Re-Exploring White Label Exchanges
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2
min
Dec 27, 2023
It’s natural to assume that companies which offer software-based services created them from scratch in their headquarters, or hired a team of developers to follow a detailed vision with specific goals. However, not all scenarios encourage this path, especially if the provider is a startup that must take into account time and budget constraints.
Sometimes the best option is to meet your product halfway through a ‘white label solution’. The term refers to a pre-built product or service that a company or individual can acquire and make their own. It’s common practice with cryptocurrency exchanges across the world because the technical knowledge required to build one might be hard to come by, even as blockchain continues its steep growth.
Given the subject’s continuous importance, we want to revisit it. So: a white label decentralized exchange is an already developed crypto exchange platform that anyone intending to offer such a service can get, giving them the possibility to rebrand and customize it according to their needs. This provides a kind of shortcut towards having a launch-ready product that still has plenty of room to be made unique.
It must be said, however, that employing white label solutions is not without challenges. In the case of crypto DEXs, which deal with users’ funds, quality in design must be backed by quality in security. An overview of the most fundamental parts might offer a glimpse into the various complexities involved:
Components of a White Label Decentralized Exchange
Smart Contracts: These core pieces are self-executing programs that facilitate, verify, or enforce the negotiation or performance of a contract when certain conditions are met, ensuring transparency and eliminating the need for a central authority. They handle functions like order matching, fund transfers, and trade settlement.
Order Book: A ledger that lists all buy and sell orders on the exchange. It can be implemented ‘on-chain’ (recorded directly on the blockchain network) or ‘off-chain’ (maintained by the exchange off the blockchain). On-chain order books enhance transparency and security but can be less scalable.
Wallet Integration: Users need a digital wallet to interact with a DEX, so a seamless integration with various kinds of wallets is crucial for a smooth user experience. Common types include software wallets, hardware wallets, and browser extensions.
Liquidity Pools: White label DEXs often use pools of tokens provided by users for trading. Users contribute tokens to the pool, and in return, they earn a share of the trading fees. Liquidity pools help maintain liquidity, enabling users to trade without relying on external market makers.
User Interface (UI) and User Experience (UX): The UI/UX design is the visual and interactive part of the DEX that users engage with, and which allows for the most branding. Key features must include easy navigation, order placement, and real-time market information.
Security Features: Given the decentralized infrastructure of a DEX, security is paramount. Two-Factor Authentication (2FA) adds an extra layer of protection to user accounts, in conjunction with other mechanisms that safeguard private keys. Regular security audits and code reviews help identify and fix vulnerabilities.
Technical Considerations
Managing a DEX, let alone building one, entails understanding blockchain technology in depth – consensus algorithms and node operations are just the tip of the iceberg when it comes to decentralized environments. Developers have to be proficient in smart contract languages like Solidity for Ethereum or alternatives for other blockchain platforms. Knowledge of decentralized storage solutions, such as InterPlanetary File System (IPFS), is also required, as well as familiarity with the integration of oracles for accessing real-world data.
Even customizing and adding features to a white label DEX might warrant expertise in blockchain development, cryptography, and cybersecurity. Getting a grasp of what it entails legally is also crucially important. Cryptocurrency and blockchain regulations vary globally, and compliance is essential to ensure the DEX operates within boundaries. Basic procedures to ensure a certain degree of trustworthiness include Know Your Customer (KYC) and Anti-Money Laundering (AML).
Knowledge of the cryptocurrency market, user behavior, and trends may also be instrumental to the success of the DEX. This also applies to marketing and target audience research, which will affect every bit of customization that the while label exchange allows.
A Brilliant Use Case
In August 2023, Polygon Ventures and other major investors announced a $1.5 million pre-seed round of support for D8X, an institutional-grade decentralized exchange. D8X is the first business-to-business (B2B) DEX built on Polygon’s zkEVM, which benefits from zero-knowledge proofs to cut transaction fees, increase security and scale operations across the Polygon and Ethereum networks.
The team behind D8X hopes to serve centralized providers that want to offer decentralized crypto services to their clients without having to hire experts to develop in-house financial engines. D8X’s partners will act as brokers, allowing them to earn fees by running their own front ends powered by the D8X trade engine and shared liquidity.
D8X follows regulatory guidance from Switzerland’s financial market regulator FINMA. By establishing itself as a fully decentralized exchange with official support while offering white label solutions for those who want to get into the crypto market, D8X makes a contribution towards the transition from CeFi (centralized finance) to DeFi (decentralized finance).
