Open source Crypt Stock Exchanges are mostly used to launch decentralized trade platforms, as their work rules are available for viewing and learning by everyone wishing. This increases the level of transparency and hence confidence. Further on, we will discuss in detail how to create such a cryptocurrency exchange.
Type of cryptocurrency exchange
The first decision you have to take in creating your own free-source cryptocurrency exchange is the choice of a type of trading platform. They are centralized, decentralized and hybrid. You can also create a platform for instant sales of cryptocurrency
, which will work as a broker. Consider the advantages and disadvantages of all options.
Central exchanges (CEX)
. Such platforms handle 99% of all transcription transactions, as they usually do not have liquidity problems, which means at the rate of execution of transactions. The main minus of such cryptocurrency exchanges is that they store all the user's means on the internal wallets of the platform that hackers break from time to time. When you create your own open source platform, you have to take this into consideration: Make sure there are no errors, bugs, "holes" in the code that hackers can see and use to hack into your exchange.
Decentralized exchanges (DEX).
These platforms lead out sellers and buyers of cryptocurrency in one place, allowing them to make automatic exchange of assets at market prices without the participation of validators. The role of the guarantors of the transaction will normally be assumed by automated smart contracts. In doing so, such smart contracts are almost always open source code so that traders can verify the reliability and integrity of the transaction, both by the counterparty and by the stock exchange. The code of the rest of the platform is also almost always open source software
Peer-t-peer exchange stocks (P2P).
Such trading platforms are, in fact, a kind of bulletin board where buyers and sellers are looking for counterparties. Users go to the platform looking for an announcement with suitable conditions or create an announcement with their offer (which currency is sold / bought, for which, course, amount, method of exchange), contact with the counterparty and agree on the exchange and terms of the transaction. It is possible to purchase or sell cryptocurrency in this way by means of a fiat, gold, goods or services - as agreed by the parties. The deal can be done online or offline. Some peer-to-peer exchange stocks have a function for the safe exchange of coins
with the deposit of funds inside a smart exchange contract.
In essence, these are online brokers, which allow users to buy and sell cryptocurrency with a simple interface. The user only needs to select a trade pair or a crypt and a payment method, after which you need to click "Buy / Sell" and the operation will be performed in a fraction of a second. Liquidity providers borrow from liquidity providers or exchange partners. The fees for speed and simplicity are high trade commissions.
Also, hybrid exchanges can be found on the market. They combine the properties of centralized and decentralized platforms, for example, the platform can be managed by one central operator / validator, but its management may be divided among several nodes. Warrants and transactions on such platforms will be recorded at the blockchain
, while the reconciliation and execution of the warrants will be carried out outside the blockchain on the sideline nodes.
Business model and monetization
The developed cryptocurrency stock exchange with the open source code can function as a traditional commercial company - there are a lot of such on the market. But it's not the only option. You can also create a stock exchange that will be managed in whole or in part by a third party and / or distributed between users of the server (token holders of stock exchanges).
With regard to monetization, cryptocurrency stock exchanges usually profit from various streams, the most popular of which are:
- Trade commissions. This is the most common way to monetize both cryptocurrency and stock exchanges. The point is that every time a trader commits a trade transaction for the sale of an asset on the site, a small commission will be charged with the transaction. A commission in the area of 0.01-0.02% is deemed to be a standard in the cryptocurrency market. In order to make a living this way, the stock market needs to get a high volume of bidding.
- The Commission for a deposit. If for trading on a cryptocurrency exchange, the user needs to enter into its account a certain amount of money (to open a deposit), usually the transaction is also subject to a commission. This is because the user essentially buys the currency from the exchange, which means that the transaction should also be paid. The size of the commission depends on the mode of input.
- Payment for withdrawal of money. This is the fee that the site charges to the users when they withdraw money from a deposit on their cryptocurrency account. Payment may take the form of a fixed sum (e.g. 10 dollars) or a percentage of the sum of the transaction (e.g., 1-5%).
- Commission with IEO, STO and ICO. Another way to derive income from an exchange is to equip the platform with a module for launching crowdfunding campaigns in the form of IEO, STO and ICO. In this context, your stock exchange can be an emission centre and / or a store for coins collected during crowdfunding. You can charge both IEO, STO and ICO, as well as for transactions to transfer funds to your exchange (and also for withdrawal).
- Listing charges. Many servers also charge for adding tokens to their listings. The amount of payment is set at random by the cryptocurrency exchange. It could be like $100 or $50,000.
- Market creation. When bidding on your site allows you to conduct almost instant transactions, you will be able to sell your liquidity to other exchanges. In fact, these are the same trade commissions, but they are not paid by your users, but by users of other cryptographic exchanges. The size of such commissions can be the same as you on the set, or be different in the bigger or smaller way.
Key functions of the CryptoExchange
Authorization and verification.
Usually, a user profile on the cryptocurrency exchange is realized via e-mail or mobile phone number, less frequently through Google, Apple, Facebook or Twitter accounts. If you are developing a centralized cryptographic exchange, in addition to registering a user, you will also normally need to complete the account verification - to confirm your identity. This is necessary for the fight against corruption and the financing of terrorism.
The trading engine of the platform.
Binance's cryptocurrency exchange registration window
It is responsible for trading transactions on the cryptocurrency market, such as checking the balance sheets of traders, matching orders, executing transactions, processing information about courses and commissions.
The trade interface of the cryptocurrency Binance Exchange
Depending on the type of exchange, it can be presented in the form of a traditional trade interface or as an online bulletin board like Craigslist. In addition, it can also be very simple if the target audience of the platform is new; or rather complex and contain many professional trader tools if the target audience is professional players. In any case, traders should be able to search for trading pairs (their course), placing purchase orders and selling, and viewing the balance sheet, book of order, history of transactions, and other statistics.
The exchange control panel.
Interface of the peer-to-peer exchange stock LocalBitcoins
With its help, you and the Exchange Officers can monitor the current status of the exchange (traffic, volume of trades, number of transactions, revenue from commissions) and manage functional, content, users, listing, verification, monetization, input / output options, etc.
Cryptocurrency wallet / deposit.
If you create a centralized cryptocurrency
exchange with open source code, you will also need to realize the functionality of the internal purses of users. Traders will store the money they will trade on your stock market.
Analytical tools for traders.
They provide additional information on the state of the market, forecast the development of the trend, implement trade strategy, etc. The most popular (mandatory) options are the Relative Strength Index (RSI), the Moving Average (MA) and the Moving Average Convergence/Divergence (MACD).
Managing the liquidity of the platform.
The liquidity of the cryptocurrency exchange refers to the availability of coins and the speed of their sales. The more coins (trading pairs) in the listing and above the speed of trade transactions, the greater the liquidity of the exchange. It is possible to provide liquidity by means of a foreign-market marker, an inter-stock market and a liquidity mining.
Push-notifications and alerts
. It will inform traders about important events on the exchange - from the conclusion of transactions to special offers. In addition, it will be convenient if data from trade indicators and advisers will also be broadcast to users through Push-, SMS- or email-notifications.
KYC, KYT, compliance to AML.
If your platform works in the American, European and other markets where regulators require the exchange of laws against money-laundering and / or the financing of terrorism, you need to implement the relevant functions / procedures. They can be implemented from scratch, and external services can be used, for example Traceer
for KYT or Sumsub
Also, in developing your cryptoexchange, you need to do everything to ensure the safety of money and confidential data of users. This is especially important if you store users' money in your platform's internal accounts. Here's what kind of protection you need to put in place:
- Protection against denial of service (DoS).
- Protection of HTTP parameters from pollution.
- Protection against distributed denial of service (DDoS).
- Protection against forgery of requests on the server side (SSRF).
- Protection against counterfeit inter-site inquiries (CSRF).
- Dual factor- and HTTPS authentication.
- Biometric authentication.
- Data encryption.
- SQL injection.
Architecture and technological stack
It is a structure that helps visually and logically to trace the relationships and interactions between all the components of the cryptoexchange being created. Here's an example of how it might look like:
Hybrid cryptoexchange Qurrex architecture
This is a set of software tools that developers will use when creating your exchange. Usually these are programming languages, frames, libraries, databases management systems, compilers, API, etc. Here's an example of a stack to create a cryptoexchange:
CryptoExchange Development Process
The development of a cryptographic exchange is best achieved through custom development, as it is only in this way that a suitable level of reliability and safety of the platform can be ensured. Which is particularly important in the case of an open source software, because if there are errors and holes in this code, it will be able to see (and use) any hacker. How to find and select a technical partner to create a cryptocurrency exchange from scratch is described in the article: “How to Choose the Blockchain Development Company