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Cover image for Cryptocurrency Exchange Development- A complete guide!

Cryptocurrency Exchange Development- A complete guide!

lisbeth_tweets profile image Anna Lisbeth ・5 min read

In this highly competitive business world, cryptocurrencies have become the primary focus of attention. Cryptocurrency exchanges are the first and remain the most crucial businesses built around the invention of cryptocurrencies. Crypto exchanges are more than just buying and selling cryptos. They are a highly in-demand business in the market, representing some of the ideal brands in the cryptosphere.

Ever since the advent of Bitcoin, cryptocurrencies and crypto exchanges have evolved tremendously. And, crypto exchanges are said to revolutionize the industry as a whole. In recent years, as we watch crypto exchanges shift, change, and widely expand, it is evident that crypto exchanges are a highly remunerative business opportunity.

A curator of the Long Reads Sunday Journal once quoted,

“The story of exchanges is a powerful lens through which to understand the story of the cryptocurrency industry as a whole”

With that being said, if you are an entrepreneur aspiring to set foot in the cryptosphere with your own crypto exchange, this blog is for you. Here, we are going to discuss how to develop a legitimate cryptocurrency exchange software for your business, starting with a quick brief of what they are and how they work. So, without further ado, let’s dive in!

What are crypto exchanges? A quick glance!

A cryptocurrency exchange is a digital marketplace where traders can exchange their cryptocurrencies for other cryptocurrencies/digital assets/ fiat money. Exchanges are the intermediary between the buyers and sellers of the crypto space. The exchanges are backed by blockchain technology, which helps control, secure, and verifies transactions that happen on the exchange platform.

With the advancement in technology, the classifications of crypto exchanges also evolved with the concept of providing better experience with speed and efficiency to the customers and widening their opportunities. Each cryptocurrency exchange has its unique functionalities, set of target audiences, investment measures, period to build, security features, etc. Let’s see what the types of exchanges are.

Types of cryptocurrency exchanges:

Admin to user exchange - This exchange is a fitting solution for starters with minimal experience of buying and selling cryptos. The exchange comes with a user-friendly interface and is quick and easy to navigate. In this platform, the user and admin can exchange directly and instantly, with no limit or stop-limit orders.

P2P exchange - This exchange is slightly reshaped from the previous model. This platform removes the involvement of the admin and directly connects the buyers and sellers. The exchange will charge a transaction fee for the trades happening on the platform.

Decentralized exchange - Decentralized exchanges are almost similar to the p2p platforms, but the difference is that they work directly with the blockchain network. There are different types in decentralized exchanges, such as on-chain, off-chain, and cross-chain exchanges.

Crypto exchange with leverage - This is one of the trending exchanges currently that gained popularity almost instantly. This is because these platforms allow users to borrow a sum LARGER than the initial deposit, which will help them raise significant profits and expand their position in the market efficiently.

Now, to build a cryptocurrency exchange software that is robust and the one that will thrive in the market, you need to take a few crucial attributes into consideration. Let’s go through them step by step for your clarity.

Essential steps to go through for developing a crypto exchange software:

Deciding the whereabouts of the exchange

The first and foremost step is to decide whether your exchange is going to operate regionally or globally. Then, you need to consider carefully and obtain a license for your exchange according to the location you are operating. Laws differ from one place to another. It is better if you gain advice from a legal expert.

KYC compliance

It is important for every crypto exchange business to comply with KYC( Know Your Customer) standards. You should make sure your exchange is KYC compliant based on the region it is functioning and gather verified, authenticated users for smooth operation.

Collaborating with a bank/ payment processor

You will have to partner with a bank or a payment processor to facilitate efficient payments for your customers through fiat currency and help them with faster settlements. You need to look carefully and choose the right bank to partner with to offer your customers a convenient business experience.

Integration of Liquidity

Liquidity is a crucial factor for any exchange. You need to make sure that your exchange is integrated with high-volume liquidity to help customers with smooth, seamless business experience. Here is how you can do that,

  1. You can integrate an API interface into your exchange, which will connect the exchange to other external exchanges to boost liquidity.
  2. You can stimulate artificial trades in the exchange and increase activity in the platform, which will bring in liquidity.
  3. You can join with a large network of crypto exchanges and tie up your exchange with them, which will improve liquidity.

Enhanced security features

Even though cryptocurrencies and crypto exchanges are prevailing in the market, a few potential investors are still uncertain about stepping foot, because of the security/ hack threats. So, in order to drive them towards your exchange, you need to integrate high-quality, multi-layered security features into the exchange that will help customers with risk-free, hassle-free business experience.

Constant maintenance and customer support

The cryptosphere is evolving with each day, with the advancements in technology. You have to keep an eye on the latest market trends and keep your exchange up-to-date to fit the current business model. Also, you need to make sure your exchange functions without any glitches to provide a seamless experience to the customers. The exchange must be constantly responsive to KYC requests, complaints of the users, processing their withdrawal and deposit requests, etc.

These are the essential steps you need to undergo, to build a strong foundation for your exchange and for it to sustain in the long run. But the competition is already widespread, and the number of exchanges is increasing rapidly with every fraction of a minute. Thus, you cannot afford too much time into developing your exchange if you want to get it up to speed in the market. And that is the reason why building the exchange from scratch is not a viable option. It will also cost a lot of money and requires quality technical assistance.

The better solution will be to go with a whitelabel cryptocurrency exchange software. A whitelabel exchange software is nothing but a readily available software, with every necessary feature, technical, and security integration required for the exchange. They also come with a name, brand, logo, UX/UI according to the customer’s desired preferences.

All the user has to do is buy the whitelabel solutions and install them. They are quick and easy to launch and are cost-effective. They are also highly-scalable and flexible. Because of the many benefits involved, there is a wide range of companies offering whitelabel solutions. To make your business credible and profitable, conduct massive research, and choose the right platform.

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Anna Lisbeth

@lisbeth_tweets

I’m a blockchain analyst and also an avid learner of the technology and its advancements. I assist budding blockchain entrepreneurs with solutions that fit their business models.

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