How to create your own cryptocurrency exchange – guide
Recently, mining cryptocurrencies has become increasingly difficult and even illegal in some countries. That is why experts are referring to other ways of making money on digital currency activities – and it is in this matter that you can quite profitably create your own cryptocurrency exchange platform.
People around the world use this type of platform to perform transactions. They usually prefer to keep money in BTC or other virtual currency, waiting for them to reach higher exchange rates. For example – the Bitcoin circulation indicator reached 16 million tokens last year, but there are still few places with possibility of physically withdrawing ones funds. Fortunately, the situation with digital payouts is much better.
It’s high time to build your own exchange site – for example – for Bitcoin transactions. Now you can start offering a cost-effective digital exchange to an open cryptographic community. Here’s how to set up a cryptocurrency exchange company and achieve success!
What is a cryptocurrency exchange?
Cryptocurrency exchange is a service where one can exchange virtual currency for other assets, such as various cryptocurrency tokens or FIAT money. Such sites are currently very popular and many companies and entrepreneurs conduct cryptographic transactions. Even the threat of a ban from the European Union cannot specifically shake the position of Bitcoin and crypto.
On the Bitcoin exchange site, a registered user can buy and sell crypto, track its exchange rates, and store some of their own cryptographic assets. Such websites usually pay most attention to the high level of security and possible payment methods. However, an experienced user should consider the proposed exchange rate too.
How is the crypto market different from a crypto exchange platform?
Cryptocurrency markets are designed for people who own crypto and want to interact with other avid crypto traders, as well as to trade using virtual currencies directly on the platform. This is a fundamental difference compared to cryptographic exchange platforms, where you can simply exchange your specific type of crypto for another type of token by interacting only directly with the service provider (not with other traders).
From the user’s point of view, exchanges are much more reliable in exchange rate stability due to their centralized nature of service. This aspect has both advantages (exchanges are free of fraud) and disadvantages (only stock exchange owners decide which rates to assign and can do so without good justification) On the other hand, prices on stock exchanges are usually based on the situation from the most popular markets . To sum up – you can’t choose the best price option on the stock exchange, you can only follow one set tariff.
Define your target group
Think about how wide your support range should be – you may be limited by your country and its jurisdiction, but it’s a completely different case when you plan to globalize your business from the very beginning. In the latter situation, you must take care of all necessary international licenses and permits in accordance with the locations where you plan to present your listed company. Either way, you need the help of a lawyer with experience in handling international exchange laws.
Establish cooperation with a reliable bank
To handle money, you will inevitably enter into contracts with banks or payment providers. That is why it is very important to choose a reliable bank with a sufficient number of online facilities, partner-friendly conditions and more or less a wide range of exchange rates. It is better to make connections in countries where cryptocurrencies are accepted as ordinary means of payment, such as the USA or Scandinavian countries.
Pay attention to the software
Today’s technology market is fully ready for adventurers who want to set up their own digital currency exchange start-ups. That is why we offer both the development of the initial software package and a ready solution for the development of your own exchange platform.
In addition to the possibility of exchanging through websites, do not forget about the development of a mobile app – mobile is a thriving market that can significantly increase your revenue. However, it may be a good idea to use a custom software package if you prefer to create a convenient, completely new exchange platform – no one will leave their favorite platform for yours if you don’t offer anything new.
Build the best exchange architecture
The basic solution in the architecture of the cryptocurrency exchange site will include four necessary steps:
- Commercial engine. Without this basic part, the whole mechanism cannot work. The trading engine should have unlimited access to the order book, match all purchase and sale orders, process transactions and calculate balances.
- Frontend. The user interface should be fully configured for fast and efficient trading and transactions. Make sure that your customers can intuitively and easily find their accounts, see all significant changes in exchange rates as soon as possible, deposit cryptocurrencies or fiat currency and place any orders.
- Wallet. Electronic wallets for digital currencies that you make available on your website should enable very quick and easy launch, and at the same time offer secure operations to withdraw virtual money and convert it to fiat currency.
- Administrator panel. This powerful dashboard should assist the administrator in carrying out commercial operations as well as in-process verification, creating liquidity and providing helpful and professional customer service.
Creating a crypto exchange page
- Ensure the right level of security
Digital money is about protection and security. We advise you to follow this rule because it has been estimated that almost half of all cryptocurrency exchange companies were shut down due to hacking. Make sure your site is an absolutely secure base for all transactions, ICOs and withdrawals that you will store. The same should be done about confidential personal data of customers, because these days they require much better protection than in the past.
- Take care of transparency and security
Virtually all currency-based services should comply with the Know-Your-Customer (KYC) policy, which involves checking their ID or other identification to confirm your personality. The main purpose of following such rules is to exclude the possibility of fraud in the exchange network.
- Think about choosing cryptocurrencies
Each exchange site must support as many significant crypto and fiat currencies as possible. In this way, developers provide a wider audience and rapid international expansion. However, the necessary manual integration of any supported currency can be a challenge, which is why it is impossible to start an exchange with many digital currencies. You need to do in-depth research to analyze your target market and see which currencies would be the best choice for your startup. In addition to popular Bitcoin and Ethereum, you should also consider, for example, Litecoin and several others.
- Ensure liquidity
When you start trading, you should artificially model the demand for your services. You can do it in a few ways:
- up the activity by buying and selling crypto using profiles that you created manually;
- connect to the network of other exchanges to get liquidity of all services that are already connected to it.
Organize good customer service
After launching the platform, you should hire at least a few employees who will support your customers. It is extremely important to provide fully comprehensive support services – i.e. support staff should respond quickly and help in required areas.
How is the launch of cryptocurrency exchange from a business perspective?
In the context of servicing the planned crypto exchange, the following three stages need to be formally completed globally:
- Calculation of the budget
To begin with, you should consider how much your entire project will cost. The most costly aspects include the design, configuration and maintenance of an exchange site. Optionally, you can use a ready-made template, adapting it to your needs. It will cost a minimum of several thousand. Of course, a platform tailored to your needs will cost more. Also, don’t forget about SEO and promotion expenses that can reach thousands of dollars. You will also need to buy some cryptocurrency and fiat money so that you can offer them for exchange. As a rule, the minimum initial amount of cash should start at $ 30,000.
- Creating documents
In some countries, the activity of online exchanges is not regulated by law at all, so they can work without documentation and do not break any regulations. However, if you make your business completely legal from the very beginning, you will minimize the future risks associated with registering your business in “not business-friendly” locations. You can either provide services in accordance with a perpetual loan-based agreement with customers or register a private establishment with the physical entity as its boss.
- Launch of the internet platform
The final stage before launching the company will be the technical launch of the internet platform. First of all, you should choose a hosting service – it should be adapted to further scaling, so do not try to save on your future provider. As for the platform itself, you can buy a ready-made template or order a custom solution from specialized programmers. In any case, you need someone to write a basic script for your software. You can also save on this if you browse GitHub or other similar forums where many ready-made scripts with open source code are available
Of course, we could write entire books about opening your own crypto exchange, but let’s treat this guide as an introduction; opening your own platform is a gigantic undertaking, something we’ve already done with CoinCasso Exchange. Feel free to contact us if you have further questions and are interested in starting your own blockchain exchange project!