Decentralized Finance (DeFi) became a real buzzword today. This technology gives momentum these days, as more and more users are getting interested in DeFi app development. Moreover, decentralized finances offer people access to crypto trading, lending, and other financial services quick and more modern.
All this can quickly be gained through decentralized software solutions. The present article aims to help you learn more about the decentralized finance basics, how to build a DeFi app, and other essentials.
What are DeFi and Decentralized Apps?
The idea of DeFi apps development is discussed a lot among financial companies and their customers. Let’s find out the basics of the concept as well as the related topics.
The Essence of DeFi and Decentralized Applications
We’ll compare the Decentralized Finance model with the Centralized Finance typically used for today’s financial operations to delve deeper into the concept of decentralized finance, reasons to build a DeFi app, and its innovativeness.
The Centralized Finance (CeFi) system performs the traditional operations with funds each user is accustomed to, and means your funds are stored on the accounts of financial establishments. The money transfer is performed by various third parties that simplify it but take payments for their services.
Imagine a situation where you need to buy some daily products using a credit card. The money is sent from the merchant to the acquiring bank transmitting the card data to the credit card network. After clearing the charge, the network asks your bank for the installment. The bank, in its turn, approves it, and informs the merchant about it through the acquiring bank.
All other operations (like loan requests) need additional payments. Herewith, people are restricted in access to their funds.
The Decentralized Finance (DeFi) system is intended to remove intermediaries from the operations with money, and enable organizations, merchants and users to deal faster with funds which will be more accessible and controllable for them. It is possible via Peer-to-Peer (P2P) networks provided with reliable connection, security protocols, and other necessities.
Harriet Taylor is ensured — DeFi will open the world for innovative, comfortable and successful financial operations. She proves this by the following statement:
Executive Director of the UN World Food Programme
With DeFi, we can build a more inclusive financial system that works for everyone.
So, due to DeFi, every customer may trade, borrow, lend, or save money using software that allows to log and validate financial transactions in distributed financial databases online from any location. A distributed database offers access from several places, gathers data from all customers, and verifies it using a consensus process.
All the transactions are accessible for every user via Decentralized Apps (dApps or DeFi apps) - special software which offers people more control over their funds through personal wallets as well as individual-focused trade services. So, the question of how to build a DeFi app becomes more and more essential.
DeFi Essentials in Statistic Report
The concept of Decentralized Financing is quite popular these days. We’ve made our own research looking through the statistics as to the matter, and chosen the most essential data to prove the DeFi app development prospect and fame.
According to the Statista’s latest report., the interest in decentralized financial technologies has significantly increased the last two years. So does the DeFi market size, which has grown to $106 billion in 2022 (which is about 50% more than last year). The DeFi audience that brings such a profit to the field comprises more than 300 000 people, as to
The number of unique DeFi users worldwide, 2019-2022 (Source: Statista)
Let’s look more attentively at how such a popular structure works before discussing how to create DeFi app.
How DeFi Apps Work
DeFi technologies and cryptocurrencies (such as Ethereum) allow to avoid the intermediaries in financial operations. Willing to get a solution to conduct such operations more straightforwardly, the entrepreneurs start the DeFi apps development.
Let’s find out how the said solutions work through the DeFi key notions.
A decentralized application (dApp) is a kind of digital product functioning in a blockchain or on a Peer-to-Peer (P2P) network to allow users to work with blockchain settlements and make P2P transactions directly. DApps can be managed by business software, which enables users to communicate using a DeFi protocol and verifies whether all required parameters are satisfied before completing an activity.
Governance tokens are non-material assets aimed for the voting/approving systems on the blockchain. They help DeFi initiatives in maintaining their decentralization by distributing authority and privileges to users. Some dApps provide governance tokens as a kind of payment to users who interact with the platform and conduct transactions.
Smart contracts. The performance of DeFi and dApps is based on smart contracts. A transaction is carried out by a smart contract code if all the agreement conditions are satisfied. The smart contract gives money back to the user if the conditions are not fulfilled. It is practically impossible to lose the details of a smart contract because of data encryption and a shared ledger. Once they are implemented, smart contracts cannot be updated or amended.
DeFi protocols are groupings of smart contracts that collaborate with each other to generate a specific solution and carry out certain activities. Such a protocol includes a set of norms, regulations, and guiding principles that can be compatible with the actual institutions of certain sectors. DeFi technologies allow for simultaneous usage by different entities since they are interoperable. DeFi protocols make use of self-executing smart contracts to assist users in managing their crypto assets.
Learn about the undeniable benefits of smart contracts blockchain!
The tech progress helped everyone to have a rare opportunity to take part in the global economy. This way, each user can advantageously launch their own financial project by getting a DeFi app that will help them perform numerous operations via smart contracts and decentralized finance protocols.
What other functioning principles and notions should the software obey to qualify it as a DApp? They are the following ones:
- The platform's data and records should be stored on a decentralized blockchain and be cryptographically protected.
- The software must make use of a native or a crypto token (e.g., Bitcoin). The user should get this token in exchange for their contributions to the system.
- The decentralized software should be self-contained and open-source. All updates to the app must be approved by the users of the system.
Why Should We Use DeFi Apps?
DApps are quite easy to use and straightforward to benefit from. Let’s find out more about their advantages and monetization models to prove the said statement.
The Most Common Benefits of dApps Usage
The dApps are empowered with robust modern technologies making them attractive and trustworthy for millions of customers interested in operations performed without intermediaries. It’s time to understand the major preferences that gather a large audience for decentralized finance solutions.
How to create DeFi app and for what: common advantages
Users’ Ability to Control Funds
It means people have full discretion over their funds expenditures, being able to directly and transparently control them. Thus, trading innovations like DEXs and DeFi let you pick your own trading partners and make a deal whenever and wherever you like, not limited to fiat payments.
Simplified Access to Finances
The Blockchain-based dApps democratize the financial sphere, offering everybody a simpler access to the money assets they need. That's why the users can operate with money directly avoiding intermediaries (e.g., banking institutions) and the necessity to turn to them to authenticate every click. At the same time, such a deal will be highly secure and transparent.
Opportunity to Transfer Money Worldwide
DeFi systems and protocols are available globally and may be used for highly convenient and simple cross-border financial transactions since they are dispersed among blockchains. The main benefit is that dApps may provide low or even free costs and affordable currency exchanges because there are no intermediaries involved.
Enhancements in Financial Operations
Users of DeFi platforms may automatically lend and borrow money using cryptographic assets as collateral. This automation might hasten financial processes, save expenses, and increase the number of financing options available.
Transparent Individual Transactions
The self-executing code included in dApp smart contracts enables flexible and direct person-to-person trades with little or no entry requirements. What is more, DeFi programs include cryptographic techniques that confirm the validity of data before collecting it.
The DeFi applications are easily combined with each other, due to what they are called "money LEGO". This composability allows the offering of new kinds of financial services to users making their money operations more straightforward.
The number of benefits the dApps can offer are countless, and we have enlisted only the most widespread ones for you to consider these solutions’ usefulness. Now, let’s discuss how to properly apply to these benefits, turning them into money.
How to Monetize dApps?
DApps represents a lot of opportunities to launch a business and make profit. How to do that? It’s high time to find out what monetization models you can use to build DeFi app, making it highly profitable.
Common monetization models for dApps
dApps with premium features. In order to effectively use dApps for profit, you can turn to a “classic approach” and add the paid functionality: for example, provide players a chance to improve their gaming performance without having to work on the levels by allowing them to purchase the premium feature with digital currency.
NFT marketplaces. We can't discuss dApps without mentioning NFTs, right? The NFT marketplace creation lets users sell, purchase, and even generate non-fungible tokens as part of current crypto trends. If your company uses a comparable procedure, you may leverage the transaction fee model to raise NFTs' overall income.
Making donations. If the goal of your dApp project is to address a global problem or advance a social cause, you may include a donation button on your website or application or even share its URL with other social entrepreneurs.
Initial Coin Offering (ICO). The ability of a DApp to earn income strongly depends on its capacity to be backed by a token and be offered for sale to the general public. You can enter the wide market with your application by capitalizing it with tokens and raising funds from decentralized asset buyers.
Paid subscription. To guarantee that the feature has only been used by subscribers or premium members, you may easily include a membership/subscription element in the contract.
Referral marketing. It may also be considered as the driving force behind the success of dApps monetization. This way, you may promote a variety of Blockchain-powered platforms on the Internet right now by clicking on a link to one of their websites. They pay you according to the number of clicks or visitors you are able to direct their way.
Technical Stack for DeFi Apps
What instruments to use when you create a DeFi app? A decentralized app's technological stack may change greatly depending on the following factors:
- The required cryptocurrency
- The kind of solution (mobile/web ones) you think about
- Functionality for your future dApp
Along with the traditional instruments for fintech app creation, the basic Ethereum development kit comprises the Truffle software suite, as well as Ganache, the Solidity programming language, and the Remix development environment.
Let’s briefly look at what the said instruments for DeFi apps development mean before dealing with them.
Truffle is an Ethereum programming environment, testing framework, and asset pipeline that aims to make life simpler for Ethereum developers.
It's a private blockchain enabling the quick creation of Corda and Ethereum distributed applications and allowing you to create, distribute, and test your dApps in a secure and predictable setting.
It is the primary contract-oriented software language for creating Ethereum blockchain smart contracts. It interacts with the blockchain stored in smart contracts.
Remix is an open-source Ethereum integrated development environment (IDE) that you may use to develop, compile, and debug Solidity code. Remix can therefore be a crucial tool in the creation of Web3 solutions, like dApps.
We've named only some of the most widespread instruments the developers commonly use for their work developing fintech apps. However, you should understand: in order to operate with a toolkit for creating a DeFi app, you should have a powerful team of fintech specialists. These experts should have deep expertise in dApp building, knowing all the pitfalls of every instrument they operate and thoroughly testing the already created functionality.
What pitfalls can the customers face while deciding to create a decentralized app?
- It might be challenging to select the best framework as each of them offer a distinct set of features. This issue can be solved by DeFi professionals for you.
- A front-end dApp enhancement is challenging, so your team must make time for this.
- Testing every piece of functionality is a complex task considering the decentralized processes.
- The software languages used for dApp development are not developer-friendly largely. So, it would be better to apply to the experts who can foresee the possible problems and find the best solutions.
All these issues are serious barriers on the way of how to make a DeFi app and implement it. However, they are all possible to solve if your IT staff is experienced enough to overcome them.
Learn how to create a robust DeFi app with Defi lending and borrowing platform development services
How to Build a DeFi app and How Much Will It Cost?
You should work on a dApp concept implementation with a powerful software development team having a profound expertise in Web3, DeFi, and near-future Fintech solutions. But how to find such a staff if you don’t have one at the moment?
There are two options to follow:
Gathering an in-house team. You can launch an employment process to hire skilled local specialists and build a team from them. But it should be considered that such specialists’ services are quite expensive: such a hiring would be cost-consuming for your budget as you need them to create a specific solution for a particular field. This is the reason why the entrepreneurs typically turn to the outsourcing providers to create the unique decentralized products like cryptocurrency exchange platforms and other dApps and maintain them further.
Applying to an external software vendor. This option implies you fully or partially entrust your dApp development to an IT company sufficiently skilled in DeFi to give your concept a proper embodiment. Choosing such a development approach, you can save your budget, access a large pool of technical talents, and obtain many other benefits that’ll boost your business as well. Moreover, the outsourcing companies may have even a rare tech expertise and sufficiently help you in a proper embodiment of software concepts of any complexity.
Let’s discuss more how your dApp development process will pass if you choose collaboration with a skilled outsourcing IT vendor. Briefly, the algorithm of how to create DeFi app will have the following steps:
- An IT provider’s choice
- The first solution discussion
- The Discovery stage
- The UI/UX design
- The development flow and integrations
- QA and dApp launch
- Support and maintenance
Let’s look at each of the steps in detail.
An IT Provider’s Choice
The outsourcing software flow to create your DeFi software solution will be as effective as possible if you lay the right foundation choosing the vendor who will be competent enough in bringing to life the decentralized finance applications.
How to do that? The below list of hints will help you understand.
- You have to outline the services you want and find out whether the IT vendor you think about can fulfill your requirements.
- Looking through the websites like Clutch or ITFirms you can find the data about the company you'd like to collaborate with as well as the reviews of the previous clients. Contact these people to know whether the outsourcing partner was successful in meeting their expectations.
- Compare the services offered by several vendors: what is included, the staff you will work with, where they will be situated, and how they stack up against competing businesses.
- If you want to determine whether an outsourcing firm has the correct combination of expertise and work ethic, look at its management team.
- Learn more about their communication: whether they proactively seek out to share information on cost-saving measures, successes, internal controls, and other comparable activities? What communication tools do they use inside and outside the company? Is their English level sufficient for a future seamless collaboration?
Working with an outsourced provider who cares as much about the success of their clients' customers as you do about your own ones can result in great business collaboration.
Need to know more about how to choose a reliable outsourcing software vendor? Read our article and find out!
Cleveroad's Solution Design Workshop
After you’ve decided the company to collaborate with, you can leave a request on their website. The specialists will then call you to collect more information about the project you would like them to outsource, and establish a Solution Design Workshop.
This meeting is required to talk more about your project and collect requirements. You can also sign a Non-Disclosure Agreement (NDA) with them. The specialists in their turn will analyze the gathered information to find out the scope of work, goals of the future project, main concerns, as well as other necessary info.
How to create a DeFi app by stages
The Discovery stage
This stage's goal is to provide more specifics on the needs that have already been gathered, including platforms you wish to support, features to include, external services to integrate (like Stripe or Google Maps), and many others.
Creating a thorough feature list, developing the interface design, writing up the project specification, and deciding on the team makeup are some of the tasks completed during the discovery stage. Additionally, the experts provide a preliminary project estimation with a timeframe so that you may comprehend the extent of the required future project charges.
The UI/UX design
The UI/UX team develops the designs once the specific needs have been decided upon, carefully considering fonts, colors, styles, etc. To confirm the future dApp's visual design, the customer edits them and approves the version. The UI/UX designers also provide a style guide that includes all the details that developers and designers could want, such as color schemes, or typography.
The process also includes the participation of the technical specialists (such as the solution architect, team lead, or developers, if needed). They offer recommendations on the viability and difficulty of particular features and UI specifics.
Once you've given your approval to the ready app interface, the UI/UX designer relinquishes control of the project to the software developers.
The development flow and integrations
The DeFi app development process itself is divided into sprints - 2-week periods when the development team works upon an upcoming dApp functionality creation. The Project Manager focuses on the list of new features, improvements to existing features, bug fixes, and other tasks that a team may deliver to achieve the set goals.
What peculiarities do the dApp development have?
- The smart contract should be created first.
- Then the front-end is created, as well as the centralized (for you to control your dApp) backend.
- The created software is thoroughly tested
Following the creation and testing of smart contracts, developers must move on to the front-end integration phase in order to enable interaction between DApps and the blockchain, such as requesting data from the blockchain and executing deployed smart contracts.
QA and dApp launch
Quality assurance (QA) specialists monitor the functionality created during each sprint and work on a project until it is released. They carry out front- and back-end testing and generate reports for software developers to solve the found issues.
After the QA engineers ensure the functionality is flawless, the team is ready to launch the DeFi app, publishing it in the marketplaces or moving to a live server (in case it's a web app).
Support and maintenance
The vendor and you continue to work together even after your decentralized digital product is live. Based on users' input, the developers can continue to work on the created system to add various adjustments, maintain your solution with upgrades and new features, or fix any bugs that have appeared.
How much does it cost?
The cost of developing a decentralized finance system depends on the platforms used, the complexity of the functionality, the design, and the hourly fees charged by the software developers. For instance, if you contact a domain software provider, it will offer several options for your application (e.g., native or cross-platform), help you integrate payment tools that support fiat and crypto currencies, select cloud solutions to optimize performance, etc. Such a company will also offer you several cooperation/pricing options to choose from.
The price is determined by using the $50 average hourly wage actual for Central Europe.
|Modules||Approx time, Flutter (hours)||Approx time, Backend (hours)"|
Authentication (registration/login, multi-factor autorisation, etc.)
Transactions management (list of operations, sort, & filter, balance viewing, integrations with messengers/crypto supporting apps)
Notifications (push notifications)
Settings (edit info, change password, set region)
User profile (main screen, payments, etc.)
Total development time
A thoughtful admin panel is necessary for the decentralized finance products to properly manage the collected financial data. Keep that in mind when finding out how much it will cost to create a DeFi app.
|Modules||Approx time, Backend (hours)||Approx time, Frontend (hours)"|
Authorization (sign-in, sign-out)
Users management (list of users, search, sort, filter, change passwords, sending notifications to all/specific customers)
Data management and navigation (collection, processing, filtering, secure storing, receiving)
Transactions management by categories (list of transactions conducted, list of payments categories)
Reports management (list of reports)
Total development time
Given the time and effort required, creating a dApp will run you about $105,000 - $107,000, if you turn to a cost-effective Flutter development. Native applications might cost 40-50% more. But keep in mind that those calculations are rough and can be changed depending on your particular situation.
We’ve represented the approximate figures for you to think up the rough budget as to the future financial app development project. Please keep in mind that using Blockchain for a custom solution can increase the cost, so it is better to order an estimate from our experts in the Fintech domain.
The Bottom Line: to DeFi Development Practice
Decentralized finances is quite a complex business field which requires profound expertise. So, one of the keys to success in turning the DeFi-based app concept into a full-fledged software (and the DeFi app development as well) is to find a competent software provider skilled in the fintech domain.
Cleveroad is the very same provider capable of offering you qualified and long-term help with your DeFi solution creation. Let us tell you more about them.
This is an outsourcing software development company with a deep experience in creating turnkey software products that represent commercial analytics, simplify online financial transactions, and reliably protects all your sensitive information from any third-party penetration.
Thanks to collaboration with us, you’ll get a bespoke blockchain-based commercial ecosystems with an appealing and user-friendly UX, a flawless DeFi digital solution connecting you to the distributed financial system running worldwide, and besides:
- Consulting services from experts in the Fintech sphere (e.g., Project Manager, Solution Architect or Business Analyst) - both in the technical stack and business intelligence as to the upcoming project
- Signing of a Non-Disclosure Agreement (NDA) to protect your app concept from being stolen
- A highly qualified and agile-minded team that will work under your tech idea embodiment and offer you a competitive edge on the market
- The Quality Assurance services being rendered on every stage of the product development
- Cutting-edge development approaches as well as an innovative tech stack to bring your project concept into life.
We are eager to perform your project development and provide you with an exceptional, easy-to-use product that will allow you to reach the wide and profitable niche of Decentralized Finance. So let’s begin our cooperation to find new exciting opportunities for your business!
A skilled dApp vendor offers help
Contact Cleveroad FinTech experts to order a dApp fully fitting the needs of your business
Decentralized App (dApp or DeFi app) - a software solution which offers people more control over their funds through personal wallets as well as individual-focused trade services.
- Users’ Ability to Control Funds
- Simplified Access to Finances
- Opportunity to Transfer Money Worldwide
- Enhancements in Financial Operations
- Transparent Individual Transactions
- dApps Composability
In order to accomplish this goal, pass through the following steps:
- An IT provider’s choice
- The first solution discussion
- The Discovery stage
- The UI/UX design
- The development flow and integration
- QA and dApp launch
- Support and maintenance
Evgeniy Altynpara is a CTO and member of the Forbes Councils’ community of tech professionals. He is an expert in software development and technological entrepreneurship and has 10+years of experience in digital transformation consulting in Healthcare, FinTech, Supply Chain and Logistics
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