How to Launch a Successful Crypto Exchange Business
Projected to reach USD 1.40 billion in 2024, crypto business comes across as a lucrative opportunity today. Those who invested in a crypto business a few years back are today sitting pretty as successful owners of digital businesses. As the concept slowly gains mainstream adoption, the opportunities are only going to increase. Setting up cryptocurrency exchange software is an ideal business opportunity.
Type of crypto exchange
One of the first decisions you need to take is the type of crypto exchange you will launch. For that, you need to know about the various types of cryptocurrency exchanges and how they differ.
- Centralized exchange
A centralized exchange functions as a third party to help perform crypto transactions. Both buyers and sellers trust the exchange to handle their assets. It is alike a bank setup, where you trust the bank to keep your money safe as the bank offers round-the-clock monitoring and security of the money that you cannot afford.
Traders moving their money on the exchange believe that their transactions will be safely completed. They also depend on the exchange for liquidity. In return, the exchange platforms charge a trading fee.
- P2P exchange
A P2P (Peer-to-Peer) exchange directly connects buyers and sellers, while almost eliminating the role of a third party, which appears only for dispute redressal. The sharing of information, data, or assets occurs between the parties involved. Such an exchange generally works on a smart contract-based escrow system to execute transactions. Daily trade numbers may run into dozens at best, contrary to a centralized exchange, where thousands of traders execute trades simultaneously.
- Decentralized exchange
A decentralized exchange (DEX) never takes custody of funds. However, it lags behind a centralized exchange when it comes to security. Many traders prefer decentralized exchanges though as they offer better security. Decentralized exchanges are likely to replace P2P exchanges in the near future.
As the volume of funds invested in cryptocurrencies is increasing, decentralized exchanges are slowly surpassing centralized exchanges in popularity. This is because decentralized exchanges are more user-friendly and provide better security.
Structure of crypto exchange platform software
Cutting-edge crypto exchange platform software is made of four components:
- Trading engine
The trading engine is something your crypto exchange just cannot work without. It has countless tasks at hand –accessing the order book, mapping buy/sell orders, performing transactions, calculating balances, and more. Before making the deal, ensure that the exchange is fortified with an efficient trade engine.
The design of the trading platform constitutes the interface. You may have heard numerous times why a visually appealing and intuitive design helps, but it does help you, so again it is important to mention the fact. Ensure that your exchange’s UI is mobile-friendly as the number of people who would open the exchange software on smartphones is continually increasing. It is even better if you get a dedicated app for mobile devices. Though it will need you to mark-up your budget, it will also ramp up your trading volume, increasing your profits.
The interface of the best cryptocurrency exchange software should offer options like:
- Sign up and log into an account
- View data such as current order book, balances, past transactions, statistics, etc.
- Deposit and withdrawal of crypto and fiat currencies
- Place buy and sell orders
- View charts
The wallet is the daemon running on the exchange server. All your digital currencies are stored in the wallet, so it needs optimum security. To mitigate the risk, the exchanges need to implement the hot/cold wallet system.
The hot wallet allows the traders to swiftly withdraw cryptocurrencies without a nod of the exchange operator. For instant withdrawals, a positive balance needs to be maintained in a hot wallet.
A cold storage wallet is a piece of paper or a USB stick storing the private keys of cryptocurrencies. As the cold wallet is offline, nobody can access the cryptocurrencies stored in it.
- Admin panel
As an exchange owner, you need an admin panel to manage and control your exchange. With admin panel, you can perform tasks like:
- Setting the spread and trading fees
- Managing liquidity
- Addressing the support requests and queries raised by customers
- Managing cryptocurrency pairs like USD/BTC, BTC/ETH, ETH/USD, etc.
- Crediting fiat deposits, or debiting fiat withdrawals requested by traders
- Approving customer accounts, after verifying KYC or other compliance requirements
How to build crypto exchange software
When it comes to building the best cryptocurrency exchange software, you have three options at hand:
- Hire a team in-house
The first thought to come to your mind will be to recruit a team of developers, designers, and writers to build your exchange software. That is fine, but you need to make sure they are the people who know how to make such a complex program. They should be well-versed with the operations of a crypto exchange and how to accumulate all the components required.
You also need to decide on the programming languages. The choice of languages is hinged to the cryptocurrencies you intend to integrate into your exchange. You also need to make sure your exchange is perfectly compatible with various payment processing platforms or banks. The team you have hired should know precisely how to safeguard the transactions on the crypto exchange.
At the top of it all, you need to estimate the costs and resources required for the development and maintenance of the software if you get it all done in-house. Such software is complex and developing it from ground zero is likely to consume months or probably year(s). Depending on the functionalities you want to implement in the software (currencies, mobile applications, etc.) the cost may amount to millions of dollars.
- Execute free/open-source scripts
On GitHub or other forums, you will find a few open-source crypto exchange scripts. But you should not be overjoyed on the source code being free as there are a few risks associated.
Regardless of the availability of the script, you need a technical team to comprehend and implement extensive code within the script. You will need to execute the script before you determine how the script functions. Customization of the script will need time as well as resources.
Moreover, there is no way to be sure that the script is secure. Your project will be botched if the script has malicious lines of code that steals your funds gradually in a clandestine manner. If not that, it may have loopholes, making the exchange susceptible to hacks. Or it might just be buggy, making it cumbersome for the users to work on. It may work so slow that the users get exasperated and move to your competitors.
With open-source scripts, you can hardly count on the development support, so your technical team will be on its own to figure out the possible bugs and other issues. Most often, people begin with a free script and have to leave it mid-way, only to start from scratch again.
- White label exchange software
The difference between white label exchange software and the free script is that the former is thoroughly tested. When you are making as big an investment as crypto exchange software, you cannot take any chances. Using white label exchange software also gives you the time to customize the code according to your specific requirements in terms of design, languages, support system, etc.
When deploying white label software, you shield yourself from the trouble of handling a flurry of technical requirements. The implementation and maintenance of an untested script is a mess and it is better for you to keep away. The functions of all core components of the white label software have already been examined and you can go ahead with quick customization, which can take a few weeks. Eventually, you can save a lot of money, while getting the best cryptocurrency exchange software you had always wanted.
Once you make up your mind to set up a crypto exchange, the first thing you need to do is to select the kind of exchange you want. Centralized, P2P, DEX — all these exchanges have their advantages and disadvantages — so you need to choose any one of these according to your specific circumstances. Thereafter, you have to make sure the crypto exchange software you have chosen has all the four essential components. The last decision of the pre-development stage is how you are going to get the software.
Your decision to buy crypto exchange software is going to be one the biggest decisions and you cannot afford to get it wrong. The best option at the table is to collaborate with a company that has made a mark for the quality of the software they offer and make the perfect start.
Antier Solutions is one of the reliable companies in India when it comes to cryptocurrency exchange software development. We provide a white label crypto exchange solution, and at the same time, we can build a custom exchange for you from the ground up.
Schedule a free demo of our white label cryptocurrency exchange software or connect with our subject matter experts to share your business needs.