What Should You Know Before Starting a Crypto Exchange?

Blockchain, cryptocurrency

Do you want to open your very own crypto exchange? It is the ultimate act of activism. Well, it isn’t impossible, but building the exchange from scratch requires a lot of work. Following, we are giving you an idea on how to begin.

Centralized vs. Decentralized

Centralized exchange lets other cryptocurrencies trade for fiat currency. This type of exchange has some control user funds, funding, and limits. Order matching takes place off Blockchain network.

Centralized Exchanges usually have high liquidity, they are easy to use, and feature advanced charting as well as exchange features. These exchanges don’t allow anonymous trade and charge a higher premium.

Decentralized Exchanges are Peer-to-Peer Exchanges. The user can directly send cryptocurrency to each other with a smart contract layer. These trades are transparent because everything takes place on the blockchain network.

This gives a better sense of security. However, Decentralized exchanges have less liquidity and volume. Decentralized exchanges have high volatility with slow order matching.

Regulations

What is your target marketing? Which country will you trade in, consider an addressable market? Mind their rules and regulations. Before you do that, make sure you have an extensive pool of cryptocurrency to assure you can buy and sell assets without any sudden changes.

There are a few ways you can integrate cryptocurrency exchange liquidity position with already-existing exchanges with API calls.

Your Crypto Currency

Consider a cryptocurrency, and search its market. Decide whether you want to serve only one type of currency or more than one. See the market advantages of that particular currency. Check its potential and choose something that will help make you popular.

Partner with a Bank or not

You are doing all this in the brainstorming phase. Consider whether you will convert cryptocurrency to fiat or not. If yes, then get a payment processing partner. You will need to pair up with a bank. But before you do, check your trading laws and transaction window.

A processing payment like bank and payment gateway API lets the user add or withdraw funds as they like.

White Label

The possibilities are endless. You can use a white-labeled software to power the exchange. But it means you are outsourcing different parts of your platform. White label software is ideal for users with less upfront capital.

It helps when building an exchange including liquidity, and the trading engine is not an option. Yes, you can apply your brand name to the solution, but be careful what you chose. There are many scams in the market

Components

You need the following components to build a Crypto Exchange:

Trading Engine

Trade Engine is your foundation; it makes up the core functions of exchange including:

  • Execution of Transactions
  • Calculates Balance
  • Make Calls to Access Order Boo
  • Match Buy/Sell Transactions on Exchange

User Interface

UI is the bridge between your users and the exchange. It’s an important component of ICO. Design your UI to accommodate

  • User Login
  • Transactions
  • View Orders, Balance, Charts, Statistics, and other data

Wallet

Wallets (basically vault) are where you will store tokens. Security should be your main concern because everyone will try to hack into your wallet. You can choose between building one from scratch or outsourcing it.

Admin Panel

It gives you control of the exchange. You can configure variables and change operations as needed. Just consider the following

  • Trading Fee
  • Cryptocurrency Listing
  • Ability to add new options
  • Manual control of accounts for support issues and tickets

 

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