Blockchain technology is rapidly rising to prominence as one of the most notable economic and technological innovations to occur since the advent of the Internet. In essence, blockchains are just digital databases. Instead of being saved on a central server that all users may access, blockchain records are stored on users’ computers worldwide. Blockchain is, therefore, a distributed database with peer-to-peer exchanges.
Without a doubt, the demand for and enthusiasm for cryptocurrencies will continue to grow as their global use and trading volume increase on a daily basis. Given this, now is an excellent moment to launch your own crypto exchange, which is considerably superior to crypto mining or other business ideas.
How do Crypto Exchanges work?
A cryptocurrency exchange is a website or platform that enables users to buy, sell, and trade cryptocurrencies and other digital assets without the involvement of the government or any banks. The place where you can store your digital currencies is referred to as a cryptocurrency wallet. Access to the digital wallet required for the transaction can be gained only after the private key has been entered.
To put it another way, a cryptocurrency exchange is a place where all cryptocurrencies are made available for trade. Exchanges for cryptocurrencies are generally accepted as a legitimate way to trade Bitcoin and other cryptocurrencies and list them for sale.
The majority of platforms today make it possible for investors to purchase their chosen cryptocurrency using fiat currency. These investors could also trade the cryptocurrencies they already possess for another digital asset if they so choose. For instance, one can trade Bitcoin for Ether if they so choose. In certain circumstances, trading cryptocurrencies for traditional currencies is possible using fiat money. A significant number of traders and investors keep stocks in their accounts in preparation for future transactions. Customers can obtain their preferred combination of services from any given cryptocurrency exchange.
Exchanges for cryptocurrencies are open around the clock, every day of the week, whereas traditional markets are only allowed to conduct business during certain hours of the day. Before being allowed to trade on an exchange, users are required to first fund their exchange account or wallet.
Because the average exchange trade volume has increased by a staggering $82 billion, you definitely don’t want to pass up the opportunity to participate in this business venture.
How to Create Your Own Cryptocurrency Exchange in 10 Steps
Since more than $112 billion is traded in different cryptocurrencies every day, it may be the best way to make money from the global potential of cryptocurrencies.
Deciding whether you wish to build a platform for centralized or decentralized exchanges is important. Both have pros and cons, including limiting fiat currency, trading pairs, and smart contracts.
Centralized exchanges are the most common type of crypto trading platform. These online resources have a central administrator or rely on a third-party entity to facilitate transactions. Users have confidence in this third party, which is in charge of security, functionality, and assisting users in locating trade partners. On the other hand, trading on decentralized exchanges entails complete accountability for your cryptocurrency.
These services can provide certain digital assets to global clients. With so many existing exchanges available to worldwide customers, it’s critical to understand how these crypto platforms work and how to create your own.
1. Obtain Legal Counsel to Ensure Licensing Requirements
Before you start planning your crypto exchange platform, you should seek legal counsel to learn about cryptocurrency regulations around the world.
Governments and authorities don’t completely understand the bitcoin sector. Therefore, many exchanges operate without control. In other countries, operators must be licensed money transmitters and obey restrictions.
Because crypto exchanges operate in financial markets, organizations must meet KYC standards. Regulations vary by country, so seek legal guidance.
2. Funding for The Venture
Keep in mind that there are certain costs associated with such a venture. These expenditures should cover software, storage, legal counsel, government licensing, and promotion.
The website’s cash flow should be stable. Most businesses fail to plan ahead, resulting in small expenditures that help with development but leave the company without operating funds until it becomes profitable.
Startups are often granted licenses by dishonest cryptocurrency exchange providers that charge recurring fees and fail to disclose the legal responsibilities and costs of building and managing an exchange website.
3. Choose a Cryptocurrency Exchange App Solution Provider
Providers should guarantee turnkey cryptocurrency exchange platforms, with users only having to pay one fee with no hidden costs. There should be no recurring fees, clients should be able to host themselves, and they should be able to view the entire code. This is important for auditing because certain regulators seek source code inspection.
The use of white-label exchange software that comes with the source code allows for the modification of a tailor-made platform while significantly cutting down on marketing and overall cost.
4. Creating a Cryptocurrency Exchange App
Most of the application development process should be separated into elements handled individually. Various parts are often created collaboratively by multiple teams. Such instances can include an API, a web interface, etc. The complexity of the application determines the quantity and variety of them.
It is critical for the platform to be both appealing and useful. Wireframes and prototype design are the two key design stages. The wireframe serves as the foundation for the future platform design, while the prototype is used for user interaction visualization.
The application’s web section contains the client-side logic for all website pages and is based on the previously constructed design. Front-end developers often create design work using various programming languages as well as frameworks.
It serves as the bitcoin trading app’s backend and the foundation for its internal functionality. Third-party companies use dedicated API services for things like cryptocurrency deals, newsletters, server-side admin panel functionality, user authorization, user authentication, and so on.
This part is responsible for ensuring the integrity of the transaction history data by processing and storing it in an unalterable manner.
This is a necessary component of modern application development. It is critical because it enables the identification and elimination of the majority of defects in the logic and the UI before launching the program.
Because the program stores sensitive information about its users, it must be appropriately protected to avoid data breaches and hacker attempts. We recommend safeguarding user information in the following ways:
Consider building a safe method of storing and transferring private information while designing the application’s back end.
- The exchange’s core components are distributed across many servers and communicate over dedicated channels.
- The hardware security keys are likewise kept on dedicated, secure servers.
4.6.2. User’s Authentication
It is advisable to implement two-factor authentication by producing a one-time token to prevent unauthorized logins to the user account. Additionally, users receive notifications when someone logs into their account.
5. Beta Testing
You’ve developed your own centralized cryptocurrency trading platform. You have agreed to a partnership with a firm that processes payments. You have taken many precautions to ensure that your business transaction is in accordance with all of the laws and policies in place.
As soon as you believe that cybercriminals will not target your company, it is time to build your own bitcoin exchange and put its whole suite of functions through beta testing.
6. Starting a Cryptocurrency Exchange Marketing
After the launch of your cryptocurrency exchange, maintaining connections with crypto news sites is an absolute must. It is essential to correctly arrange your marketing approach and its associated costs to ensure that your initial fundraising effort does not force you into a frantic search for further funding.
Most of the time, exchanges do not have a budget for marketing and instead rely on free marketing through social media to reach the people they are trying to reach. Use the correct SEO for crypto exchanges, as this will increase your rankings on search engines.
7. Connect Your Exchange with Other Exchanges for Liquidity Increasing
Each and every successful platform is built on a foundation of liquidity. If your new company does not yet have any orders or trade activity, prospective customers will likely view it as suspicious. Connect your platform to more liquidity providers to avoid these issues and the requirement to simulate activity using dummy accounts inside the new exchange. This will also help boost the platform’s overall liquidity.
Keep in mind that the larger the network of exchanges, the less of a challenge the lack of liquidity will provide for your new exchange.
8. Partnering with A Payment Processor
There will be significant variations between payment processors, including fee structures. You need to have the lowest transaction rate that accurately represents the trading volume of your customers if you want to compete with other exchanges. In addition, some processors contain hidden expenses in their contracts, so it is imperative that you fully comprehend what you agree to before signing anything.
Settlement time and compliance with PCI DSS, a set of best practices for protecting cyber security, are two further aspects that differentiate processors from one another. It is essential to keep in mind that compliance is not required by federal law in the United States; nevertheless, numerous state laws do make it a requirement. Payment processors should follow PCI standards to protect your new business from online threats.
9. Customer Support
Although offering good customer service is the last step in creating a successful cryptocurrency exchange, your ability to succeed in this area will determine the long-term success of your organization. Those who work directly with customers are responsible for paying close attention to what they need and responding quickly to any complaints or technical issues.
Since the cryptocurrency market is open around the clock, it’s important to have a ticketing system staffed by knowledgeable, helpful people who can assist customers whenever it’s most convenient for them.
10. Maintain a Legal Team
It’s necessary to follow all current and prospective rules and regulations. This applies to your exchange’s home country and any international jurisdictions where members or traders reside or trade.
Because cryptocurrency rules are constantly being revised globally, it’s important to engage in-house legal staff or outsource to well-known law firms to keep your business on the right side of the law in all locations where you do business.
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How Much Does It Cost to Build a Cryptocurrency Exchange?
Let us look at the cost to create white label cryptocurrency exchange platform. A bitcoin exchange website costs between $130,000 and $160,000 to build. There are various phases to creating the entire crypto exchange architecture, each with its own costs.
Discovery Phase & Design
After extensive market research on the desired centralized cryptocurrency exchange, the first step is to create one based on the current needs. It entails providing a visual component of the crypto platform, diverse user interface designs, developing various prototypes, and so on. The prototype that best meets the needs of consumers emerges as the winner.
Extensive research is necessary since a precise representation of cryptocurrency exchanges can assist firms in eliminating any unrelated concerns while maintaining user interaction. It is one of the cheaper parts of the process, costing an average of $5,000.
Set Up a Crypto Exchange Website & App Development
Website development begins in this phase, depending on the completed design or prototype. The front-end crypto exchange developers begin working on the finished user interface design, while the back-end developers begin working on the website’s core, protecting the website, database connectors, and so on.
This end-to-end website development will lead to a crypto exchange platform that links the front end to the back end through the user interface.
Website development costs include the cost of developers, their working hours, the technology used, and quality testing. It is one of the most expensive stages of development, with costs ranging from $40,000 to $45,000.
API integration is critical in developing a crypto exchange since it allows the platform to interact with other resources. It reduces the need for humans to exchange data across multiple web sources and keep them synced. As a result, ensuring the crypto exchange’s flawless functionality and interaction with other online resources is essential.
API integration is one of the most expensive stages of crypto exchange development, costing any organization between $50,000 and $75,000.
All cryptocurrency exchanges operate on blockchain technology. It enables the platform to track payments, orders, and other trading operations, among other things.
Because all of the facts are maintained in discrete blocks, it helps to build a sense of confidence and security. The cost of developing the blockchain for your cryptocurrency exchange will range between $10,000 and $12,000.
The testing step is the final but most important stage of the site’s construction. Solving various problems, enhancing the crypto exchange, and uncovering general weaknesses are necessary.
Businesses may easily tweak the beta version of the platform until it is suitable for their clients. The typical cost of testing crypto exchange development is roughly $25,000.
With the global cryptocurrency industry estimated to rise to $4.94 billion by 2030, any business should be able to build a cryptocurrency exchange. With simple research, it is easy to grasp crypto trading. The methods for starting a cryptocurrency exchange service enable any organization to access the cryptocurrency market.
With ever-evolving software, companies can build cutting-edge trading engine that is both user-friendly and economical.
If you wish to create a cryptocurrency exchange, you should know that it will take significant time and money. While you can pay a crypto exchange development team to help you create the platform for your company, this option will require a larger initial investment.
You have the option of creating centralized or decentralized crypto exchanges. Like any cryptocurrency exchange platform, the former is housed on a central server, while the latter operates directly on a blockchain.
You may apply for a license to run a bitcoin exchange business in any state, but each state has its own regulations. To provide cross-state transactions, you must get a license in each state.
Users should be able to purchase and sell cryptocurrencies to other users on any lucrative cryptocurrency exchange platform. Purchases on the trading platform should be completed quickly and without mistakes. The system should provide numerous options for creating orders.
You may legally purchase cryptocurrency on controlled and decentralized exchange platforms and brokerage sites. You can trade crypto in any nation that allows it as long as you disclose your revenue.