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Steps To Consider When Building Your Cryptocurrency Exchange
In 2019, cryptocurrency is a concept that is no longer attributed to geeks. Today, more and more people are using it for everyday use because of the decentralization and anonymity it offers. Hence, cryptocurrency exchanges pose as a potential business opportunity for any budding entrepreneur.
This is a user generated content for MyStory, a YourStory initiative to enable its community to contribute and have their voices heard. The views and writings here reflect that of the author and not of YourStory.
The common man's interest in cryptocurrencies spiked following the incredible bull run of Bitcoin. In 2017, Bitcoin witnessed a fantastic growth rate where the crypto rose from $1000 and peaked at $19,784! This led to an unprecedented increase in the usage of this financial instrument.
Interestingly, this growth was majorly powered by cryptocurrency exchanges. They can simply be understood as online platforms that facilitate the buying and selling of different digital currencies. Their functioning can be compared to that of the forex market as they often offer users with similar trading options. However, unlike conventional exchanges, crypto platforms allow users to organize trade without any geographic or time restrictions.
Today, it is relatively easy to build Cryptocurrency exchange software by approaching a development company. However, it is essential to understand the nuances of this business before proceeding. In this article, we will do just that.
Types of Exchanges
You may have come across terms such as centralized or decentralized exchange, but what do they mean? They simply refer to the different models of cryptocurrency exchange. Let us see how many such models exist and what are their advantages.
- Centralized Exchange (CEX): A trusted intermediary manages this type of platforms. They usually support a variety of cryptocurrencies and focus on faster transaction speeds.
- Decentralized Exchange (DEX): On the contrary, DEX platforms do away with a middleman and instead rely on peer-to-peer interactions. This type of exchanges are very secure and users can employ their independent wallets to execute transactions.
- Hybrid Exchange (HEX): As the name suggests, this is a combination of the above two exchanges. Platforms in this category usually feature a trusted regulator while customers are not required to use the platform's hot wallet.
Features of a Successful Exchange
According to CoinMarketCap, exchanges now boast of daily trading volumes that run into the billions. This goes on to show the phenomenal demand in the market for different cryptocurrencies. But what makes a successful exchange? The standard features shared by the various market leaders have been listed below:
- Simplified Registration: Complicated signup processes tend to discourage new users. Hence, many platforms host a streamlined registration process that integrates social media login options.
- Low Fees: Most platforms try to either eliminate transaction fees or limit them to meagre rates. This encourages users to execute multiple orders at a time.
- Security Protocols: This factor makes or breaks a platform. Hence, multiple steps are taken to protect the users and networks against external threats such as hack attacks. Presence of improved security infrastructure goes a long way in building credibility for an exchange.
Also Read: How to Build a Cryptocurrency Exchange and How Much It Would Cost?
- Multi-currency Support: It is common for an exchange to feature a variety of cryptocurrencies that range from the popular ones to those that are very niche. This helps attract customers from different spectrums and encourages trade.
- Automated Transactions: Cryptocurrency is a very volatile market and demands constant attention of the trader. Some platforms have begun introducing trading bots that can be programmed to place orders based on different parameters automatically. This enables users to enjoy greater mobility while also improving the platform's trading volumes.
- Easy Liquidation: Users prefer exchanges that allow to deposit or withdraw funds in an instant. Also, many businesses feature a variety of payment methods that include net-banking, debit/credit cards, and even cryptocurrency.
Summing Up
As mentioned earlier launching a cryptocurrency exchange is no longer an uphill task. With the presence of several development firms, an entrepreneur can simply outsource the work. Most firms offer white-labelled solutions that can be modified to meet the client's requirements. However, one should take due precaution and do the necessary research or background checks before choosing a development partner.