How do DeFi trends affect crypto exchange development?

Posted by Antier Solutions on June 11th, 2021

Decentralized Finance or DeFi witnessed a massive boom in 2020 and turned unstoppable in 2021. Over the last year, the total value locked in DeFi protocols soared from .07 billion to billion. This shift of traders’ interest has greatly affected the white label crypto exchange development. This is because the traders are looking for innovative ways to trade, and crypto exchanges play a vital role here.

Here are the upcoming DeFi trends and how are they shaping the development of a white label crypto exchange:

Derivative in DeFi
Derivatives are a noteworthy part of the traditional financial system. According to the reports, the total value of financial derivatives is expected to reach a value more than 10 times that of the global GDP.

On similar lines, the demand for derivatives is gaining traction in the crypto space. Currently, the DeFi derivatives market values almost 7% of the total DeFi market. With DeFi TVL growing, the DeFi derivatives TVL is also expected to grow immensely. However, there exist very few platforms that allow DeFi traders to buy/sell derivatives. White label crypto exchange software customized to support derivatives trading can easily help an exchange operator provide DeFi traders a platform to trade derivatives.

These platforms are designed to create synthetic assets of underlying assets like BTC, ETH, or any other asset. The synthetic asset or derivative copies the price action of the underlying assets. A very successful synthetic asset is wBTC (wrapped BTC), which is an Ethereum-based derivative of bitcoin. The wBTC owners can lend, stake or yield farm BTC on the Ethereum blockchain. Even wrapped Ethereum is also available for trade on other platforms.

Another traditional financial product that is gaining traction in the crypto sphere is options trading. The platform or exchange must be designed to support an on-chain options contract for the underlying asset. This gives traders an easy way to hedge their risks.

Lending is evolving
A lot of financial innovation is happening in the DeFi lending space. One of the latest trends in the space is the tranche lending. It allows lenders to pool in their assets and expose that pool to volatile and risky loans. The pools are based on the risk appetite of the lenders. This has become very popular in the crypto space because the crypto markets are very volatile and earning fixed income is difficult; tranche lending changes this for good.

Support cross-chains
One of the biggest challenges that is holding back DeFi growth is the increasing Ethereum gas fees. Because of the soaring gas fees, DeFi platforms have experienced massive liquidations. To avoid this, white label crypto exchange software must support multiple chains so that when the fees on a particular network are high, they can use another network.

To state an example, permissionless decentralized exchanges are being built on Polkadot to support cross-chain token pools. With such support from exchanges, traders find it easy to participate in the trading of assets that go way beyond the current ERC20 standard from a single platform.

It has also been noted that automated market maker (AMMs) based decentralized exchanges are fuelling the DeFi growth. As a result, most of the new crypto exchanges that are being rolled out are based on AMM’s or its innovative variants like PMM (Proactive Market Maker).

Wrapping it up

Undoubtedly, crypto exchanges are racking in profits whether it’s a bullish or bearish market as the traders continue to trade. However, finding and establishing your own niche in this space has become equally important as the competition is skyrocketing.
That is where Antier Solutions comes in. We help our clients create feature-rich white label crypto exchange software. The transaction speed and security are taken into consideration to ensure that the exchange you roll out is top-notch and grabs the attention of the traders. In addition to white label crypto exchange software, we specialize in building custom exchange crypto exchanges from scratch.

Schedule a free demo of our white label crypto exchange or connect with our subject matter experts to share your needs for a custom exchange built from the ground up.