Today, millions of users mine and trade cryptocurrencies for both profit and pleasure. Despite forecasts from sceptics that cryptocurrencies will fail, consumers and financial institutions alike continue to embrace virtual currency. The situation of Bitcoin and other cryptocurrencies has not appeared to change much, not even in the face of EU threats to prohibit them.
The cryptocurrency market is booming in 2021, providing opportunities for new businesses and trading operations to take root in this emerging industry.
High-quality cryptocurrency exchanges like Kraken, Gemini, and Binance are required because banks and investment organizations are now unable to sell cryptocurrency. By developing a cryptocurrency exchange platform, you enable trade and generate revenue by charging a fee for the use of your platform.
The competition in this market may be quite intense, therefore developing a distinctive cryptocurrency website or app is crucial. Additionally, your offering needs to be exceptional and dependable in order to rival other services. The key components of a successful start are real-time data, user-friendly design, and a high level of security with biometric authentication.
How do platforms for crypto-exchanges operate?
A Cryptocurrency Exchange Development platform is a marketplace where users can swap digital currencies like Bitcoin or Ether. Platforms are not participants in the cryptocurrency market; rather, they enable the buying, selling, and/or conversion of digital coins into fiat currencies (such as USD, EUR, GBP, etc.) and vice versa.
Cryptocurrency exchanges vary widely. While some exchanges merely allow users to trade, others make available open and transparent trading data within the exchange via their order book. In the latter, consumers can establish a certain pricing for their orders, among other more sophisticated functions. Make a decision regarding the amount of data you are willing to supply before building a cryptocurrency exchange site.
Next, decide what degree of platform scalability you require. As there are three ways to set up data connection in a crypto exchange platform, you have three options:
Asynchronous – Message broker solutions like Kafka serve as a mediator in this case, allowing requests and subsequent responses to move independently between distinct tiers. Every key function in a crypto exchange platform can have a separate service thanks to asynchronous inter-service communication. This guarantees platform stability and allows for the processing of more data. Platforms that allow for more trade volume have superior scalability.
Distributed – This type of exchange is based on groups of services that divide and handle individual consumer requests. Your cryptocurrency platform can process a significant volume of data if you utilise this kind of architecture without sacrificing stability. Additionally, it has endless expansion potential due to its distributed style of platform architecture and utilisation of cloud technologies.
Types of cryptocurrency exchanges
The type of exchange you’re going to offer is the next step in developing a crypto exchange. This will assist define the platform’s main characteristics and offer you a clearer concept of the finished result. Four basic categories of cryptocurrency exchanges exist:
Centralised
A centralised operator is in charge of updates, security, and functionality. This kind of exchange typically oversees order books, which keep track of all transactions and hold currency. This is one drawback of centralised exchanges because money might be easily lost in the event of a hack. If you do decide to employ this form of exchange, security is of the biggest significance; you should start using extensive security assessments right after creating a crypto exchange MVP.
Decentralized
Direct transfers of money between users’ wallets; decentralised. The platform is less vulnerable to hacks because it doesn’t store cryptocurrencies. Decentralized exchanges do not have a monitoring third party, therefore users are solely accountable for mistakes.
Peer-to-peer (P2P)
P2P exchanges allow users to trade cryptocurrencies directly or convert their coins to fiat money. Traders can submit their offers, and other participants can reply and haggle over the terms, much like on a bulletin board. The world still recalls how Binance lost $40 million in a 2019 phishing attack, so if you established a P2P crypto exchange, security should be your top priority.
Instant
Instant cryptocurrency exchanges are available on these user-friendly exchanges. Trades are carried out instantly because instant exchanges pool offers and liquidity from other exchanges, just like CoinSwitch, ChangeNow, and other exchanges of this kind. If you choose to create an immediate cryptocurrency exchange, keep in mind that it must be prepared for days with a lot of traffic.
In addition to the four primary types of cryptocurrency exchanges described above, hybrid platforms like Mt. Gox, BitFloor, and Poloniex exist. In these, the anonymity and security of decentralised exchanges are combined with the usability and liquidity of centralised platforms.
Users of hybrid exchanges don’t have to hand over any of their money to outside parties and retain full control over it. Users’ wallets provide access to digital goods intended for commerce, and tokens are deposited into trustworthy smart contracts. Hybrid cryptocurrency exchanges are viewed by many experts as the industry’s future.
How do trading platforms generate revenue?
Popular cryptocurrency exchanges like Bitz, Binance, Coinbase, and Kraken generate revenue by levying a charge for each undocumented transaction or withdrawal that takes place on the platform. You can use more monetization techniques in your cryptocurrency exchange, though. Let’s look at it:
Deposit fees
Many exchanges impose a fee on users who wish to deposit funds into their bitcoin exchange. The transaction costs you charge for any sale or buy made on your platform are distinct from the deposit fees.
Fees for withdrawals – You have the option to charge users a fee each time they withdraw bitcoin or fiat money to their wallets. If a flat charge works better for you than a percentage, choose that option.
Withdrawal fees
A service fee you charge for arranging a trade is a trading commission. Giants like Binance, with its multimillion daily trade volume, make considerable money utilising this monetization method even though a regular commission is less than 0.01%. Even if they don’t initially generate much revenue, transaction commissions should be included in your monetization strategy. Your platform’s growth will increase your revenue.
Listing fees – It is a fantastic starting point for newcomers. Smaller exchanges cannot survive solely off of commission-based income. In its place, they might charge for the right to list tokens and coins on their network.
Market making
It is a method of generating revenue on a cryptocurrency exchange by using bid and ask limit orders to create liquidity for a specific cryptocurrency. Market makers make money on the difference between offers and bids on certain deals.
You might also think about raising money through initial coin offerings (ICO), security token offerings (STO), and initial exchange offerings (IEO). Simply include the relevant module while building your trading platform.
By allowing contributors to obtain Ethereum and Bitcoin in exchange for the platform’s financial asset (be it a cryptocurrency or utility token) before these hit exchanges, you can raise money via this technique. Fundraisers are paid a portion of the overall revenue in exchange for raising money on the company’s behalf. The hosting exchange will be paid significantly if the total sum raised is considerable.
Wrapping Up
Mining, farming, and trading cryptocurrencies are becoming more common than ever. Every day, the price of Bitcoin and other cryptocurrencies grows, providing investors with enormous returns. The evolving nature of the financial systems around the world can also be advantageous to you. If done correctly, starting a bitcoin exchange is a smart business move. Hire experts to create a safe cryptocurrency exchange platform, and it can turn out to be your golden goose for the ensuing few decades.