Cryptocurrency has caught a lot of investor attention lately. According to Kaspersky Cryptocurrency Report 2019, almost 19% of the world’s total population bought some kind of digital currency before 2019. Over the last couple of years, the popularity of cryptocurrency has seen new highs. On Jan 02, 2020, the bitcoin trading volume was close to $28.6 million which has now soared up to $633 million. These growing daily trade volumes on cryptocurrency exchanges serve as a testament to the growing popularity of cryptocurrencies.
Cryptocurrency exchanges are the most important service category in the modern-day digital currency economy. They represent almost 90% of all value sent by services. Unless you have been hiding under the rock for the past few years, you know the importance of cryptocurrency exchanges in the market. While novice traders are looking for intuitive, safe, and secure exchanges, professional traders are seeking fancy exchanges. Thus, the cryptocurrency exchange software is required to meet the needs of a wide range of traders.
The fact is that the exchange business models are evolving every passing day. If you are planning to create a cryptocurrency exchange, you must have thorough knowledge about the types of crypto exchanges and must know the best practices to run one successfully.
Primarily, there are four key types of cryptocurrency exchanges.
Whether your target audience is a newbie or a seasoned trader, a retail exchange can serve the purpose. For the retail exchanges to run successfully, usability, speed, intuitiveness, and asset security are the primary parameters.
Retail exchanges generally hold the user’s private keys for ease of trading. However, this also increases the risk for the exchange operators. The cryptocurrency exchange software used in this case must be hackproof.
A peer-to-peer exchange is the one that facilitates direct trade between the two traders. The traders can create a public listing to place a buy/sell trade. Generally, a P2P exchange comes with an auto-matching engine to connect the traders. P2P exchanges can be both custodial and non-custodial platforms.
These are non-custodial exchanges that emerged in the crypto space recently. These call for minimal involvement of the exchange operator. These use smart contracts or protocols to facilitate the trade. Thus, decentralized exchanges offer more privacy and security.
This type of exchange is more suitable for seasoned traders. It gives traders more than one investment option. A trader can do spot trading, leveraged-trading, and much more using a derivatives exchange. As these exchanges offer higher earning opportunities, they also expose traders to higher risk. Thus, the exchange is exposed to greater regulatory scrutiny.
To create a crypto exchange and then run it successfully requires strategic planning. From a trading and compliance standpoint, an exchange operator must keep the following parameters in mind:
This is a make or break parameter for the success of cryptocurrency exchange software. Before deciding on the deposit, transaction and withdrawal fees that your exchange will charge, make sure you conduct a thorough competitor analysis. This will help you place your exchange correctly in this competitive space.
Crypto exchanges that offer multiple payment methods are generally more popular. Some of the main payment methods that must be present are credit card, debit card, and PayPal. When you facilitate credit card payments, make sure user identity verification is performed. This will make you charge more to the traders but will keep on the right side of the law by avoiding credit card frauds.
A fiat on-ramp can be a key differentiator for crypto exchanges. It must be noted that the fiat-to-crypto exchanges also end up facing greater regulatory scrutiny. On the other hand, crypto-to-crypto exchanges are more suitable for seasoned traders. Thus, the exchanges that offer both fiat-to-crypto and crypto-to-crypto support have higher chances of success.
This is the most debatable topic of the crypto exchange service. While dealing with cryptocurrency, the traders wish to maintain complete anonymity and privacy. However, as an exchange operator, if you skip KYC, you might be questioned by regulatory bodies. Thus, the operator must take alternate approaches like KYC and ensure that the trader’s private information is secured.
If you are planning to create crypto exchange, Antier Solutions can help. With a team of seasoned blockchain engineers and financial experts, we deliver secure and institutional-grade cryptocurrency exchange platforms. we specialize in offering a white label exchange solution, and at the same time, we can build a custom exchange for you from scratch.
Schedule a free demo of our white label cryptocurrency exchange software or connect with our subject matter experts to share your needs for a custom exchange built from the ground up.