Featured image for Cryptocurrency Exchange App Development

// Category: Cryptocurrency

Cryptocurrency Exchange App Development

Featured image for Cryptocurrency Exchange App Development

Let us tell you what problems interfere with crypto exchange development, as well as about who and how to solve them. This will help to understand which currencies have a future and growth potential, and which ones will leave the market due to the technological lag.

Types

Before starting development, you need to understand what type of platform you want to run. Therefore, we will consider the main types of crypto exchange applications.

Spot. The simplest type of trading where users buy cryptocurrency from another user. The terminal has a wide range of features for trading on limit and market orders. As a rule, on such platforms, the owner earns on a fee.

Margin. The user can borrow funds from the platform and trade. This feature makes it possible to increase income on the one hand, but there is also a risk of losing your entire balance. The owner of the platform earns on the fee and the interest rate of the borrow. As a rule, a loan is issued in the amount of x3 - x5 of the user's balance.

Futures. The user has the opportunity to trade with a credit cry from x2 to x100. Suitable only for experienced traders. High risks give high profits. But according to statistics, only 2% of all users actually earn using leverage. The remaining 98% lose their entire balance. The platform owner earns from fee, liquidations and maker/taker fee.

Additional earnings can be the placement of crypto tokens on your platform and the development of your own token.

Security

The essence of the problem. The Encrybit survey showed that 40% of cryptocurrency traders consider security as the main problem in the crypto exchange software. And this is understandable, since, according to Group-IB, the activity of hacker attacks on cryptocurrency services has increased over the past year.

Cryptocurrency Exchange Development list of attack

Distribution of cyber attack victims by country

They studied the indicators of the 19 most popular exchanges in Group-IB. They found that at least 5 of them were victims of hackers: Binance, Bitstamp, Poloniex, Bithumb, Bitfinex and, Huobi.

These are cryptocurrency exchanges that have a good security system: "Security perimeter", several levels of protection for authentication and other means of protection. It is terrible to think what is happening with security on online exchangers and p2p crypto exchange platforms.

How to solve the problem. A study of the Mistertango payment platform showed that 55% of cryptocurrency users support AML/KYC and other protection methods in order to increase the security level of cryptocurrency transactions.

Other security features can be:
● use of biometric data for authentication;
● use of AI, quantum entanglement and other advanced technologies to increase the level of protection;
● transition to platforms created on the basis of decentralized blockchains.
● use face and fingerprint biometric reader in crypto exchange app development.

What has been done. A decentralized cryptocurrency exchange is a platform that brings the seller and buyer of cryptocurrency together, giving them the opportunity to make a deal without having to transfer funds to a third party account (exchange). That is, if you, for example, buy bitcoins for dollars, you and your counterparty do not need to open a deposit on the exchange - you initiate a smart contract and create a crypto exchange.

Cryptocurrency Exchange Development: beetwen Decentralized Exchange and Centralized Exchange

The most popular decentralized exchanges — Pancakeswap, Uniswap.

The use of biometrics supports such cryptocurrency wallets Trust Wallet, Coinbase Wallet, Exodus. All of them give access to funds only after authentication, which may involve a fingerprint, face ID or retinal scan. At the same time, the developers promise that after the portable and relatively cheap DNA scanners appear, they will also be involved.

The Best Hot Wallets

The best hot wallets 2024-2025. Source of the rate nerdwallet

For the safe exchange of one cryptocurrency to another, they invented an “atomic swap” - special smart contracts that guarantee the exchange of values between two blockchains without intermediaries and guarantors. Atomic swap support Bitcoin, Decred, Vertcoin and Litecoin.

Quantum entanglement in the field of cyber security so far no one has been able to implement, including banks and states (there are doubts here, since the data can be classified). Artificial intelligence for security when cryptocurrency transactions plan to use AUTONIO, AICoin and Peculium.

Scalability

The essence of the problem. Many cryptocurrencies like Ethereum and Bitcoin, have a growth limitation due to the fact that when a certain level of user activity is reached, system performance drops sharply: the time required to confirm transactions increases, commission fees increase. This should be taken into account when developing a trading platform software.

Popular payment systems

Bandwidth of popular payment systems

In Bitcoin, the limit is in the region of 7 transactions per second, in the Ethereum - 20 operations per second. For example, Visa can process about 1700 transactions per second. If users perform more operations than the blockchain can process, a queue is formed. This leads to an increase in commissions, since the larger they are, the higher the priority in the queue.

According to this scenario, events developed in the summer, and then at the end of 2017-2018, when thousands of queues formed in the Bitcoin network, due to which the transaction time increased to several days, and the commission jumped to $50.

Transaction fee

The average fee for a transaction on the Bitcoin network

How to solve a problem. Experts offer the following options:
- increase the block size or make it customizable (according to the decision of miners or depending on the load on the system);
- replace the PoW consensus protocol with another, for example, PoS;
- use centralized blockchains;
- process part of the transaction "offline".

What has been done. In the Bitcoin network, the problem of scalability was partially solved by updating SegWit, which increased the blockchain bandwidth from 3 to 7 operations per second and implemented Lightning Network (LN).

Network

LN work pattern

Lightning Network allows you to create payment gateways between users, within which you can make almost instant transactions with an unusually low commission. Only the opening of the channel and its closure is prescribed in the blockchain, since all operations inside the gateway are carried out "off-line".

Ethereum plans to solve the problem of scalability using the Raiden Network technology (analogue of LN), as well as a possible transition to the PoS or Zk-Snarks consensus protocol and the introduction of several other technologies: State Channels, Sharding and Plasma. In addition, the replacement of EVM by eWASM is discussed.

And don't forget about liquidity providers for a cryptocurrency exchange app.

Usability and market acceptance

The essence of the problem. Cryptocurrencies cannot be used for ordinary payments, as they are too complicated, have an unstable rate and are accepted by a limited number of points of sale of goods and services: shops, airlines, hotels and the like. It looks like bitcoin will be more used as an asset to save money and as a trading speculation. Therefore, I think that it makes sense to develop a crypto application, since the popularity of this asset will only grow. We already saw this at the beginning of 2023.

BTCUSDT chart

Bitcoin dynamics

How to solve a problem. To use bitcoin exchange scripts, you need to understand how this technology works, download a cryptocurrency wallet, register on the network, figure out how to make transactions, and constantly recheck everything - it's too difficult to buy a cup of coffee or a plane ticket.

cryptocurrency development company

Survey results on why Americans do not buy cryptocurrency

Most of this process will become unnecessary if you use a cryptocurrency debit card and/or simple mobile applications. With their help, you can make financial and payment transactions with the same ease as a VISA card or PayPal payment system.

You can increase the level of understanding of technology through advertising, educational programs and expanding the scope of cryptocurrency. 10 years ago, few people understood how to work in online banking. Now it is the norm for 66% of Americans and 70% of UK residents. With cryptocurrency will also.

The level of market acceptance will grow with the spread of cryptocurrency in the world, reducing the complexity of their use and reducing the rate of volatility. The latter will occur automatically as the capitalization of cryptocurrency increases - as it happened with the rate of Internet companies' shares at the beginning of zero.

What has been done. Most of the popular cryptocurrency wallets acquired mobile versions, web version and browser version. Debit cards use Cryptopay, Coinkite and others. Some companies only issue debit cards that can be used as bank cards.

6 best debit cards for Bitcoin

Overstock was the first major marketplace to start accepting bitcoins. It was followed by online stores of Xbox, Expedia, Newegg, Virgin Galactic and thousands of others. Last year, about 36% of small and medium-sized companies in the US accepted bitcoin. The 3 most popular companies that accept bitcoin payments are:
- Wikipedia
- Microsoft
- AT&T

map where accept bitcoin payment

The distribution density of sales points that accept cryptocurrency according to simtechdev.com

It is also worth noting that there are more and more ATMs-ATMs in the world, with the help of which you can make purchase and sale of cryptocurrency using Fiat or bank cards. The first such ATM was installed in 2013 in the center of Vancouver. Now there are 4,000, most of which are installed in the US.

Bitcoin ATMs

Appearance of ATMs-ATMs

At these ATMs, you can sell and buy Bitcoin, Bitcoin Cash, Ether, Litecoin, Dogecoin, Monero, Zcash and Dash. The developers promise that the number of currencies will gradually grow until it reaches the first hundred of cryptocurrencies by capitalization. This means that the development of a crypto exchange app can have great prospects in the future.

Microtransactions

The essence of the problem. Microtransactions are transactions with very small amounts, which usually occur when buying and selling low-value goods. For example, when buying a pen, a cup of tea or a pack of matches. To service such operations, you need a payment system with high speed and very small commissions.

Bitcoin, Bitcoin Cash, Ethereumand other popular cryptocurrencies are not suitable for servicing microtransactions due to low speed and high commissions for such operations. For example, buying a pen for $1 using bitcoins will take 30–60 minutes and cost $1.5 ($1 per pen + $0.5 of commission).

How to solve a problem. This can be done in two ways:
1. Use centralized cryptocurrencies to increase transaction speed by reducing the level of security;
2. Create payment channels on top of the blockchain network, so that operations take place “offline”.

What has been done. Most of the new cryptocurrencies went the first way, because it is easier and cheaper. However, many people don’t like it, because users prefer high-speed security.

Table of the cryptocurrency

“Old” cryptocurrencies are forced to resort to new technologies to create the conditions for microtransactions. For example, in Bitcoin, the previously mentioned Lightning Network technology is used for this. Thanks to it, the capacity of the system will increase to 10,000 operations per second, and one cent will be enough for a month of active use of the LN channel.

Lightning Network is in open. The number of test participants reached 12,000 users. Brazilian Bitcoin enthusiast "taught" the Coca-Cola vending machine to accept cryptocurrency using the Lightning Network. To use such an ATM, you need to scan a QR code with a BTC address and pay for it with a wallet that supports the Lightning Network.

Legal nuances

The essence of the problem. Legal issues in the development of a crypto exchange application related to cryptocurrency transactions can be divided into two categories:
- prohibitive measures - some countries, referring to the possibility of using cryptocurrencies to finance terrorism, money laundering and tax evasion, decided to ban them. These include Vietnam, Kyrgyzstan, Bangladesh, Ecuador and Bolivia.
- jurisdiction and taxation - so far no country has introduced rules according to which it would be unambiguously clear how operations and income related to cryptocurrency are levied, and what operations fall under this or that jurisdiction.

How to solve a problem. The Mistertango study found that 88% of cryptocurrency exchangers want more industry regulation to improve the reputation of the technology and avoid the turmoil associated with scandals around hacker attacks, fraud and other negative scenarios.

Thus, the elimination of legal barriers to the development of the crypto exchange market is associated with lobbying legislative acts that increase market regulation.

This can be done in several ways:
- hold rallies, actions, meetings with officials;
- create organizations that will do this;
- hire lobbyists.

What has been done. Cryptocurrencies feel best in Switzerland because they are equated to foreign currencies there. In Germany, bitcoins and other digital money were recognized as a settlement currency. In Japan, they are legalized as a means of payment. In Ukraine and a number of other countries there are no restrictions on the sale and purchase of cryptocurrencies, but there are problems with the taxation of such operations

How countries relate to cryptocurrency

How countries relate to cryptocurrency. Source thomsonreuters.com

In the US, cryptocurrencies are legalized (as an investment asset) and taxed:
- if a currency is kept for less than a year and its price has increased, then this income falls under the personal income tax with a progressive scale from 10% to 37%;
- if a currency is kept longer than a year and its price has increased, a tax is imposed on long-term capital gains and is taxed at a rate of 24%;
- if the cryptocurrency passed the Howey test, its coins are considered shares and are taxed according to the above rules.

The cost of developing a crypto app

It is difficult to give one figure, since the cryptocurrency exchange development cost depends on the number and complexity of features in the application. In general, the cost of a software solution ranges from $20,000 to $150,000. In some cases, the cost of a crypto exchange can reach $500,000 - $800,000. It depends on your ambitions and your vision.

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