Last week we launched the Hydro SDK — a full-stack solution for building decentralized exchanges and DeFi Marketplaces. Today, we’ll talk about some of the awesome ways you could use the Hydro SDK to build powerful applications and tools.

This article details 6 use cases for the Hydro SDK.

1. Deposit-mode Decentralized Exchanges

Hydro Protocol based decentralized exchanges are characterized by a “hybrid” architecture: on-chain settlement and asset storage, with off-chain orderbooks and order matching. Within the asset storage component, Hydro supports two distinct structures that are actually significantly different:

Approval Mode (funds held in users trading wallet)

Deposit Mode (funds deposited into a smart contract)

The approval mode is what users of exchanges like Radar Relay, DDEX, and Paradex, are used to. This has the advantage of keeping all assets directly in your digital wallet, but suffers from the complexities of token allowance permissions and WETH (wrapped Ethereum).

Hydro also supports a deposit mode. In this there is no need for wrapping Ethereum (bye WETH!). Instead, traders deposit their assets into a smart contract to trade. This creates a sort of platform specific wallet structure. Once trading is complete, users can withdraw their assets back into their wallets.

These modes are fully compatible. A Hydro Relayer could theoretically offer a user both options.

2. Decentralized Bridges — From CEX to DEX

Notice some similarities between these order books between Bitfinex and Ethfinex?

As technology improves, more and more centralized exchanges are starting to create (and/or invest in) decentralized counterparts. Coinbase has Paradex, Bitfinex has Ethfinex, and Binance has their BinanceDex. Not every CEX has the funds and time available to do this well though. There are several challenges here:

Spinning up a DEX from scratch is hard/costly

Once the DEX is up, you need to find a way to bridge liquidity

Iterative costs for keeping up with technology improvements could add up

The Hydro SDK provides solutions to all of these problems.

The SDK launches a DEX template in minutes, complete with a matching engine and full-stack UI

We have a standardized API and provide support to bridge liquidity through automated market making bots

Since we are only focused on decentralized exchange, we iterate and improve upon the contracts and developer tools quickly.

3. DeFi DEX-based Protocols for crypto-assets

DeFi projects and DEX protocols are another perfect fit. We’ve seen MakerDao and dydx build DEX-based portals (oasis and expo respectively) for their DeFi crypto assets with huge success.

Being able to easily provide decentralized, risk-free marketplaces for DeFi assets within the DeFi platform can provide a significant advantage. Again, the Hydro SDK provides a fast, powerful, and open source template for creating DeFi focused marketplaces. This allows DeFi projects to focus on their unique features, instead of wasting time building exchanges from scratch.

4. Add Augur For Prediction Markets

Augur’s prediction market protocol can be leveraged by Hydro

Peer-to-peer prediction markets are an excellent use case for DEX protocols. These markets form two-sided orderbooks that can be displayed in many ways, but all handled with the Hydro SDK’s matching model.

Consider the following prediction example:

“Will the Patriots win the super bowl again in 2020?”

There are two possible answers: “yes” or “no”. The price and depth of the yes vs the no is determined by the open market. It’s the perfect challenge for a matching engine exchange.

The Hydro SDK can easily spin-up the back-end, matching engine, and smart contracts required to quickly build a powerful decentralized prediction marketplace.

Our Prediction Market Scaffold: https://github.com/HydroProtocol/hydro-augur-scaffold

Video Guide: https://www.youtube.com/watch?v=ZgRrcExeE10&t=2s

5. Build a DEX on an upcoming blockchain

Hydro Protocol was designed from the ground up to be multi-chain compatible. DEX’s will form a core component of Blockchain ecosystems — having a standardized approach to settlement sets up for easily leveraging of cross-chains pegs. Additionally, it creates an intriguing opportunity for DEX operators who could break into untapped marketplaces.

6. Upgrading an existing DEX

Older DEX protocols are often plagued with illiquid and inactive markets. Hydro provides several advantages over these previous gen DEX protocols:

Perfect order matching: no slippage

No weird token friction — take fees however you want

No protocol layer order tax

Matching engine is provided (if you don’t already have one you don’t have to write one from scratch)

Free order cancellation. A must have for market makers

Audited, secure, and proven

Supports both deposit and approval modes

Completely focused on high performance decentralized exchange, not distracted by other problems

By using Hydro to do the heavy lifting at the protocol and middleware layer, DEX projects can focus on growth, liquidity, and product differentiation.

Try It Today

The Hydro SDK is available on GitHub today. For the sake of comprehensibility, we kept the initial version simple. In the days ahead, we plan to release a wide range of additional modules and features.

Screenshot from the Hydro Relayer SDK Front End

You can checkout the Hydro Relayer SDK Github here. To get started just:

Clone the git repository

Run the docker container shown in the README

The whole setup should take less than 5 minutes.