How to Build your Cryptocurrency Exchange Platform
A decade after the introduction of Bitcoin, the first cryptocurrency, digital currencies continue to defy the doomsday. Despite being around for a decade, cryptocurrencies already show the potential to transform the financial services landscape, and replace conventional fiat currencies.
The reason behind the increasing popularity and adoption of cryptocurrency is the technology behind it — Blockchain — which allows more secure, transparent, traceable and quick transactions.
The opportunity to make large and fairly quick earnings is another reason behind the popularity of digital currencies. Previously, a plethora of individuals started mining cryptocurrencies to earn lucrative rewards. However, as mining difficulty increased and profits declined, many people’s interest gradually shifted to crypto trading. But, trading offers real benefits when the market is bullish. One of the best options to earn profits is probably cryptocurrency exchange development.
Why should you build your own exchange?
With over 70 million cryptocurrency traders worldwide and many potential traders ready to enter the crypto trading market, building a crypto exchange could maximize profit-making opportunities.
Binance, the popular cryptocurrency exchange, brought in a total of $78 million in profits in Q1 2019.
A well-developed exchange underpinned by features that traders seek can increase the profits manifold.
So, the question that arises is:
What features should an exchange have?
Powerful Trading Engine
A trading engine is the main component of an exchange. It is responsible for matching buy and sell orders. The powerful the trading engine, the better — as it facilitates order matching with minimum latency.
Users expect rapid fulfillment of buy and sell order. Integrating the exchange with a powerful matching engine would mean a bigger user base and inflow of more profits.
Given the large amount of users funds stored on cryptocurrency exchange platforms, they are an enticing option for hackers.
Bitpoint — a Japan-based cryptocurrency exchange recently lost USD 32 million in a hack that involved Ripple and other cryptocurrencies.
Security is, thus, one of the crucial aspects during cryptocurrency exchange development. Intelligent people learn from other people’s mistakes. It is true and applicable here. Analyze past attacks on exchange platforms and identify relevant vulnerabilities. Achieve multi-layer security by integrating the right security features into the exchange.
In addition, use a combination of hot and cold wallets to allay the risk of hacking considerably.
The operation of any exchange is impossible without a wallet which is used to send, receive and store crypto assets. To enhance the security of a wallet, it must be fortified with the right security features to safeguard users’ funds against any hack.
In addition, other crucial things to ensure for a wallet include:
- Maximum number of input-output options
- High transaction speed
You can disable obligatory account verification to replenish wallets, but can enable it during withdrawal of funds to avoid money laundering.
To integrate a fiat wallet into an exchange, license and partnership with a bank is required. This requires opening an account which will receive funds from users and vice versa. The funds will then be sent from the account to users’ balance upon request.
Another crucial aspect to consider during cryptocurrency exchange development is liquidity. Liquidity is the ability of an asset to be converted into cash. An exchange with high liquidity is able to fulfill users’ buy and sell orders quickly, which is why crypto traders like to use such exchange platforms. There are various factors affecting liquidity in cryptocurrency exchange development.
New exchanges, initially, are usually unable to fulfill order requests quickly due to less number of users on their platform. Features like market maker and API to external exchange help achieve high liquidity in such a scenario.
UI (user interface) and UX (user experience) of an exchange are as important as the functionality of the exchange. A good UI/UX coupled with good functionality enhances the performance of the exchange.
The trading interface of an exchange has multiple features, such as order book, charts, trading pairs, and more. With all these features, it can be a bit challenging to create an easy-to-understand interface. This is when the expertise of a professional company comes into play. Seasoned and skilled graphic designers and front-end developers can create a self-explanatory interface that facilitates accessibility of exchange for both experience users and noobs.
Cut Through the Noise with Multi-Channel Marketing
A cryptocurrency exchange underpinned by features aforementioned is more likely to deliver world-class performance. However, to make an exchange successful and to help it gain essential competitive edge, marketing is essential. Effective communications coupled with multi-channel marketing on the right platforms command investors’ attention and help influence their behaviors, thus reinvigorating exchanges for long-term success.
To sum up, an experienced technical team, integration of right features, and data-driven marketing strategy can together navigate your journey of cryptocurrency exchange development and launch towards success.