The rapid growth of crypto users is the reason for this huge increase. It's not unusual to see novice traders relying on easy exchange solutions. What exactly is a crypto-exchange solution? What are the different types of crypto exchanges available? What are the most important features that an exchange solution should have? These questions will be answered, and we'll show you how to create a secure and robust cryptocurrency exchange appealing to your users.
Let's begin.
What's a Crypto Exchange?
A Cryptocurrency Exchange allows customers to buy or sell cryptocurrencies instantly. Users can trade one cryptocurrency for another using such exchange platforms. They can trade their Ethereum for Bitcoin, Litecoin, or Binance coins. Customers can also trade digital coins with crypto exchange apps for fiat money like the US Dollar and Aus Dollar.
The market price for the cryptocurrency they hold is also displayed on exchange platforms. You can convert cryptocurrency back into any currency you choose. Users can withdraw the whole amount or leave it as cash in their account if they want to trade it into crypto.
Crypto exchanges are buyers' and sellers' intermediaries and earn money through transaction fees and commissions. Transaction fees can be used to withdraw, trade, deposit, etc. To encourage traders, some cryptocurrency exchanges offer tokens. Not all crypto exchanges work the same. Some exchanges allow users to trade, while others offer transparent and open trading data via their order books.
Types Of Crypto Exchanges
There are three types of cryptocurrency exchanges: DEX, centralized exchange, and hybrid. Let's find out how they differ and highlight their pros and cons.
CEX - Centralized Cryptocurrency Exchanges
The Exchange operator oversees a central crypto exchange. It ensures that customers sign up and that trading goes smoothly. Connecting your bank account or debit cards to CEX platforms to purchase or sell digital assets is easy. They are also centrally controlled and managed, which makes them reliable. They also offer both crypto-to-crypto and fiat-to-crypto trading options.
DEX - Decentralized Cryptocurrency Exchanges
DEX platforms allow buyers and sellers to come together and transact directly in crypto. These peer-to-peer (P2P) transaction executions are free from any intermediary or third party.
Securer decentralized cryptocurrency exchanges. On the other hand, users are more likely to lose their money. Another problem with DEXs is that they don't allow trading fiat currencies for digital. Due to CEX being more popular, DEX has low volume and liquidity.
Hybrid Exchanges
Hybrid, a new crypto exchange domain, is still being developed. Hybrid crypto exchange platforms combine the best of DEX and CEX. It combines the speed and liquidity of a centralized platform with the privacy and security of a DEX solution.
How do you Create a Crypto Exchange App?
Building a cryptocurrency exchange platform that appeals to everyone is easy if you have a clear roadmap. This roadmap will ensure your app development and deployment is smooth and efficient.
Let's take a look at all the steps in this roadmap.
Identify the Problem
Start by understanding your customers' pain points and how your crypto exchange plans can help them. This means you must thoroughly research the problems of your customers. Analyze the solutions available on the market to determine if your app can stand out and solve users' issues.
Do a cost-benefit analysis of your solution to determine if it is worth the investment. Assess any possible risks.
Establish the Operational Scope
Another important step is to set the operational scope for your crypto exchange. Here you can provide detailed functional specifications. It is dangerous to build your app without defining a scope. This helps app developers know what they are building. It also helps project managers estimate the effort and time required to build the app. You will need to get all approvals based on the operational scope.
Select a Crypto Exchange Type
Choosing the right type of crypto exchange is important because it will determine how the app will work. There are three types: Hybrid, Centralized, and Decentralized crypto exchanges, as discussed in the previous section.
Choose a Jurisdiction
You will need specific licenses and approvals to operate your crypto exchange smoothly, regardless of whether you are looking to go global with your app. There may be laws that are different from one place to the next. For example, some countries or regions may have no regulations, while others have clearly defined rules. Pay attention to any new or upcoming legislative changes.
It Would Help if you Took Care of Compliance & Regulations
Because of the amount of money involved, governments worldwide are often strict about using cryptocurrency and exchanges. You should adhere to certain KYC standards in your app. For example, you can facilitate documentation to verify your customers' identities. KYC compliance reduces the risk that money laundering can occur through cryptocurrency trading. Integrate a customer verification API into your crypto exchange. Also, create a back-end database for records.
Partner with a Payment Processor/bank
This is necessary to allow payment processing in fiat currency. It would help if you looked for a bank offering various online services. This is especially important if you live in a country that cannot make an instant bank transfer. Transactions in such situations can take many days to settle. Customers prefer banks that offer fast clearing, settlement, and transaction times.
Locate a Liquidity Provider
Another important aspect of Crypto-Exchange Solutions is liquidity. Liquidity is a key aspect of any exchange platform. How quickly can you get an asset exchange going? Customers will prefer an exchange with better liquidity and a wider spread.
It would help if you did some things.
- With APIs, integrate your crypto exchange's liquidity with other businesses. It allows you to share liquidity and trade volume information between two exchanges.
- To increase its liquidity, you can make your crypto exchange part of the exchange network.
Top-Notch Security Standards
Hackers and other malicious attacks are easy targets for crypto exchanges. This is why you need to ensure the security of your exchange. This can be done with features like multi-signature wallets and two-factor authentication.
Keep the records and funds of traders safe in cold wallets. Transferring funds between cold and hot wallets should be easy and quick whenever necessary. Transparency should not be compromised. A proper KYC process should be established in the best interest of all parties.
Initiate a Customer Support channel
This feature is essential for any app that's being developed today. An interactive customer support channel that responds to customer inquiries immediately is not an option. Your app should have a customer service channel, especially if it involves cryptocurrency exchange that involves money transactions.
Support for Cryptocurrency
Cryptocurrency can be a highly competitive market. Decide how many cryptocurrencies you want your exchange to support. The more cryptocurrency exchange supports, the greater the investment in developing dedicated APIs that can fetch historical data, charts, and place orders. Decide carefully which digital coins to use.
Try Your Crypto Exchange
Before launching your application, make sure you test it. Get feedback from users and make any necessary changes to ensure smooth operation.
The crypto exchange must be tested for its performance, liquidity, functionality, and transparency. It should also assess transaction speed, reliability, security, and reliability.
What Are The Key Features To Include In Your Crypto Exchange App?
You now have an understanding of how to create a crypto exchange system. Now you need to think about ways to improve the crypto trading experience for your customers.
Although you can add many great features to your app, there are some essential features every crypto exchange app should have.
These include:
1. Trading Engine
The heart of any crypto exchange platform is its trading engine. A crypto exchange app is useless without a functioning trading engine.
A trading engine feature typically tracks all open orders and bids and allows you to find and create new trades. This feature does the following:
- Execution of crypto transactions.
- Calculation of balances.
- Order-books access.
- Match transactions (buying/selling on the exchange).
2. Crypto Wallet
Another essential feature to have in your app is the crypto wallet. This allows your users to store, send and receive virtual currency. This feature can be customized and enhanced to meet your needs.
You have the option to create a hot or cold wallet. Hot wallets can be connected to the Internet. These wallets are easier to use and faster than offline ones but are also more vulnerable to online attacks. On the other hand, cold wallets are known as offline wallets. These are safer but not as convenient.
Make sure that your wallet supports multi-cryptocurrency functions. Investors will appreciate a wallet that integrates Cryptocurrency.
3. Analytics
Analytics is an amazing tool for building a compelling crypto solution. This feature puts the power of data in the hands of your users. This feature allows app users to make better investments and get the most from every trading opportunity.
Let's look at some common indicators traders use to make decisions:
- The Relative Strength Index measures the strength and likelihood of trend change. This indicator, for example, can show the recent price changes and the rate at which they have changed.
- The Moving Average is the average price for a given period.
- It is used to predict fluctuations in prices.
- Stochastic RSI: This tool is great for identifying oversold and overbought areas.
Your app must provide a visual trading experience for your users in addition to live information tracking.
4. User Interface with Intuitive Features
An intuitive user interface is essential for your app. Both novice and experienced traders can use crypto exchange apps. It should have a simple interface to hide the complexity of crypto trading.
The following is what you will need:
- A user interface that makes it easy to execute transactions efficiently and reduces trading time.
- The dashboard provides quick access to all the essential information and a clear view.
- Deposits and withdrawals of funds are seamless.
- Connect with support.
5. Push Notifications
Because they allow for communication between app users, push notifications are a key feature of many crypto exchange apps. Push notifications allow you to notify your users about new trends, special offers, price changes, and other information. You can customize the notifications that users receive.
6. Admin Panel
An admin console is a great feature that allows traders and owners of crypto exchanges to manage different aspects of the exchange.
This feature can be customized to meet your specific crypto app needs. Every admin console should offer the ability to add currencies, modify trading fees, manage crypto listings and credit/debit accounts, and address support-related problems.
7. Verification and Authorization of the User
Users will love your app if they have an easy and interactive onboarding experience. With a simple KYC - Know Your Customers feature, you can ensure trust in your cryptocurrency exchange solution. This feature allows the app to authenticate documents submitted by new users instantly.
A crypto exchange that does not require user verification can increase fraud risk and reduce transaction transparency. Integrating your app with data encryption and two-factor authentication is a good way to increase data security.
The Advanced Features of a Crypto Exchange
Now, look at some advanced options you might want to add to make your crypto exchange stand out.
Crypto Staking
Staking crypto is similar to a bank deposit. You can lock in a certain number of coins and begin earning interest. Although the rates are not as lucrative as other DeFi options, they are still very profitable. It's still a great option that provides traders peace of mind, even if they're not actively trading.
Cold Wallets Integration
Tech-savvy users would love to be able to link their crypto wallets to hardware wallets that don't connect to the Internet. They are safer for large amounts of crypto. You should be aware that crypto exchange owners must provide this option to investors, regardless of whether they choose to do so. All your staked cryptos and any other dormant cryptos will be stored in cold crypto wallets. This makes them inaccessible to hackers, even if your defenses are breached.
Credit Card Integration
CoinBase and Crypto.com, two of the most popular crypto exchanges, offer credit cards allowing customers to use crypto to pay everyday expenses. Users get crypto cashback as part of the deal.
P2p Forex Trading
The exchange can also assume escrow responsibilities and facilitate direct crypto trading between users. The option is worth considering for rare digital assets users may have in their private wallets. You must place funds on hold until both parties confirm the exchange.
KYT
KYT stands for Know Your Cryptocurrency Transaction. It is the highest level of KYC required by companies that deal with cryptocurrencies. KYT procedures are a combination of analysis of transactions and risk assessment regarding their involvement in money laundering or other criminal activities, as required by FATF and 5AMLD regulations.
Tradable Exchange Token
You can also create your token to incentivize users to buy and trade it. These are our suggestions on how to create a crypto-token.
Advanced Trading Options
Smart investors will also search for the same tools in traditional investment instruments, such as margin trading, limit orders, and stop-loss orders.
Another option is to add a separate platform that allows you to launch vetted crypto projects via IEO (Initial Exchange Offering) and a yield farming solution for extended cryptocurrency staking. This add-on gives users early access and a chance to win good tokens. The yield farming platform could be used as a liquidity provider.
APIs
Your crypto exchange can have an API linked to their account. This allows them to live outside of their borders. Your customers can access other crypto-focused apps by supplying portfolio data and any additional information the API can relay.
Social Elements
You could think about adding socializing features. To win perks and bonuses, users would love to be able to compete in other leagues. You could have a hall where the top callers are recognized and receive an exchange token to help them make accurate price predictions. A crypto exchange is a safer and more anonymous way to boast about your gains.
The Architecture of a Cryptocurrency Exchange
You can't create a cryptocurrency exchange without understanding its architecture. Software architecture can seem intimidating and complicated to the average business owner. Nevertheless, it isn't as scary as thinking about the architecture of your home without getting too technical.
We Promise It's Not Scary!
Your crypto exchange developers will have to sketch the architecture of a cryptocurrency asset exchange. However, you'll see that they base their assumptions on basic concepts like:
- Are you looking for a CEX or DEX?
- What number of users are you expecting to serve simultaneously?
- What speed should they be able to transact?
- What should the maximum uptime be?
- What processing power will the exchange use behind the scenes?
- What front ends do you envision (web/mobile/desktop/etc. )?
These questions are answered by the team responsible for developing crypto exchanges. They then combine various components of your product into a robust and reliable trading platform.
It would help to use a microservice architecture, regardless of whether you create your cryptocurrency exchange, such as CEX or DEX. Although your crypto product may seem simple and intuitive to customers, it is complex. It consists of many elements.
Each element can be built separately and interconnected to make it easy to update the block in the future without having to adjust the others. Furthermore, multiple developers can work simultaneously on different parts of the exchange, which increases market speed.
Bird's Eye View Of Crypto Exchange Architecture
Which building blocks are necessary to create your bitcoin exchange?
- Trading Engine
Your product's heart and soul. This is where all the trading logic lives. This block typically includes an order-matching engine that matches buyers' bids and sellers' asks.
- Multi-Cryptocurrency Wallet Generator
Remember, every customer receives a wallet. A mechanism is needed to do this automatically. Each customer receives multiple wallets (for different cryptocurrencies), and they all work with your internal wallets to ensure the fastest movement of funds.
- Admin Dashboard
An admin panel allows your operators to manage the platform. It is usually role-based and protected by hardware security keys.
- Authentication Server
Server for KYCing and authenticating customers.
- Front End: Mobile/Web
The customer's eye candy.
- API Layer
APIs are used to link building blocks together, as you probably know. APIs can also be used to link your exchange with third-party solutions. You can link to many things, including liquidity providers, payment gateways, and blockchain explorers. Trading bots, analytics, logging, and so on.
Create Your Own Cryptocurrency Exchange In 5 Steps
Okay, let's talk about how to build a crypto exchange platform. How do you launch such a product, and what are the steps?
Step 1 - Build from scratch or choose an off-the-shelf solution
First, you must decide whether to create your cryptocurrency exchange website or use a pre-built solution. There are a few options on the market, such as Alphapoint or OpenDAX, but each has pros and cons.
Pros:
- Markets are quicker
- Mild customization
This is all there is to it. A custom-built exchange offers all the other benefits, including scalability and infinite customization. Let's now look at the downsides of an off-the-shelf platform.
Cons:
- Stock functionality is not upgradeable (cannot add unique features).
- It's time for your team (or you can stick with the team who made the canned solution).
- A full security audit from a third party is necessary to ensure that existing code is safe.
- High initial costs.
You can be confident that your crypto exchange is safe and secure. You can even watch your investment transform into a product you can use to test.
However, you can still choose an off-the-shelf option. Consider this step as your final. Follow these steps if you require a custom-built exchange.
Step 2 - Investigate Legalities and Create Partnerships
It is important to ensure your CEX follows local laws. However, a DEX does not necessarily need to conform as it runs on blockchain technology. Governments have very little control over this. However, you will need a crypto lawyer to ensure your product conforms to AML/KYC regulations and other local regulations.
You must partner with companies offering fiat-crypto payment gateways, crypto liquidity provisioning, and fiat-crypto-on-ramp solutions. This could include partnering with banks, credit unions, and other financial institutions.
Want More Information About Our Services? Talk to Our Consultants!
Step 3: Create And Verify Ux/Ui
Let's get back to the product. We need to spend enough time designing a cryptocurrency exchange website.
Here, the usual routine is to:
- Make a prototype.
- You can test the prototype with your users.
- Based on the feedback, update the UX/UI.
- Blockchain developers can verify design feasibility.
- Give the UX/UI design to a development team.
Step 4 - Develop the Front Ends and Back End
Nothing is interesting about this; it's just developers creating code for your platform's front-end and back-end. The best part about programming is when you get to play with the first builds. This is a crucial step that you should not miss. You need to provide feedback as it is easier to fix problems in the process than once the entire thing has been completed. When you build a bitcoin exchange website, you must have two teams of developers.
- Traditional app developers.
- Blockchain developers.
Step 5 - Run Qa and Release
After your crypto exchange website (or/and a smartphone app) is developed, it's time for you to test it thoroughly. Then, simulate massive user inflow before releasing it.
Here are two things to remember:
- Testing is a crucial part of development. This QA step ensures that everything works as intended.
- Deployment and release include setting up DevOps processes to ensure that you can continuously improve your product without interruptions for customers.
This ensures that your solution doesn't go offline, which is not an option for these businesses.
Avoidable Pitfalls During Crypto Exchange Development
While you may encounter a brick wall several times when building a CEX/DEX, we are happy to help you navigate toward a successful product.
Ux/Ui Questions
Each product must have a target audience. What do you do if your target audience is extremely diverse? Everyone seems to be willing to participate in the crypto hype today.
You have two options. You can choose a targeted audience and then work with market players to grow it. You can appeal to as many people as possible and then find ways to add advanced features to more crypto-savvy users.
Building the Right Development Team
This is a brief overview of how to put together a team for a crypto asset exchange. These days, blockchain developers who have real-world experience are highly sought after. You will need them to collaborate with skilled UX/UI designers, QA engineers, and other app developers and project managers. While some of these roles may only be part-time, everyone must work together.
Mobile Vs. Web
How do you plan to attract more users? Are you going to launch a web or mobile app first? Is it necessary to adapt the mobile-first design to your web app later? In a separate blog, we provide the answers: Mobile-First Web Design.
You'll notice that your mobile app and the browser-based exchange must be compatible. You don't build a web application and then optimize it for mobile. It is best to work on both (even if one is due for later development).
Security is Your Everything
Although it doesn't happen often, there are a few instances when crypto exchanges get hacked. This is why you cannot overperform. Take every precaution you and your team can to protect yourself.
- It is possible to identify fraudulent transactions using machine learning.
- Before you withdraw funds, lock down the fund movements immediately.
- Users must take more proactive steps based on how much they trade/invest.
- Use bio authentication.
- 2-factor authentication is a strong security measure (read: not through text messages).
- Multi-signature crypto wallets should be implemented.
This list doesn't even cover the details of securing cryptocurrency exchanges. If you're interested in learning more about how to create a cryptocurrency exchange, we are happy to help.
How Much Does It Cost to Create a Cryptocurrency Exchange
As always, the price of a product depends on many things:
- Do you want to build a DEX or CEX?
- Do you require a mobile app for your business?
- Are you interested in an open-source trading platform?
There are many other factors. A $300,000 to 400,000 investment would be required for a minimum marketable CEX.
Want More Information About Our Services? Talk to Our Consultants!
Conclusion
With a steady increase in users each year, the demand for cryptocurrency exchange apps is growing. You must have a reliable, secure, intuitive, and quick solution to succeed in this market. Cyber Infrastructure Inc. can help you navigate this process.
We can help you create a crypto-exchange app for your company. We will provide technical support to help you create a custom crypto exchange solution.
Cyber Infrastructure Inc. is an award-winning web and mobile app developer company with a wealth of experience creating remarkable digital success stories.
