How to Create Your Own Cryptocurrency Exchange?

Trade has been an integral part of human history, and trade is as old as history itself. The evolution of trading from the barter system to cryptocurrency trading is the most significant journey of mankind. Though the concept of cryptocurrency or digital currency is trending worldwide, knowledge of digital currency remains limited. It is not to be confused with digital transactions that we perform today. 

In recent years, cryptocurrencies, like Bitcoin, Ethereum and Litecoin, have demonstrated its potential by having 14 billion digital currencies in circulation. The popularity of cryptocurrency among investors is not just because of its value, it also possesses high degree transaction security, scalability, trustworthiness, and ease of use.

So, if you are an investor who is interested in starting a Cryptocurrency Exchange Business, this article will help you do that.

What is Cryptocurrency Exchange?

A cryptocurrency exchange is an online marketplace where customers trade their cryptocurrencies for fiat money or other digital currencies. It acts as a brokerage between buyer and seller, and you can deposit money via bank transfer and online transactions. Each exchange can have different payment methods to transfer funds, like bank transfer, credit cards, debit cards, and sometimes even gift cards are allowed. 

In exchange for the service offered, you need to pay a particular amount as a transaction commission. The currency conversion fee is charged if a trader wants to trade for altcoins.

What are the types of cryptocurrency exchange?

There are three major types of cryptocurrency exchanges:

  1. Centralized Cryptocurrency Exchange
  2. Decentralized Cryptocurrency Exchanges
  3. Cryptocurrency Brokerage Platform

Let us see each section in detail.

 

  • Centralized Cryptocurrency Exchange: 

 

A centralized exchange is similar to a traditional stock exchange platform. They act as middlemen throughout the process of trading. It is easy to adapt to this model, and it is considered more reliable than decentralized and distributed network of exchanges. It comes with two major downsides like security issues and commissions. 

As your Bitcoin is at the disposal of a centralized exchange, there is a risk of being stolen if there is any hack. A user is liable to pay commission to the exchange for every successful trade.

 

  • Decentralized Cryptocurrency Exchanges: 

 

Also referred to as Peer-to-Peer exchange, the decentralized exchange eliminates the drawbacks of a centralized exchange concerning security, regulations and overseen by the government and, most importantly, traders can avoid paying commissions. This is the only mode of exchange for anonymous transactions. 

But this mode of exchange is still an undeveloped technology that leads to irregular or no customer support if something goes wrong. Here trade is performed at your own risk. Peer-to-peer models are more popular across scamsters.

 

  • Cryptocurrency Broker: 

 

In a cryptocurrency brokerage, the user’s funds are traded via a network of digital currency dealer networks. Brokering is referred to as an over-the-counter (OTC) exchange.

Over-the-Counter exchange is performed between two parties, without any third-party supervision, as opposed to centralized exchanges.

Some exchanges and brokerages have the account and wallet facility. It depends on their business model.

Place of Exchange Business:

Your choice of business location is one of the key aspects of the digital currency exchange business. In the present scenario, only a few countries allow cryptocurrency trading and creating laws to legalize it. So, it is worth considering the rules & regulations concerning cryptocurrency in the country where you planned to set up.

In general, Mexico is considered as cryptocurrency paradise.

How to launch your cryptocurrency exchange?

There are three different software solutions to build a cryptocurrency platform.

  • Whitelabel crypto trading platform
  • Open-Source Software Solution
  • Customized Software Development

Whitelabel crypto trading platform:

There is a good deal of software development organizations where you can purchase ready-made digital currency exchange software products. Blockchain App Factory is one of the best software solution providers where you can get customized white-label platforms to suit your business requirements.

The white-label solution is easy to launch, customizable to a certain extent, and also reduces the development cost and time. It is the most sought-after solution for launching the crypto exchange platform

Open-Source Software Solution:

In this type, the exchange is launched using the software solution available in the open and free market. It is very easy to launch, but it is not quite reliable, low-security features and customization are not possible.

Customized Software Development

In this type, the software is developed from scratch by the business owner itself. It consumes more time and money in the development stage.

But considering all the above-mentioned solutions, it is more customizable, ease of enhancing security features and no dependency on a third-party service provider. 

What are the key features of the cryptocurrency exchange?

  1. Well-developed User Interface and User Experience.
  2. Secured transaction facility
  3. Ease-to-use and secured wallet
  4. Responsive customer support and trade advice
  5. Maintaining Anonymity of the user and data security
  6. Affordable fees
  7. Location-based service.

Conclusion:

We hope you have gained enough knowledge to take a step further towards starting your cryptocurrency exchange in your location. It is advisable to weigh both pros and cons at each stage of investment towards cryptocurrency. We have a team of cryptocurrency exchange developers who can assist you in white-label solutions for your business venture.

If you need more clarity, you can always reach out to us through chat support.