The rise of cryptocurrency, more than just digital currency, has significantly impacted online business owners. Even though many laypeople believe it to be a bubble, experts in the field frequently disagree based on evidence of its growth. A 35-member group, as reported by Forbes, predicts that Bitcoin will begin the year 2023 at approximately $76,000.
Setting up a cryptocurrency exchange platform may seem like a far-fetched concept initially, but it’s quite straightforward and achievable by anyone in the technology industry. Six simple steps are required for crypto exchange development that has been tested and worked for our clients. You will surely add your magic ingredients to transform your business idea into a great cryptocurrency exchange platform.
Step To Develop A Crypto Exchange Platform For Your Business
Table of Contents
Define your target audience
Consider the scope of your TA – your country and its laws may limit you, but if you intend to globalize your business from the outset, the situation is entirely different. In the latter case, you must obtain all international licenses and permissions based on the locations where you intend to present your exchange business. In either case, you will need the assistance of a lawyer with experience in international exchange laws.
Develop a relationship with a reputable bank
To use fiat currency, you must inevitably interact with a bank or payment processor. Therefore, selecting a reputable bank with a sufficient number of online services, partner-friendly terms, and roughly actual exchange rates is crucial. It is preferable to establish connections in nations where cryptocurrency is a common form of payment, such as the United States or Scandinavia.
Obtain funding for the endeavor
Before beginning your project, you should estimate the associated costs. A minimum of $135,000 will be required to develop and launch a cryptocurrency exchange. This includes the cost of technology, hosting, some initial legal counsel, registration with the government, and initial advertising. Although not all funds are required upfront, the venture must have access to sufficient funds to allow for a proper runway. One of the most significant errors startups make is failing to plan for the future, securing small initial raises that may cover development costs but leaving the venture without the crucial operational funds required until it becomes profitable. Startups also frequently make the error of acquiring licenses from shady crypto exchange providers who charge ongoing fees and fail to mention the legal obligations and costs associated with establishing and maintaining an exchange.
Find a provider of technological solutions
The best crypto exchange development team offers turnkey custom cryptocurrency exchanges for a one-time license fee with no ongoing royalties or commissions. This means there are no ongoing fees, clients can host the business themselves, and clients receive the complete source code, which is essential for auditing as some regulators request to inspect the source code.
Why use source code with a white label? White label exchange software with complete source code permits all the customization of a custom-built exchange while significantly reducing time to market and overall cost.
Connect your exchange to others to increase liquidity
Liquidity is the foundation of any successful exchange. Potential customers will view your new business skeptically if you need an order book and active trading. We can connect your trade to a network of existing exchanges, thereby increasing liquidity, to circumvent these issues without simulating activity via dummy accounts within the new business. Remember that the larger the sales network, the fewer liquidity issues your new exchange will encounter.
Collaboration with a payment processor
Not all payment processors are equal. Among other things, fee structures will vary widely between businesses. You will need the lowest transaction rate to be competitive with other exchanges. In addition, some processors include hidden fees in their contracts; therefore, you should read the agreement carefully before signing. Further distinctions between processors are settlement time and compliance with PCI DSS, a set of cyber security best practices. Federal law does not require submission in the United States, but many state laws do. Ensure your payment processor is PCI-compliant to protect your new business from cyber threats. This is another illustration of the significance of comprehending the complexities of industry regulation.
Implement optimal security measures
Utilizing offline cold storage wallets, two-factor authentication, and encrypted databases, exchanges built with Best Technology are among the most secure in the world. Additionally, Best Technology does not store passwords; only hashes are stored. We have written extensively about the notorious data breaches in the industry, including those at Mt. Gox and Bithumb. The conclusion? Cybercrime and hacking are increasingly targeting cryptocurrencies, leaving exchanges scrambling to differentiate themselves based on security.
Go live via beta testing
You’ve built your exchange. You have established a contract with a payment processing company. And you have taken great care to ensure that your business adheres to all regulations. You have safeguarded your enterprise against Cybercrime. Now is the time to launch your exchange and test all its beta features.
Commence marketing and PR efforts
Once your exchange has launched, it is time to connect with crypto news outlets, such as Coindesk. It is essential to adequately plan your marketing activities and associated costs to ensure your initial funding doesn’t leave you scrambling for additional resources. Only when a critical mass of traders is reached will exchanges frequently allocate a budget for marketing, relying instead on free social media marketing.
Carefully provide customer service
Customer service is the final step in creating a successful cryptocurrency exchange, but your proficiency in this area will determine your long-term success. Those who interact with consumers must be attentive and satisfactorily resolve customer complaints and technical issues. Plan on implementing a ticketing system such as ZenDesk and staffing it with knowledgeable and helpful representatives available 24 hours a day, seven days a week, since cryptocurrency trading never ceases.
Maintain a legal department to ensure ongoing compliance
We cannot emphasize the importance of maintaining legal compliance and adhering to all existing and proposed laws and regulations, not only in the jurisdiction where your exchange is headquartered but also in all foreign jurisdictions where your exchange members or traders will reside or conduct trading. It is crucial to employ a full-time, in-house legal compliance team or outsource to reputable law firms to maintain the legality of your exchange in all geographies in which you conduct business.
Principal Types of Cryptocurrency Exchanges Platforms
There are numerous crypto exchange platforms, and each has unique characteristics, particularly when discussing the development of DeFi applications. Suppose we dissect the different types of crypto exchange platforms. In that case, we will understand what each presents in terms of growth and how they can be utilized when building a cryptocurrency exchange website for a business.
CEXs are centralized exchanges
Centralized exchanges (CEX) are electronic platforms that require users to deposit their digital assets to trade them. The operator provides a platform for users to buy, sell, and store cryptocurrencies and also earns transaction fees.
DEXs are decentralized exchanges
Decentralized exchanges (DEX) are a relatively new type of exchange that employs blockchain technology to facilitate cryptocurrency trading. They are decentralized because no third party is required to hold the cryptocurrency, and no one can control your funds. However, they are not linked to a specific server or organization. This is helpful if you attempt to create a Bitcoin exchange or an exchange for other popular cryptocurrencies.
Peer-To-Peer Exchanges (P2P)
Peer-to-Peer Exchanges (P2P) enable direct connections between buyers and sellers via an online platform. The sellers set their prices for their goods and services, and the buyers pay them directly using their preferred payment method.
Hybrid cryptocurrency exchanges
Hybrid cryptocurrency exchanges combine centralized and decentralized exchange characteristics. These platforms typically have a central authority that controls certain aspects of the business (such as security) but also gives users some control over their assets when utilizing the platform service.
Developing a cryptocurrency exchange platform is a difficult task requiring significant effort, time, and resources. You must conduct extensive market and user research, define the necessary features, develop effective UI/UX design solutions, choose an appropriate technology stack, and execute an effective marketing campaign.
Suppose you are looking for a Crypto wallet development company and cryptocurrency exchange developers. In that case, you should select a group with in-depth knowledge of developing specialized online portals.