Cryptocurrency and blockchain are few trending keywords in recent times, and we have discussed about them in detail in our previous blogs. With the success of Bitcoin, several cryptocurrencies have emerged and are still emerging. Currently, There are 1597 coins are totally existing as of now in the market and this has led to the birth of cryptocurrency exchange trading platform.
Types Of Cryptocurrency Exchanges
Basically, there are two types of cryptocurrency exchanges. One is ‘Centralized exchange,’ and the other is ‘Decentralised exchange.’
A decentralized exchange is the one where the trading happens between the buyer and seller directly within the exchange. It does not rely on any third party services or APIs to execute the trading. The main drawback of having this type of exchange is that it does not have an easy to use interface and it lacks advanced features.
A centralized exchange is owned by a third party that executes the trading. In this exchange, the third party agency/company levies ‘Transaction Fee’ through which they obtain revenue. The main advantage of having a centralized exchange is that is, and it supports advanced features. Also, lot many users have started using crypto exchange platform with the growth of cryptocurrencies. So, owning a crypto exchange will be a lucrative option for an organization to foray into crypto business. For example, a small commission of 0.2% to 0.3% for a transaction would yield a considerable revenue for the organization. According to CoinMarketcap, a crypto exchange platform is having daily earnings of $28,000 to $4,20,000 only through commissions.
Checklist For owning Crypto Exchange platform
- Region of incorporation
- Selection of Fiat/Cryptocurrencies
- Features in the exchange platform
- Security and protection
Region Of Incorporation
Since the cryptocurrencies are under scrutiny in various countries, selection of country for registering the company is very crucial. It is wise to choose the countries which officially allows bitcoin as a mode of payment. Some of the recommended countries are Estonia, Belarus, Iceland, France, Venezuela, and the US.
Selection Of Fiat/Cryptocurrencies
Having a handful of crypto/fiat currencies listed in the exchange will be good. The more cryptocurrencies listed in the exchange will attract more audience. An interesting point to be noted is that the cost of maintaining 3 cryptocurrencies is as same as to that of 50 cryptocurrencies. It would be ideal to have the well-performing cryptocurrencies like Bitcoin, Ethereum, Ripple, Litecoin, Bytecoin, Dogecoin, etc. Another best option would be to have an own coin in the exchange platform and leveraging users to use the coin by offering discounts.
Features In The Exchange Platform
The reason for having a centralized exchange is that it supports advanced features. Some of the expected features are,
- Flexibility for customization
- Easy management
- Low delay time
Every platform should contain several modules for executing a transaction between the front end and backend. Having APIs to execute each activity will provide better scalability. In this way, it would be easy to build web applications, mobile apps, and desktop apps and so on.
Security And Protection
Security and protection plays a significant role in determining the success of the exchange platform. Hopefully, security can be ensured in adopting the following tools,
- Using Two-Factor authentication
- Using secure and protected libraries and frameworks
- Adopting the KYC Module to store documents such as passport, driver license, etc
- Admin Module – Having a separate module for admin helps in controlling the exchange efficiently. A cold wallet would he highly recommended so that the cryptocurrencies in the exchange would be safe. Feature for admin to approve/reject the transaction based on the volume of transactions should be in place.
Apart from these, backups should be taken at regular intervals for user log files, trading calculation files, etc
Cost For Owning An Exchange
Developing a crypto exchange platform will be a complex project, and the timeframe would vary from 2 to 5 months based on the experience of the team. The team should comprise of a Project Manager, QA Engineer, Designer, UI developer and 2 to 3 developers. The cost would vary based on the region of development/incorporation of the company. In Eastern Europe, it would cost approximately $12,000 to develop exchange and the same would cost around $3,20,000 in US or UK.
All these above factors should be taken into consideration before owning a crypto exchange. There are readily made crypto exchange products existing in the market which are available in Enterprise model and SAAS model. For the organization, which wants to own a crypto exchange with a minimum price then the ideal option would be a SAAS model. If an organization wants to own the complete exchange where capital would not be an issue, then they can opt for Enterprise model.
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