How to Start and Build a Crypto Exchange Business?

Are you a business looking to tap into the potential of cryptocurrencies globally? It can be the ideal business decision for your profits as more than 112 billion USD is traded in different cryptocurrencies daily. These exchanges can serve global customers with specific cryptocurrencies. With many cryptocurrency exchanges available to international users, it becomes crucial to understand the start and creation of these digital exchanges.

Let us help you go through all about starting and building a crypto exchange business from scratch. We’ll start with a quick definition of the crypto exchange, followed by the dedicated steps to create one for your corporate needs. After the preparation work, we’ve incorporated the quick steps to build a cryptocurrency app. We’ll cover the different cryptocurrency exchange platforms, architecture, APIs, technology stack, and associated costs of building crypto exchange.

What Is a Crypto Exchange?

It is a dedicated digital platform that sells and buys different cryptocurrencies. Further, these exchanges can be used to trade one cryptocurrency for other. It reflects the current market prices of various cryptocurrencies. Let us learn more about the popularity of these exchanges powered by some statistics. 

Crypto Exchanges Are Getting More Popular

Are you learning more about cryptocurrencies recently? If yes, it is due to the increasing popularity of the different crypto exchanges. Let us have a quick look at some of the key statistics:

• The daily cryptocurrency trade volume has risen by a whopping 82 billion USD on average.
• There are more than 10,000 active cryptocurrencies in circulation globally.
• There are around 526 cryptocurrency spot exchanges available to global traders.
• The global market of all digital payments has surpassed 700 billion transactions.
• More than 70 million people use Blockchain wallets globally.

Steps to Start Crypto Exchange Business

The steps required to start a dedicated cryptocurrency exchange business are:

1. Obtain Proper Legal Counsel to Ensure Licensing Requirements Are Met

It starts by understanding the legalities of the cryptocurrency exchange platform. Some regions have specific regulations, while others keep making cryptocurrency an open asset. Further, different cryptocurrency exchange regulators have sure “Know Your Customers” regulations. All you need to do is consult a legal expert knowing all about the licensing details of the cryptocurrency exchanges.

2. Attain Funding for The Venture

The second step is to know the total money involved in creating the crypto exchange business. It must include costs like initial advertising, government registration, initial legal counsel, hosting, technology, etc. All you need to do is ensure that you keep some space for the sudden rise in costs.

3. Find a Cryptocurrency Exchange App Solution Provider

Going for professional cryptocurrency exchange app solution providers is an excellent idea. It helps handle customized cryptocurrency exchanges, commission structures, and one-time license fees. This company takes all about the stock exchanges, backend technology, etc.

4. Connect Your Exchange with Others for Added Liquidity

Liquidity is one of the essential features of any cryptocurrency exchange platform. All you need to do is connect your crypto exchange to other exchanges to improve liquidity. It can be achieved using different APIs.

5. Partnering with A Payment Processor

A dedicated payment processor for your crypto exchange is a crucial step in overall platform development. It is essential to have the lowest transaction rates and lowest fee structures and stay away from the hidden costs. Further, the payment processor of your crypto exchange must be PCI DSS complaint. 

6. Implement Best Security Practices

It is crucial to make a highly secure crypto exchange. These practices include encrypted databases, two-factor authentication, offline cold storage wallets, etc. The system mustn’t store the passwords. Cryptocurrencies are the next target for hacking or cybercrime, so making your cryptocurrency exchange highly secure is essential.

7. Go Live via Beta Testing

Launching the crypto exchange and testing all its capabilities in the beta version is essential. It is important to realize the design results, contract with the processing firm, follow the rules and regulations, etc.

8. Start Marketing & PR Campaigns

Once your crypto exchange platform is tested in its beta version, it is crucial to plan the dedicated marketing activities with planned budgets. All you need to do is select the combination of paid advertising or free online marketing.

9. Offer Customer Support

If you want that your cryptocurrency exchange platform should shine ahead of its competitors, it is crucial to offer high-quality customer support to all users. Cryptocurrencies never stop trading, so offering 24*7 support on your crypto exchange platform is vital.

10. Maintain a Legal Team for Ongoing Compliance

Cryptocurrencies are subject to different regional rules and regulations. Hence, maintaining a legal team for all your cryptocurrency exchange platform compliances is of utmost importance. These compliances are various for different regions; hence, the only solution is to connect with a full-time legal team or outsource the same to a legal firm specializing in cryptocurrencies.

Steps to Build a Cryptocurrency Exchange App

The quick steps to create a cryptocurrency exchange app include:

1. Design

It is essential to have a cryptocurrency exchange with having beautiful and functional design. The two main design stages are wireframes and prototype designing. The wireframe is the base of the future platform design, while the prototype utilizes the user interaction visualization.

2. Client-Side Development

It involves client-side logic of the website pages on previously created design. Some leading technologies used in client-side development include Vue.js, React.js, Angular.js, Javascript, CSS markups, and HTML. 

3. API

It is the backend of the cryptocurrency exchange app and is the base of the application’s internal logic. Some of the dedicated API functions include API used by third-party companies, cryptocurrency deals, newsletters, admin panel’s server-side functioning, user authorization, user authentication, etc. 

4. Blockchain

It presents a secured environment for real-time processing and storing crypto data related to different trades. 

5. Testing

It is essential to distinguish and eliminate bugs within the cryptocurrency exchange logic. It helps improve the app before its launch.

6. Security

Any crypto exchange platform needs to have the top security features. Some of these are:

a) Secure Architecture

It helps secure the information exchange and storage related to crypto information. Further, all the encryption keys are stored at dedicated secured servers.

b) User’s Authentication

It is essential to eliminate the possibility of unauthorized login using the two-factor authentication using a one-time token. Further, the features like IP address tracking, push notifications, etc., can help crypto exchanges introduce security features.

Types of Cryptocurrency Exchange Platforms

Understanding the main types of cryptocurrency exchange platforms is essential before starting and creating one for your business. These are:

1. Centralized Exchanges (CEX)

a) Advantages

It has millions of operations per second. It offers multiple features for professional traders and beginners. It has a simple and user-friendly interface.

b) Disadvantages

It makes a mandate for the users to keep the money in the accounts of the crypto exchange. It has weak protection against hacking. Further, the fees can go as high as 8%.

2. Decentralized Exchanges (DEX)

a) Advantages

It has capped the maximum fees at 0.25%. It requires dedicated registration and verification of new users. It has reduced the probability of losses as user funds are not stored on exchange accounts.

b) Disadvantages

Bank cards or PayPal can revoke the payments. It has issues with waiting until other traders are closing the orders. It lacks the facility of third-party moderation.

3. Peer-To-Peer Exchanges (P2P)

a) Advantages

There is no fee for deposits, withdrawals, and exchanges. It is an ideal crypto exchange for beginners. It offers advanced security features like cryptocurrency blocking, seller ratings, etc.

b) Disadvantages

It has latency issues. There are problems in solving disputes regarding transactions. There are errors in sending money to the wrong users.

4. Instant Exchangers

a) Advantages

It supports large orders. It has one of the highest transaction speeds out of different types of crypto exchanges. It uses one of the highly effective trading engines.

b) Disadvantages

It has issues in offering refunds. Its security level is medium. It has a complicated platform.

Architecture, Technology Stack, and API

After going through the different types of cryptocurrency exchange platforms, it comes down to understanding the architecture, technology stack, and popular APIs required. Let us have a quick look at the same:

1. Crypto Exchange Architecture

It helps get a logical summary and comprehensive look of the platform along with the working of its components. It largely depends on the scalability, functions, and different platform types. Crypto exchange architecture components are databases, APIs, security functions, user interface, user authentication, control panel, multiple wallets generator, trading engine, user login, etc. The different types of crypto exchange architecture include:

• Microservices architecture: All the components are located on separate servers in this architecture type.
• Monolithic architecture is one of the cheapest application architectures created on a single server. 
• Asynchronous architecture: It has separate layers passing their requests without waiting for the responses.
• Synchronous architecture: It requires a response for every sent request and processes every order streamlined. 
• Distributed architecture: It offers every user a logically built environment and divides the services into independently operating separate groups.

2. Technology Stack

The set of technology stacks required to create crypto exchange includes:

• Blockchain: Based on the platform types
• Push notifications: MAP, Amazon SNS, Twilio
• Cloud: Microsoft Azure, Google Cloud Platform, AWS
• iOS platform: IOS Fabric, Laravel, ROR, Node JS, Swift
• Android platform: Laravel, ROR, Node JS, Kotlin, Java
• MEAN stack: Node JS, Angular JS, Express JS, MongoDB
• Website development: PHP- Codeigniter/ Laravel
• LAMP stack: PHP, Mysql DB, Apache, Linux Server
• Databases: Redis, MongoDB, MySQL
• Languages: Laravel, MEAN Stack, JAVA, PHP
• Others: Xcode, C++, PhoneGap, PUMA server, Phantom JS, RSpec

3. Popular API’s to Develop Crypto Exchange Apps

1. Binance API 

a) Pros

It offers different platforms for the different needs of the users. It has additional features like charting tools, order types, and books. It has instant buying fees and multiple services.

b) Cons

The selection of different platforms can be confusing. It is not available in the US. It has issues in the account verification.

2. CoinBase API

a) Pros

It supports different payment capabilities and allows users to make payments through credit cards, banks, etc. It helps quick creation of user profiles. It has two-factor authentication for additional security.

b) Cons

It has high transaction issues. It has customer service issues. It develops account security issues.

3. Kucoin API

a) Pros

It allows automatic trading of different cryptocurrencies on KuCoin. It offers more than 200 coins selection. Setting up an account on KuCoin API is free.

b) Cons

It has a lower trading volume. It experiences API delays on high traffic days. It has lousy server latency.

4. CEX.IO API

a) Pros

It helps gain real-time market data from the CEX.IO platform. It is easy to supply market data to any trading engine. Its dedicated software manages different trades.

b) Cons

It requires strict monitoring. It fails to perform under a weak internet connection. Some users complain of over-optimization.

5. Cryptocompare API

a) Pros

It offers real-time trading and high-quality historical data. It provides volume data and order books through market-leading APIs. It has real-time pricing updates on LiteCoin, Ethereum, and Bitcoin.

b) Cons

It has multiple trading issues.

6. Nomics API

a) Pros

It offers free real-time market data for different cryptocurrencies. It accesses current and historical prices and offers exchange rate data. It is the first choice of many analysts, market makers, and investors.

b) Cons

It doesn’t have internal API endpoints.

7. Coin Market Cap API

a) Pros

It is backed by robust documentation for helping traders. It offers economical pricing plans. It provides flexible, robust, and highly precise market data endpoints.

b) Cons

It has a lengthy payment process.

How Much Does It Cost to Build a Crypto Exchange?

Let us now discuss the costs of building an effective crypto exchange for your business needs. The average price of building a crypto exchange ranges between 130,000USD to 162,000USD. Let us understand the bifurcation of this amount based on the different steps involved in creating a crypto exchange and its associated cost, including:

Stage 1. Discovery Phase & Design

After detailed market research on the desired crypto exchange platform, the first step is to design one based on the essential requirements. It involves offering a visual aspect of the crypto exchange, multiple user interface designs, creating different prototypes, etc. The prototype standing high ahead of the needs and research emerges as the winner in the design.

It requires a lot of homework as the detailed visualization of the crypto exchange can help businesses eliminate any UX-related issues and maintain the user interaction logic. It is one of the inexpensive phases of the crypto exchange development and may cost around 5,000USD on average to any business.

Stage 2. Website Development

In this step, the website development starts based on the finalized design or prototype. The front-end developers start working on the user interface design finalized, while the back-end developers start on the website’s core, securing the website, database integrations, etc. This end-to-end website development results in a customized trading engine that connects the front-end with the backend using the user interface.

The website development costs include the cost of the developers, working hours, types of technology used, and quality testing. It is one of the expensive stages of the crypto exchange development and may cost between 40,000USD to 45,000USD.

Stage 3. API Integration

It is one of the crucial stages in the crypto exchange development as it allows the platform to connect with other resources. It eliminates the human intervention in exchanging data between different online sources and keeping it synchronized. Hence, ensuring the crypto exchange’s seamless functionality and integration with other online resources is essential.

The API integration is one of the expensive stages of the crypto exchange development as it may cost between 50,000USD to 75,000USD to any business. 

Stage 4. Blockchain

Any crypto exchange works on the dedicated blockchain technology. It allows the platform to track payments, orders, other trading activities, etc. It helps generate a feeling of confidence and security as all the details are saved in separate blocks. Creating the blockchain for your crypto exchange may cost around 10,000USD to 12,000USD on average.

Stage 5. Testing

The last but essential stage of crypto exchange development is the testing stage. It is required to fix the different bugs, improve the crypto exchange, and identify the overall weaknesses. It is easy for businesses to improve the beta version of the cryptocurrency exchange platform until it reaches perfection for their customers. The testing of crypto exchange development may cost around 25,000USD on average.

Conclusion

With the projected growth of the global cryptocurrency market set to reach 4.94 billion USD by 2030, any business can start and build a cryptocurrency exchange business. It is easy to understand the cryptocurrency exchange with a quick definition. The steps to create a crypto exchange business allow any company to enter this profitable market.

Not to miss are the detailed steps to make the cryptocurrency exchange app after understanding their different types. The developers need to have an overview of the APIs, technology stack, and architecture of cryptocurrency exchange. You can go through the steps involved in making cryptocurrency exchanges and their associated costs.