognitive stress and facilitate familiarity with the system and its use.
- Minimize potential user errors. At the same time it should be possible to quickly roll back all actions back and perform them again.
- All icons and buttons must be standardized, that is, they mean the same thing in different sections and run the same actions (forward, back, cancel, buy, etc.).
- Aesthetics and minimalism.
This is an optional module, since the script for decentralized cryptocurrency exchange
works directly with users' wallets. However, to increase audience coverage and turnover on the site, you need to think about exchanging virtual assets for fiat money and vice versa. For this, it is necessary to establish partnerships with banks and payment services.
The choice of specific payment services should depend on geography:
- North America: PayPal, 2Checkout, Simplify Commerce, Stripe, WorldPay, SagePay, Amazon Payments.
- Latin America: 2Checkout, PayU Latam, Mercado Pago, Pagseguro, WorldPay.
- European Union: SecurionPay, Skrill, Stripe, Amazon Pay, PayPal.
- Asia: 2Checkout, Paypal, Skrill, WorldPay, Alipay, UnionPay, Tenpay.
- CIS: PayPal, WebMoney, Qiwi, Yandex.Money, Robokassa.
- Africa: MyGate, SagePay, Ingenico, WafaCash, Skrill.
To activate MasterCard, VISA, American Express payment services, you need to contact your local bank and conclude an appropriate agreement with it.
If the exchange focuses not only on automatic exchange operations
but also on direct transactions between users, then adding a component that provides real-time communication is more than necessary.
To ensure full-scale communication, the messenger must be embedded in the script, that is, it must not be a buffer between the platform and the mail or stand-alone messengers. The rest of the requirements for the messenger are a decentralized way of messaging and independence from blockchain networks
Needed to manage the resource and configuration of variable exchange configurations. To the capabilities of this working tool you need to add such features:
- Ability to manually replenish accounts in case of problems with support and tickets.
- Managing the listing of trading pairs.
- Expansion of the cryptocurrency list.
- Change of trade fees.
- Means of arbitration.
Decentralized exchanges do not force users to transfer money to site deposits, thus creating liquidity
pools, which is why such sites have problems with transaction processing speed. This problem is solved in two ways:
- Dealing Center - a module that creates an “artificial” course for selected trading pairs. By betting on these trading pairs, traders play against the stock exchange.
- External liquidity pool - an API that connects the site to other exchanges (for example, Kraken) or liquidity providers.
In the second case, your exchange accepts a request to buy / sell a cryptocurrency
and sends it to an external liquidity provider, which will process it. This will speed up the exchange operations, but will slightly increase their cost, since the liquidity provider will have to pay a commission.
Customer Support Channels
Customer support is not just a mechanism for eliminating problems with users, which are often complex or not experienced enough to properly handle the exchange. It is also a tool for upgrading your own platform, since no one will tell you what needs to be added, removed or improved better than the client itself. Staff provides feedback (preferably around the clock), responds to complaints, approves or rejects KYC requests, and so on.
For support, you can use exclusively live operators, and a hybrid system: a neural network is dealt with simple questions in the form of a bot, and in case of complex questions, it switches the user to an operator.
Potential costs and efforts
Even according to the most conservative estimates, launching a cryptocurrency exchange will be very expensive. Even if programmers are hired from post-Soviet countries, Africa or Asia, which, as a rule, implies much lower production costs, the terms (even if a specialist has the proper qualifications) vary from a couple of months to six months, and in terms of financial costs - from 50 000 to 240,000 euros in Europe and from 65,000 to 310,000 dollars in the United States. Below is a more detailed analysis, taking into account the costs of the work of each specific specialist.