Introduction to OpenDAX – An Open-Source Crypto Exchange Engine

Starting a crypto exchange platform is a difficult & risky business endeavor, primarily due to two reasons. First is the cost required for developing and maintaining the software infrastructure, and second is obtaining the crypto liquidity to make the exchange functional. It only gets more difficult when you realize the crypto exchange landscape is highly-competitive and the major chunk of market share lies with the big exchanges who fight for slivers of user share and liquidity.

This situation has siloed the entire crypto space and has kept new exchanges or brokers from entering this space. OpenDAX is a unique white-label exchange software built to resolve this problem. It is a self-managed cloud-native solution that cuts down the cost and resources required in building, managing, and bringing liquidity to exchanges. OpenDAX takes care of everything under the hood so that you can focus on the growth of your business.

Let’s dive deeper to understand how the OpenDAX platform can help you achieve your business goals and what business problems it solves.

About OpenDAX & Yellow Network

OpenDAX is a crypto brokerage engine platform you can use to build your cryptocurrency exchange. It includes a self-hosted solution for enterprises, a managed crypto exchange platform on the cloud, and a free solution for developers with complete access to public repositories.

The UI components of OpenDAX are freely available as part of the WebSDK – which can be used to create custom design configurations for the platform. Additionally, most of the OpenDAX stack is highly open-source and is based on technologies like Supabase, Next.js, and React. All these things together make OpenDAX super extensible and customizable (to be covered in later articles).

OpenDAX comes with built-in shared liquidity support of Yellow Network, a peer-to-peer mesh overlay that interconnects multiple blockchains through state channels. In doing so, it unlocks the liquidity of isolated networks and provides lightning-fast trading speeds. Once a broker joins the Yellow Network, they can harness this deep cross-chain liquidity on their OpenDAX nodes and perform liquidity mining.

Together, OpenDAX & Yellow Network provide a strong self-managed & supportive ecosystem for crypto exchange businesses to work on, so they only have to focus on their business growth and ideas.

What Makes OpenDAX Special?

OpenDAX abstracts away the complexities of handling & operating a crypto exchange by providing handy and user-friendly tools. Here’s everything that makes OpenDAX special as a crypto brokerage platform.

Quick Setup

OpenDAX is available on AWS, GCP, Azure & Digital Ocean as a pre-configured image you can launch in about 15 minutes. The setup requires only the basic knowledge of cloud platforms, while the OpenDAX interactive installation package takes care of the rest.

Hybrid Model

OpenDAX is hybrid in design, as it provides the security and transparency of decentralized exchanges and the speed and immense liquidity pools of centralized exchanges. It is the best of both worlds.

State Channels

State Channel is a cutting-edge virtualization method that takes data and processing off-chain to facilitate fast transaction speeds and cross-chain support. This technology allows OpenDAX to fill orders while allowing precise high-frequency trading.

Aggregated Liquidity

By becoming a part of the Yellow Network as a broker, you can aggregate deep liquidity for your crypto exchange, saving you from investing any capital in market makers or other solutions.

Hassle-Free Maintenance

Maintaining cryptocurrency exchanges is difficult as it requires the maintenance of individual blockchain nodes. OpenDAX cloud is a managed solution that takes care of everything under the hood so that you can focus on the business side of things.

High-Performance

OpenDAX was designed with performance in mind. Its matching engine uses machine learning models to quickly and accurately fill the trade order. OpenDAX Kubernetes pods can also scale with your business as the demand grows.

OpenDAX Tech Stack

OpenDAX v4’s tech stack is highly modular, and the entire exchange engine is based on the microservice architecture. Individual components are loosely coupled, and there’s no risk of accidentally breaking the software should you try to extend it.

It also means that the system is fault-resistant and self-healing – since microservices don’t rely on each other, and there’s no hard linking.

Customizable Frontend & Backend

The front end consists of the trading UI, wallet management service, and administration interface for low-level control over the exchange. The UI components used by OpenDAX are the same as those present in the WebSDK. These components are coded in React and can easily be customized or extended with other components.

The backend consists of the Finex trading engine, which performs order matching at lightning speeds, and smart contracts that take care of the user fund deposits and withdrawals. The front end and back end are tied together through Next.js, a full-stack react framework where you can create your APIs, pages, and endpoints, giving you complete control over the customization of your exchange.

The benefit of using Next.js over plain React and Node.js is SSR or Server-side rendering. Your exchange is going to perform well, even on low-spec client devices. It also means your exchange would benefit from search engine optimization (SEO) as SSR renders pages in a static-like manner that is friendly to the Google spider bots.

Authentication, APIs, and Key Management

For secure key management, OpenDAX comes integrated with Vault – an industry standard for securing keys and other secrets. GoTrue is used to authenticate all APIs, while Kong serves as a gateway and helps in scaling those APIs.

OpenDAX also comes integrated with Supabase – an open-source Firebase alternative. It is a BaaS (backend as a service) tool that helps you create and manage your software's APIs.

Maintenance & Scaling Infrastructure

Docker is a DevOps containerization service that separates your code from the infrastructure it depends on. Docker is often coupled with Kubernetes, which helps you rapidly deploy, scale and manage your containers. Together, they administer rapid software delivery and take care of its scaling.

OpenDAX comes pre-configured with these tools, and they take care of the scaling as the demand for your software grows. It also means you can create production-grade workflows for your development team if you plan to extend the software stack.

Cloud Native

Hosting an exchange on bare-metal servers is cost and resource-intensive, so OpenDAX has been developed as a cloud-native solution. OpenDAX is available as a free image on AWS, Azure, and GCP, and you are only required to pay as you use the hosting. It also means you don't have to worry about scaling, downtimes, or other security threats, as these cloud services take care of protection and reliability.

If you want to try the installation immediately, check out the step-by-step video guide for the OpenDAX v4 mainnet installation.

Key Benefits of OpenDAX

The crypto exchange ecosystem is plagued with many technical problems that have made launching and operating crypto exchanges difficult. OpenDAX aims to resolve these issues.

If you like it visual, here’s an OpenDAX v4 video webinar by Openware CEO & Founder Louis Bellet:

KYC & AML Compliant

Even now, compliance remains a huge problem in the crypto exchange space. And although KYC and AML solutions exist, standards vary across countries. OpenDAX has in-built KYC/AML solutions you can easily integrate with a KYC supplier service.

You can also customize these solutions to suit your own needs.

Cutting Down Business Costs

Because of the other benefits of OpenDAX in infrastructure, development, security, and liquidity, it can massively cut down the cost required to launch and operate a cryptocurrency exchange business. That includes minimizing OPEX & CAPEX costs, making OpenDAX stand out from other similar solutions.

Perfect For Businesses of All Sizes

Whether your exchange is operating globally or is serving a small area, OpenDAX can scale to serve audiences of all sizes. OpenDAX can be operated by small and large teams, making it easier to start a crypto exchange business.

Final Thoughts

This article summarizes the OpenDAX crypto exchange platform's technical and business benefits. If you have any doubts or queries regarding the engine, feel free to reach out to the extensive OpenDAX community. In the upcoming articles, we will explain how you can deploy, manage and extend an OpenDAXv4 mainnet instance on the cloud of your choice.

Feel free to experiment with the installation, ask your questions to the community, and let’s build the Web3 Internet of Finance together!