The script for decentralized exchange 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.).
Features of decentralized cryptocurrency exchanges:
- No need to transfer funds to the purse (deposit) of the exchange.
- No need to transfer the secret key to the exchange administrator or another service provider.
- The ability to instantly share digital assets.
- Optional verification and KYC AML procedures.
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 workAuthentication process. 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.
Exchange process. 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.
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 companyA good software development with the help of an outsourced company is an optimal approach, since it allows you to develop a unique solution and at the same time receive a guarantee of its efficiency. The customer determines the goals, features, characteristics and appearance of the software, and its implementation is carried out by professionals with extensive experience in developing such solutions.
Purchasing and installing a ready-made script for cryptocurrency exchange is perhaps the easiest approach, since you just need to select the right software and buy it. Then the company-developer will install everything, configure and test everything. You can also buy an existing site and simply change its name, i.e. rebrand.
White label solutions
A type of cooperation, when one company creates a decentralized app, and another implements it in a cryptocurrency exchange under its own brand. This approach saves money and development time, as the script, in fact, has already been created, and its implementation is the steps of installation, configuration and testing. 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
Trading engineThis is the basis of any cryptocurrency exchange. 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.
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.
Atomic swapsBy 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.
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. The exchange operation is carried out almost instantly, although this does not change the fact that you need to wait for confirmation of the transaction to close the contract.
- Lightness. The fewer participants, the easier the transaction.
Order bookDecentralized platforms, 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.
User interfaceThis 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.
- 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.
Payment instrumentsThis 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 cryptocurrency exchange will support not only automatic exchange operations (created an application and wait for it to close), but also direct transactions between users, you need to add some kind of communication.
This method must meet the following requirements:
- Messaging should be automatic, that is, users should not manually search for contacts and send messages to mail, telegrams, and the like.
- The messaging method must be decentralized.
- Messenger should not depend on any blockchain network.
Admin panelNeeded 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.
LiquidityDecentralized 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 ChannelsCustomer support is one of the most important elements of any cryptocurrency exchange. Staff is needed for customer feedback, response to complaints, approval of KYC requests, and the like.
A well-established customer support mechanism will reduce the negative reaction of users in the event of any problems (and they will be 100%) and will let you know what needs to be changed, improved and added so that customers bring even more profit.
Potential costs and efforts
According to experts, the creation and launch of a centralized cryptocurrency exchange can take from several months to six months, depending on the approach to development, the functionality of the site and the list of supported platforms (mobile devices, PCs, tablets, shopping web site).
If you use programmers from the CIS, Africa or Asia, the cost of development can be reduced several times without losing quality.