White Label Crypto Exchange — is a programming solution that makes starting a trading platform easy, simple and relatively cheap. Buy or sign a subscription on white label, customize it, and you can start. Usually, no programming is needed. The supplier of white labels is developing and supporting the software. As a result, the client can focus on marketing and sales.
In this article we will give the details on how to start a white label for crypto exchange, what it requires, and how much it costs.
The niche and target audience
What features do traders search for on crypto exchanges. Source
To launch a white label project, you will need to work at least with two target audiences: with those who want to start their white label crypto exchange, and the users(traders). Moreover, you will need to understand their aims, needs, pains and consumption habits.
What concerns the entrepreneurs, they want to launch their exchange platform and make money with little investment. They will also focus on their clients, who might vary depending on the niche, country and entrepreneurs preferences. Your white label product should be flexible to meet the needs of any entrepreneur. This involves the interface, trading pairs, commissions, payment methods, languages, marketing etc.
However, by analyzing the needs of the crypto exchange users (traders, investors), we see that everything is quite more complicated, since their needs and aims are very different. For example, experienced traders from the USA and EU focus on security, legal sector, liquidity, values and the trading indicators and signals. While beginner traders from these countries search for a decentralized system, sophisticated interface, and simple design. Security matters for them too, but not that much as for the experienced ones. Normally, experienced players enter the crypto world from Forex, and beginners — from Reddit.
If you are focused on the EU and the USA, it means that you need to create a white label crypto exchange with a good design customization, functionality and administration. You will also decide whether your solution fits the beginners or the professional traders. If you choose beginners, it will make everything more simple and cheap, but the audience will be much smaller. The second ones are just contrasting, the audience is not limited, but the development is more complicated and expensive.
In some other countries, the target audience may have different preferences.
Monetization model for white label
After you know your target audience and the niche, you will also need to decide how to monetize your white label. These are the main ways:
- One-time payment. It means that you will offer software for one-time payment, like Windows, Adobe Photoshop, video games and products on the internet are sold.
- Fees and commissions. You will offer your white label for free, but you will get a commission from each trading deal.
- Freemium. The basic function will be for free, if the users need a more developed function they pay additional fees.
- Subscription. You will give access to your white label crypto exchange on a subscription basis. This monetization model is used by Netflix, Spotify and Creative Cloud (graphic services company).
The crypto exchange platform type
The next step of your white label launch is choosing the type of your platform. This solution will impact the mechanism of the crypto assets exchange and the ways of its storage, availability of fiat trading, liquidity, transaction speed and flow capacity.
Centralized (CEX). Now, around 99% of crypto transactions are made on centralized crypto exchanges, since this method offers a higher liquidity and a bigger trading value than the decentralized exchange does. The CEX system works similarly to traditional stock exchanges, there is a single operator that controls the processes, and the trader deposits funds on the exchange to buy and sell the assets there.
Decentralized (DEX). These platforms are usually owned by companies or private individuals, but the processes are controlled by a few independent hubs, or they are controlled by automatic algorithms. Smart contracts are used for transactions on DEX, instead of a centralized operator. And the traders do not need to deposit funds on the exchange to get the ability to trade.
Peer-to-peer exchange (P2P). These services are sort of online bulletin boards, where users can notify other people about their will to buy or sell cryptocurrency. The deal can be made online or during a private meeting. The conditions may be discussed by both sides, it can be cryptocurrency exchange for cash or other products.
Instant exchange. This type includes all websites and applications, where you can easily buy, sell or exchange crypto assets. These platforms are kind of brokers that offer the client liquidity of other exchangers, where you can make the transactions immediately. The fee for good speed is a higher commission.
Managing the platform liquidity
Also, to start a white label, you will need to think about the way you will provide liquidity on your trade exchange: the ability and the speed of setting orders for buying or selling cryptocurrency. The bigger is the liquidity, the faster the traders will set their orders.
To provide the best liquidity on your trade exchange, you can use:
- Third party market maker. Consider working with third party suppliers of liquidity that can connect one trading platform to the others, and if one platform lacks liquidity, the order will be done on the other exchange.
- Creating a cross-listing market. Cooperate with other exchangers directly, without connecting to liquidity suppliers. In this case, the pool of liquidity will be lowered, but there will not be any commissions to market makers.
- Liquidity mining. This is actually making a mechanism that will encourage the users to deposit their fund on the account of the trading platform, the platform itself will give special offers instead, like dividends or platform tokens (this is the way PoS cryptocurrencies work).
White label Crypto Exchange functionality
The functions of your white label for crypto exchange launch should be separated into 2 groups. The first on — functionality, needed for launch, setting and managing a cryptocurrency trading platform. The second one — is the end user (traders) functionality, which will allow them to buy and sell assets on the platform.
All you need to have to launch an exchange by the means white label provides is:
This is the functionality for traders:
- Trading engine. This module is the basement of any exchange, since it is responsible for wallet balance checking, setting order for buying and selling assets (matching), counting the balances, integration with the pools of liquidity and payment gateways, and counting the rates and commissions.
- User interface. It includes the platform branding, personalization and customization. You should work on a naming, logo, design settings, functionality and other features.
- Security system. In this section the owner of the platform can set the authorization, verification, additional security measures, privacy and hack-proof.
- Payment system. This one is responsible for white label monetization, commission and its amount, deposit and withdrawal of funds.
- External integrations. Your licensees might need integrations with social networks, partnership programs, banks, marketing instruments, fiscal authorities, liquidity pools etc.
- Support. To develop a white label for cryptocurrency exchange, you will need to consider the way traders will communicate with you if needed.
- Registration process, log in. Your platform should offer different options for registering an account. The most popular ones are: email, phone number, social network account. You can also add biometrical data as a login option.
- Verification of identity. All modern trading platforms need to meet the KYC, KYT and AML requirements. To do it, you will need to add identity verification of users.
- User page. Here the users will be able to manage their bank accounts, deposits, registration data, and privacy, also they can contact the administration there.
- Trading platform interface. Here is each function that is responsible for buying and selling cryptocurrency, searching for assets, setting/canceling orders, graphics, indicators, and hints.
- Deposits, payments. Depositing and withdrawing, tracing the transactions, browsing the transaction history and other.
- News feed. It allows the traders to see recent events, like their orders, updates, world news etc.
- Notifications. It will tell the user about closing a deal, new messages, signals and other customizable things.
- Reports, analytics. The users should have the ability to trace and analyze the result of their trade.
Security and meeting the KYC, KYT and AML requirements
The results of CipherTrace research about the losses from crime in crypto sector
Security. According to CipherTrace date in 2020 the users lost approximately $1.9 billions in various hacks and scams. Hacks took $500 millions, $129 millions were from decentralized finances (DeFi). The KuCoin platform had the biggest losses, from their account $291 million dollars were stolen (84% were brought back). In the past, the losses were much less.
When you start your own white label for crypto exchange, do everything possible to secure the deposits and the user’s data. This is even more important if you want to develop a decentralized exchange.
Here is the list of security measures you should add:
KYC, KYT and AML. If you focus on the USA, EU, or Eastern Asian market, your platform should be secure and meet the actions against money laundering and terrorism financing. You will need to add these features:
- Denial of service defense (DoS).
- HTTP-parameters pollution protection
- Distributed denial of service defense (DDoS)
- Cross-site request forgery protection (CSRF)
- Two-factor and HTTPS authentications
- Biometrical authentication
- Data encryption
- SQL injection
- KYC (Know Your Client). Each trader on the platform should be verified, to show that they are adults and have the right to crypto investment. In some countries it is forbidden, in others you will need to be an accredited investor. KYC also helps to trace the hackers. Sumsub, Trulioo or Veriff can give the proper solutions.
- KYT (Know Your Transaction). The platforms should check the source of users’ money, and block the transactions if the sources are suspicious or under sanctions. The Traceer service comes to help.
- AML (Anti-Money Laundering). In many countries there are general rules that the platform should attend to, but in the USA, the platform should have one worker, who fights the money laundering. This worker will need to check the suspicious transaction and send reports about SAR to finance monitoring authorities. The worker should have an ICA or ACAMS certificate and a degree in finances.
The architecture, technological stack and API
Exchange architecture. It is a structure of a trading platform that logically and visually helps to find the connection between each component of software. Here is an example:
Technological stack. These are the programming instruments that help the developers to make a white label solution for cryptocurrency exchange. It includes the programming languages, compilers, frameworks, database management system, libraries, API etc.
The structure of Qurrex exchange. Source
The process of White Label exchange development
White Label Crypto Exchange — is a very complicated software that can not be developed on a constructor or script. It is possible only if it’s a custom developed by a professional and experienced company. Where to find this expert and what are the criteria you can see in this article: «How to choose a blockchain development company».
After you chose the developer, your collaboration will be the following:
- Signing a contract. On the first step the customer and the partner discuss the white label concept, the way it should work, what functions it should have, and how it should look. Then the technical description of the project is made and the details (time and price of developments) are discussed. Finally, the contract is signed.
- Making a prototype of the platform. Then the customer, business analyst and designers are making a draft of the platform. The user streams are in work at this step too.
- Making the interface design. The drafts are used as a basement and then the templates and interface prototypes are made. They show the way the users will see the users (licensees and traders).