Cryptocurrencies have emerged as the biggest challenge to the current financial system as it promotes decentralization. Cryptocurrency exchanges are handling billions of dollars of funds of traders by offering a platform for buying, selling, and exchanging different cryptocurrencies. Most of the exchanges also accept payments made in fiat currencies. Some of the popular centralized exchanges are Binance and Coinbase. Some of the famous decentralized exchanges are OKEX and IDEX.
The basic structure of every Cryptocurrency exchange
- The trading engine – It helps in the management of orders by matching the requests raised by different buyers and sellers on the platform. It should be highly accurate.
- The user interface – It should be convenient enough for the traders to handle their basic operations smoothly without any errors and glitches. It must be intuitive with easy navigation.
- Customer service – Traders’ doubts and queries should be swiftly responded in multiple languages. It helps in improving user retention and trust in the system. A professional support team is needed to infuse confidence in the minds of the customer. People should be encouraged to invest in a cryptocurrency exchange platform.
- Adequate security measures – Protection of the funds and personal data of the users is highly important for every crypto exchange. To safeguard itself against hacking and phishing attacks, it must take steps like two-factor authentication, jail login, end-to-end encryption of database, and password-protected user access without fail. With operations becoming increasingly digitized, issues such as virus and malware attacks are quite common. The data can be backed up in an independent location separate from the operational servers.
Steps to follow for kickstarting Cryptocurrency exchange development
- Comply with legal norms – Any crypto exchange that happens to be illegal will be forced to exit the industry. Hence, obtain an operational licence issued by a certified authority. It depends on the scale of operations (local or global) regarding its compliance with the prevailing laws in different countries. The KYC (Know Your Customer) verification process and AML (Anti Money Laundering) laws must be strictly adhered to. This is done to prevent any sort of frauds and scams. Certain countries like Singapore, Switzerland, Japan, Canada, and the USA are highly friendly towards cryptocurrency exchanges with a trustworthy judicial system.
- Formulate an agreement with a bank or a payment solution provider – Since traders will buy or sell cryptocurrencies regularly, there is a need to invest in a foolproof transactional system. It must facilitate seamless deposits and withdrawals. Multiple payment gateways or process systems need to be set up to handle the huge volume of funds. A tightly regulated ecosystem will have limited banking options compared to an open and decentralized system.
- Management of liquidity – Liquidity is one of the essential attributes of successful cryptocurrency exchanges in the market. Absence of sufficient liquidity in an exchange will fail to attract investors and lose their business to the competitors in the industry. Liquidity can be boosted by forming API’s and sharing trading volume information with the leading exchanges in the market.
The process by which a Cryptocurrency exchange works
- The user gets himself registered on the platform after completing all the needed formalities.
- An individual wallet is created for him to store his respective coins or tokens.
- He can select any receiver on the platform for sending funds.
- Once a particular cryptocurrency has been completely sold out on the platform, he has the option to buy foreign currency.
- He can receive funds by choosing any of the available currencies on the platform.
The time taken to build a Cryptocurrency exchange
It depends on the kind of exchange platform (centralized, decentralized or hybrid) chosen by the business firm. White label solutions can be developed within a week as it comes with all the in-built features and functionalities. For exchanges that are developed from scratch by hiring various developers, it will take a couple of weeks or months.
Important sources of revenue for a Cryptocurrency exchange
Every crypto exchange owner can make money by imposing charges on withdrawals, trading commission, and incorporating Initial Exchange Offering (IEO) into their platform for launching new crypto coins or tokens.
The total cost involved to build a Cryptocurrency exchange
The cost will vary depending on the kind of features a firm wants to integrate into its exchange. White label solutions involve less developmental expenses when compared to building an exchange from scratch.
The different services offered by exchange development companies
Most of the cryptocurrency exchange development companies offer services like wallet integration, ICO development, mobile app development, and trading platform creation.
The future of Cryptocurrency exchange development
Since its origin more than a decade ago, Cryptocurrencies have grown to massive proportions today. It is the pride of the digital age. It can be used for a wide variety of activities such as processing payments, storage of value and proving digital ownership. Since it has a huge capacity to disrupt the traditional financial systems, there are concerns and worries regarding the potential use of the technology. Many corporate companies are accepting payments made in cryptocurrencies indicating its adoption in the mainstream economy. This will increase its accessibility and popularity contributing to an increase in its value.
Threats to its growth include the banning of cryptocurrencies by various governments and restrictive regulations by authorities. The unpredictable fluctuations in its price cause a lot of panic in the market. Technologies such as Artificial intelligence can be used to predict crypto market fluctuations. Regulation needs to push cryptocurrencies from the periphery of the current financial systems. Many central banks are also attempting to issue their own digital coins. Cryptos are being increasingly preferred amidst the economic downturn affecting the entire world. With the halving of cryptocurrency’s leader Bitcoin to take place in 2020, its view as a speculative and volatile asset will change with the years to come. It is highly important that businesses all over the world realize the significance of cryptocurrencies and equip their operations to leverage its benefits. It remains to be seen if cryptocurrency is the future of money. With more preference for decentralization, safety, and anonymity, it is expected to grow exponentially in the coming days.