How to Build a Cryptocurrency Exchange Business?

The cryptocurrency market is absolutely on the rise and increased by almost 900% during the period from March 2020 to February 2021. The ever-growing  number of cryptocurrency exchange platforms has led to market overheating, lifting barriers to entry for new companies. So, how to launch a crypto exchange business and meet competition? Here’s how to set up a crypto exchange business efficiently.

Crypto exchange

What Is a Cryptocurrency Exchange?

A cryptocurrency exchange or digital currency exchange (DCE) allows customers to sell and buy cryptocurrencies such as bitcoins, and others. They are traded by exchanging fiat currencies, electronic monetary units, and other digital assets.

What makes a cryptocurrency exchange platform attractive for customers is its anonymity when buying and selling cryptocurrency. Moreover, advanced cryptography ensures the security of transactions.

Based on the presence of middlemen when performing transactions, there are three different types of exchanges, including:

  • a centralized exchange that requires a middleman to execute buying/selling transactions;
  • a decentralized exchange with no middleman in the chain of transactions;
  • a hybrid exchange which is a combination of both types mentioned above.

Thus, you need to know how each type of cryptocurrency exchange works and choose the exchange that you want to set up.

The Architecture of a Cryptocurrency Exchange Software

Here are the types of a crypto exchange architecture and the key components of every platform.

Cryptocurrency Exchange Architecture Types

The process of connecting buyers and sellers is executed by using different architectures that include the types below:

  • A monolith architecture that houses all the components on the same server, which might be less suitable for scaling users.
  • A modular architecture that usually keeps modules for each function kept on different servers.
  • A distributed architecture that has independent modules of various submodules and allows storing the database on multiple servers.

Basic Components

Trade Engine

A trading engine is the core component of a cryptocurrency exchange platform that serves as a connection between cryptocurrency buyers and sellers, helps access the order book to match buying and selling orders, and executes exchange transactions and calculations. So, the main requirements for a trade engine are speed and performance capabilities. Most cryptocurrency traders apply to limit and market orders not to lose performance quality, ensuring faster transaction processing.

User Interface

The front-end of your crypto trading software must be user-friendly to ensure excellent user experience and customer loyalty to your product. With the growing number of smartphone users, it’s enough to start with a mobile-friendly website but as your business develops, you must consider investing in iOS and Android app development. Here are some features that can boost user experience:

  • Easy registration process
  • Multi-cryptocurrencies and fiat currencies deposition a
  • Withdrawal functions
  • Reviewing the history of transactions
  • 24/7 customer support

Wallets Module

When it comes to wallets, this module comprises cryptocurrency wallets and fiat wallets. They allow you to integrate deposit, withdrawal, and trading functions. As far as fiat currency is concerned, you can implement it by using direct bank transfers or automatic transactions via Visa/Mastercard. According to the first way, you’ll receive money sent by platform users directly to your bank transfer but you’ll have to check it manually. As far as an automatic mode is concerned, such transactions are executed on the side of payment gateways that often don’t support cryptocurrency.

Admin Console

An administration system is an essential control panel for a cryptocurrency exchange owner. That’s why its functionality must have the tools below:

  • User management to verify the identity and KYC (Know Your Customer) documents;
  • The transactions module to monitor the cryptocurrency exchange process;
  • Wallets to manage cryptocurrencies;
  • The roles module to delegate the rights to control the platform unless you start a business on your own;
  • The financial section to manage your business earnings.

Where Can You Get Your Cryptocurrency Exchange Software?

Purchase and Customize a White-Label Solution

If you want your cryptocurrency exchange platform to be introduced to the market within the shortest possible time, and you have a limited budget at your disposal, you may leverage a white-label solution. By purchasing ready-made cryptocurrency exchange software, you receive a full infrastructure with all functionality features required, including technical and security modules. It might be a perfect model for those who don’t have the technical expertise and aren’t willing or have no chance to invest in building a cryptocurrency exchange platform from scratch. Yet, you can bring your vision of an exchange platform by customizing a white-label solution so that you can target your market more efficiently.

Compared to developing a cryptocurrency exchange platform yourself, a white-label solution brings several benefits, and the main ones may include the following:

  • No technical expertise is required.
  • All the functionality to build a platform is offered by the provider.
  • The software deployment and release to the market is faster.
  • It is already tested and bug-free.

Still, with the growing cryptocurrency market that is projected to reach USD 1,758.0 million by 2027, it’s vital to create a unique cryptocurrency exchange platform to stand out on the global market. Finally, there’s another option to open a crypto exchange business and build the platform from scratch.

Find a Reliable Software Development Provider to Build from Scratch

Building a cryptocurrency exchange platform requires skillful technical expertise and extensive resources, so it might be too complicated to do on your own. To create a cryptocurrency trading platform that can give you a competitive advantage and help you compete with those already existing on the market, you’d better turn to an outsourcing software development company.

Working with an outsourcing partner, you can get the result exactly how it was considered even if you aren’t a technical geek. Nevertheless, you need to understand that developing a platform from scratch means putting in a lot of effort, time, and financial resources if compared with the above-mentioned option.

Below are several advantages of hiring an outsourcing development team:

  • Access to a rich pool of experienced specialists to staff a team, including software engineers, data analysts, UX/UI designers, etc;
  • A custom cryptocurrency trading platform based on your specific requirements and needs;
  • Eliminating security risks when building and maintain the platform;
  • Getting full control over your solution compared to a white-label partnership.

It’s worth mentioning that developing a bitcoin or other cryptocurrency exchange platform from scratch needs more financial resources from the start, but it will pay back if you need to enter a region with high competition in the cryptocurrency trading market. For example, the Nigerian market where cryptocurrency use is on the rise with 33% of Nigerians either using or owning cryptocurrency.

How Much Does It Cost to Create Your Own Cryptocurrency Platform?

The final cost  of starting a cryptocurrency exchange business varies based on different factors. It will depend on your project needs and the option you choose to build the trading platform. To finalize the budget, you must consider non-technical costs to open a crypto exchange company and the finances you need to cover the development of cryptocurrency exchange software.

Essential Factors that Determine the Cryptocurrency Exchange Setup Cost

When you plan to do a cryptocurrency exchange business, you must finalize the general budget to launch your company, so be sure you take into account the following factors:

  • It’s essential to define the exact time you need your platform to be built because the cost will grow with the shorter duration.
  • Calculate the funds to start a cryptocurrency business, for example, expenses on legal compliance and licenses, market research, etc.
  • Make provisions in the budget estimates for running the cryptocurrency platform, unless you’re going to perform maintenance on your own.
  • It is not implausible that you might need finances for future plans for your business like managing errors and bugs or scaling your project.
  • To compete with other crypto exchanging platforms, you should work with a trusted and reliable payment processing service that will also impact the overall cost.
  • To improve the liquidity of your cryptocurrency exchange, you need to partner with large exchanges, so include these expenses in the final budget.

What’s the Cost to Build Cryptocurrency Exchange Software?

The cost of cryptocurrency exchange development is based on the option you choose, be it a white-label solution or building from scratch. Still, it also depends on technical requirements for your future platform. Below you’ll find the essential things that shape the final cost to build a crypto exchange platform from scratch:

  • Time expected to introduce the exchange platform on the market
  • Server maintenance
  • The volume of cryptocurrency you want to integrate
  • Type of cryptocurrency exchange
  • Platform functionality you’re going to integrate
  • High-security mechanism

Bottom Line

To start your own crypto exchange business, you have two different options. The first one is building your platform from scratch, which is more time- and money-consuming, but providing a unique platform based on your needs. The second option is to purchase and customize a white-label solution if the time to market but not uniqueness is essential for you. Whatever road you would go, you must make an informed decision based on your target market, budget available, resources, and other important factors.