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Seeing how profitable and opportunistic the crypto market is, planning to launch your own exchange doesn’t sound like a bad initiative. If everything goes well according to the initial plan, you could have profits in millions within a very short span and achieve a breakthrough in this hypercompetitive market. However, designing and launching a crypto exchange is not a matter of joke that can be done overnight or with simple planning. Not only are there numerous variables controlling the success roadmap for your exchange but you also need to deepen your domain knowledge to make a well-informed decision.
On top of everything, a crypto exchange might seem to be a regular marketplace where traders or crypto owners can sell, buy, or trade cryptocurrencies. Still, the underlying architecture and technical functionalities are quite complex. If thorough planning is not laid out beforehand, unplanned events might occur during the dev process which could halt the entire plan. With this being said, we have crafted a comprehensive guide, including everything you need to know about building a crypto exchange from scratch and launching it sooner in the market for your target audience.
Crypto Exchange: What Is It And How Does It Function?
First of all, let’s first understand what a crypto exchange is and its functioning. Having the basic knowledge will help you proceed further with the dev plan and choose the best exchange platform according to your future goals and objectives. In textbook terms, a crypto exchange is a platform where users can exchange their digital assets or cryptocurrencies from one form to another. It serves as the intermediatory platform, connecting crypto owners and traders with the global crypto market, and providing them with easy access to the price action movements and the trade market.
As per the current market conditions, the major two types of crypto exchange platforms based on the currency exchange rules are:
- Fiat-to-crypto exchange: Here, users can exchange their fiat currencies for cryptocurrencies and vice versa.
- Crypto-to-crypto exchange: As the name implies, these platforms allow their users to exchange one form of cryptocurrency for another, like Bitcoin to Stablecoins and Ethereum to Bitcoins.
Also, the supported cryptocurrencies will vary from one platform to another along with the restrictions, like movements of the digital assets to external wallets or accessing the traditional financial rails for fiat currencies.
Why Create And Launch Your Crypto Exchange?
Now, you must be in a dilemma about the advantages of starting a crypto exchange, especially when the market is so hypercompetitive and people are yet to acknowledge the true potential of digital currencies. So, to clarify your doubts, below we have listed a few ways in which you can benefit from this project.
1. Higher profit potential: Earnings from the crypto exchange platform can be done in several ways. First, you will be charging a transaction fee to your users, which can be fixed or variable based on the crypto volume being exchanged or the market price movements. Secondly, if you are offering listing services, you can charge a nominal listing fee also to your users. Another way in which you can increase the profit potential of the crypto exchange is by offering paid premium services and add-on services.
2. Market demand and global reach: In today’s decentralized finance ecosystem, the demand for a feature-rich and secured crypto exchange platform is quite high. Although the competition is fierce, if you can position your crypto exchange properly, you will pave the way for a glorious future. Apart from this, you will have both individuals and businesses as your target audience with a global outreach since cryptocurrencies do not follow any geographical restrictions.
3. Optimal feature control: Also, you will have optimal control over the features to be included in the crypto exchange platform through customization so that it can adhere to the current market standards and user expectations. To attract experienced traders, you can include top-notch and advanced features in the platform, like margin trading, derivatives, futures contracts, and staking.
4. Blockchain integration: One of the many reasons to invest in your own crypto exchange is gaining access to blockchain technology. You can leverage the unique features of this distributed ledger technology to provide the optimal experience to your users and allow them to borrow, lend, or trade cryptocurrencies on multiple blockchains.
What Are The Types Of Crypto Exchanges?
Four types of crypto exchanges are there in the decentralized finance ecosystem, each having its own pros and cons. Before you begin the build process, it’s essential you know about these categories so that you can choose the best exchange type for yourself and align the same with your goals and objectives. Below we have briefly described the four types of crypto exchange platforms for your further clarification.
1. Centralized exchanges: Known to be more secure and profitable, centralized exchanges act as intermediatory platforms between buyers and sellers, allowing them to store their digital assets.
2. Decentralized exchanges: From the name itself, you can understand that these crypto exchange platforms do not store user’s digital assets but rather allow traders to interact directly with one another through the integrated blockchain for selling, buying, or trading cryptocurrencies.
3. Peer-to-Peer exchanges: Although the P2P exchanges are almost similar to the decentralized platforms, they will need collaboration with a third-party escrow service provider to ensure the transactions are completed within the stipulated time and securely.
4. Instant exchanges: These crypto exchange platforms allow users to exchange their cryptocurrencies much faster without storing their assets.
What Are The Two Options For Starting A Crypto Exchange?
Now that you have decided to proceed further with starting your crypto exchange, let’s look at the two major options you can go with for the process. You can either for a white-label development solution or choose the custom development process according to your budget, feasibility, and future goals and objectives. Below we have briefly discussed these two options so that you can proceed with a well-informed decision.
White-Label Crypto Exchange Development
In a white-label crypto exchange development solution, you will get the pre-built framework with all the essential components required for starting your crypto exchange, including a trading engine, liquidity integration, user interface, admin panel, and wallet. With this, you will have a faster time to market since you can skip the scratch development process and access the most basic features necessary to get the crypto exchange up and running in the live market. Apart from this, the development costs will be much lower, which is suitable for a restricted-budget project. However, there will be an immense dependency on a third-party service provider with limited customization options.
Custom Crypto Exchange Development
As the name implies, here you will develop and build the crypto exchange from scratch, including everything necessary for running a basic platform like the trading engine, admin panel, user account, interface, and wallet. Here, you can customize the features according to the initial roadmap and ensure the platform can attract both novice and experienced traders. Besides, here, you will have more control over the development process while ensuring optimal scalability and flexibility so that you can accommodate any last-minute modification. However, the time to market will be pretty high along with the increased development costs for custom solutions.
How To Start A Crypto Exchange: A Step-By-Step Guide
1. Choosing The Countries For Operations
Since regional regulations have been put in place for cryptocurrency exchange and trading, it would be best if you define the countries where you want the crypto exchange platform to be operational and accessible. This will help you adhere to these regulations and ensure optimal compliance for your platform. Besides, you can also decide the cryptocurrencies and fiat currencies to be supported in the platform based on the local markets.
2. Defining The Target Audience
Once you are done with defining the countries, you need to focus on choosing the target audience. Whether you want the platform to target beginners or experienced traders will influence the choice of the exchange platform features and other variables.
3. Obtaining The Crypto License
The next step will be to obtain the crypto trading license based on the country-specific regulations so that you won’t have to worry about legal compliance or any other such hassle later on. Ensure you get the license first before the real dev cycle commences.
4. Choosing The Exchange Platform Features
After this, you should determine the features to be included in the crypto exchange platform. Some of the key features that every platform needs to have for both experienced and novice traders are authorization and verification of user wallets, trading engine, bank card, traditional financial rail integration, eWallet, notifications, dashboards and charts, security protocols, and transaction history charts.
5. Designing The Exchange Platform
Ensure the crypto exchange platform has a user-friendly interface design so that users won’t have to struggle with navigating through different pages or nodes. Also, you have to focus on streamlining the user onboarding process through a dedicated page for account creation and identity verification.
6. Starting The Development Process
Several intermediate responsibilities will be associated with the crypto exchange development process, including:
- Deciding and designing the base architecture
- Developing custom service-based APIs for interacting with the database and the front end of the exchange application
- Developing the service modules that will handle the events and functional workflows
- Implementing proper encryption protocols and security layers
- Integrating blockchain technology for a decentralized exchange platform
7. Launching And Marketing The Platform
Once the crypto exchange platform is developed, you can plan for its launch in the market. Continuous discovery and continuous improvement are the key factors to focus on as they will help you find the gaps and fix them for an optimal user experience.
Conclusion
In this article, we have elaborated on the facts that you need to know how to start a crypto exchange platform and enter the competitive decentralized finance market with ease. Since the development process is quite complicated and will require professional expertise, it’s better to collaborate with an experienced and skilled crypto marketplace development company. This way you can focus on your core competencies and outsource the tasks that require technical excellence and deep domain knowledge.
