In this article, we'll dive deep about building and launching own cryptocurrency (or bitcoin) exchange trading platform. If you want to know more about P2P exchanges, or margin trading and how to make money through them - welcome. We'll explain everything in depth.
Let's start from the very beginning, and talk a little about bitcoin mining.
Is Mining Profitable?As already mentioned above, bitcoin is quite popular now, hence bitcoin mining has become more difficult. You will need simply unimaginable computing GPU performance (CPU is more than 50 times slower). It is extremely difficult now to get at least one bitcoin.
Additionally, some countries have increased their attention to it. There bitcoin mining considered as an illegal business, tax evasion and other nonsense. Still, in most part of the world, cryptocurrency is grey zone and isn’t regulating now. However, the situation may change soon.
How Else to Earn Money on Bitcoins?
If you have an online store, a SaaS application, or you work online and accept money – you can allow your customers to pay by bitcoins. In fact, you invest in bitcoin in this way. We have already heard how the bitcoin rate fluctuated in the summer of 2017, and by the autumn it doubled. It’s just unthinkable!
Another option for earning money on bitcoins is the online exchange-trading platform. Its opening is not a typical task and it is resource-intensive. Let’s turn to what will platform owners get in return? A small commission from 0.2% to 3%. Quite miserly, don’t you think so? However, let’s calculate the volume of trades per day.
With a turnover of $100,000 you will receive $200. This is only 13 bitcoins in turnover per day. According to Coinmarketcap, Exmo platform has a $13,996,000 daily turnover. Their daily earnings starting from $28,000 to $420,000 only on commissions! Not bad? Knowing e-commerce trends this can be an actual alternative option to make some money in 2018.
How to Start a Bitcoin Exchange?
What target market are you aiming at? Depending on the country, states and their laws, your representative office must have certain permissions. The easiest way is to work in those countries that officially allow bitcoin as a means of payment, probably, Estonia or even Malta (Binance moved and registered here). Belarus have already legalized cryptocurrency, only time will show us how it affects the industry. Australia provided an opportunity to pay bills (including utility) through bitcoin.
Iceland and France are well-known countries for the extremely low cost of electricity, therefore, makes the cost of mining incredibly low. Venezuela, and other countries in South America as well as some states in the US are also popular for crypto miners. So the very first thing is to choose cryptocurrency friendly jurisdiction. Company registration is important for accepting fiat money.
Cryptocurrencies to List
The obvious but yet significant point. The more currencies you provide to users, the more audience coverage and more interest to the cryptocurrency exchange platform. Contrary to the erroneous view, cryptocurrencies are not much more difficult to maintain than 3. But at first, we need to integrate them, and this process takes some time. Once you have dealt with the previous two points of preparation, here is your next one.
But you should keep in mind, that every cryptocurrency such as Ripple, Litecoin, Ethereum, Dash, Dogecoin and other need to be integrated manually. Or you can create your own cryptocurrency and launch ICO. Companies like Binance, Exmo, and many other exchanges chose this proven way. They provide discount by using their coin as an internal volume. This is a safe strategy. Users get discount and exchange increases volume of coins.
Cryptocurrency Exchange Trading Platform
Preparing and planning are indeed important web development phases before launching almost anything – whether it is as complex as the exchange platform, the SaaS platform, or the website for your business. Let’s take a look at what features have to be in cryptocurrency exchange to satisfy their customer and owners.
1. Flexibility to customization and scaling
3. Easy management
4. The incredibly low delay time for the user
Moreover, each platform consists of separate modules, the so-called layers. Either of which functions independently relying on received data and the exchange interface. For example, the cash flow engine, the service of user processes, the server side, and integration with the UI (user interface). APIs and requests between layers organize connections. Usually, each of them is located on a separate machine/server.
The most important thing is obviously the platform itself, the server side. With this you can easily scale your business to web applications, desktop apps, mobile apps and so on. However, what to choose first - a mobile app or website?
Security and Protection
First, let’s find out what common issues, holes, and problems you might be faced with in the security of the system.
1. Unauthorized access to the administrator account (hacking)
2. Access violation to the server
3. The rogue process due to privileges
4. Security issues in external platforms
Users’ accommodations. Personal data security is in the first place, moreover, access to the system must be strictly regulated. Popular tools to protect this layer are:
1. Using secure and protected libraries and frameworks.
2. Two-factor authentication using Google passcode.
3. Request documents from users (KYC and AML). This item mostly related to exchanges with cryptocurrency to FIAT pairs and vice versa. It doesn’t necessary right now to upload documents for cryptocurrency to cryptocurrency pairs. In most cases you need only international passport, driver license or ID; also bank statement or utility bills for level 2 verification.
4. Manual confirmation from the administrator of high volume transactions and/or their large amounts. A cold wallet is optional and highly recommended to be used.
Administrator’s privileges, whether the cryptocurrency exchange built with blockchain technology, which is among other things in mobile apps development trends. Any trading platform requires admins. To secure yourself and the system check the following list:
1. Distinguish responsibilities and privileges of administrators; create additional groups, and roles. Every person manages only his small part and does not have access to more.
2. Team solution. Administrators from different groups must confirm especially important features.
3. Development and production are at least two separate areas. Limited access to each group. Manual database transfer, which is controlled by executives, CTO for example.
Malicious processes. Caused by malicious software either due to an intruder.
1. DDoS attacks. Requests must pass through certain servers and be cleaned for the end project.
2. Firewall vulnerability. They are solved quite easy – by professional system administrator, or an awesome hosting. AWS is probably the best solution at least if your Government allows hosting platform in the cloud. Otherwise, you have to take a closer look at the dedicated servers with load-balancing.
3. Authorized and protected access. 2FA is mandatory, whatever you choose Google Authenticator or SMS or even both options. If you decide to build decentralized cryptocurrency exchange you can forgot about this item.
4. Notification of administrators about suspicious activity. Well, you and your team have to be informed and up-to-date with current stage.
Technical issues. Sometimes things break down. Software issues or damaged hardware. Everything should be monitored and have Plan B, as well as a backup in a safe place.
1. Changes, exchange, and trading transactions are calculated, and if something is wrong – there is a return of operations.
2. Validation of sum.
3. Regular backups.
4. Available user log files.
5. Administrative notifications in case of inadequate activity.
Most importantly, in the event of a malfunction respond as quickly as possible; and be generally notified about it. Therefore, the cost of supporting of such projects monthly ranges from $200 to $2000, subject to working with East European Company. If you work with a company from central Europe, the UK or the US – you can safely multiply this cost by 3-5 times, depending on the company. In any case, it is important to know how to choose a web design agency. If you considering a quick launch you might be interested in our white label cryptocurrency exchange.
How much does it cost to build cryptocurrency exchange platform?
Trading currency exchange is a complex project, unlike a personal website. The team should consist of the following persons:
1. Project Manager for 2-3 months. Responsible for the work in the team, discussions, communication between team and client and actually the project management.
2. QA Engineer for 2-3 months. To test all possible scenarios and vulnerabilities.
3. Designer for 1 month. Designs an interface, and creates a relationship between users and the cryptocurrency platform.
4. UI developer for 2-3 months.
5. 2-3 Platform Developers for 2-3 months.
* This time frames are only for a high-skilled team who already has an experience and real examples. Otherwise, you can multiply time frame *2.
Conclusion: initial cost of developing a crypto exchange is $14,000, working with an agency from Eastern Europe, and with time frames at about 2-6 weeks for a white-label option. We have already our core and ready to deploy it in short terms. If you prefer to work with Central Europe, the US or UK based team, be ready to pay 22x times, approximately $320,000 for the same team.
Bitcoin is one of the most desired currencies for venture capitalists, hedge-funds, internet entrepreneurs and almost for everyone. Crypto exchange Exmo gained additional 2.11% traffic and now has strong positions. Almost in every country trading platforms take a position within first 1000 websites. Apparently, it’s not over yet. Financial analytics predict future Bitcoin growth.
Is Cryptocurrency Volatility Good for You?
Cryptocurrency market has a very strong volatility and the crypto exchange rate is highly variable and affects virtually any news. If something related to bitcoin affects it, be sure that the same news will affect Ripple (XRP) and even NEO or Stellar Lumens (XLM). Is it good? Depends on your role. It provides an opportunity to grow for traders and increases daily volume for cryptocurrency exchange platforms. Despite the fact, probably only long-term investments may lose. Even if you want to use a white-label platform, custom build one upon bitcoin exchange script. Your choice must depend only on your specific and particular business needs.
If you have a crypto exchange platform, you’ll earn a transaction between users regardless of the rate of Bitcoin. This is the one example of a successful business.