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Step-By-Step Guide To Building A DEX

Step-By-Step Guide To Building A DEX

Last Updated on March 1, 2024 by Ameer Hamza

What is a DEX?

DEX stands for decentralized exchange. A DEX is a peer-to-peer platform that facilitates crypto transactions between buyers and sellers. Popular DEXs like Uniswap and Binance DEX operate on the Ethereum blockchain. They employ smart contracts to promote the self-executing and secure mechanisms that make up decentralized finance.

How does a DEX work?

DEXs that provide crypto exchange services are essentially the opposite of centralized exchange platforms. In addition, on a DEX, users’ transactions are handled by smart contracts, and it records these transactions directly on the blockchain. Lastly, a DEX allows users to trade only with crypto tokens, unlike a centralized exchange where trading can be done with fiat or crypto.

Benefits of a DEX 

  1. Decentralization: This is one of the highlights of a DEX, i.e. fostering financial transactions that an external party does not control. DEX platforms utilize smart contracts to facilitate transactions.
  2. Non-custodial: On a DEX, users control their private keys when transacting. A user keeps custody of his funds by retaining control of his private keys.
  3. Increased access: A DEX platform allows users access to various crypto tokens. Furthermore, most altcoins not listed on a centralized exchange can be found on a DEX.

5 short steps to build a DEX Platform

One primary thing you should know about DEX platforms is that they are open-source codes. Regardless, here is a short guide for you to create a DEX

First, you should decide on a theme for your DEX and design a UI around it. This is usually done based on customer requirements and your target group.

Secondly, you need to understand the kind of code used by the decentralized exchange platforms. A platform like Uniswap uses three sets of code – Factory contract, routing contract, and front-end code. In addition, know the function of each code. For instance, the user calls the routing code to interact with the factory contract.

Third, begin to compile the codes for building your DEX. It involves several technical processes and knowledge of web development. This stage involves checking that all the necessary features, like payment method and smart contract features, are inputted appropriately.

Fourth, ensure to check that the system is operating well. Every bug and vulnerability should be fixed at this point.

Lastly, deploy your decentralized exchange and make it accessible!

Final words

In building your DEX platform, you should be conscious of every bug or vulnerability in your code. The steps might also vary depending on the DEX platform you choose to emulate. Finally, although you can build a DEX platform by yourself with the appropriate tools and knowledge, know that there are experts who specialize in doing this.

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