By 2019, the idea of a cryptocurrency business does not surprise anyone. But what to do? Mining loses profit, trading takes a lot of time and effort, some methods (like Bitcoin faucets) are a priori not profitable. Against this background, launching your own exchange platform is becoming more and more relevant.
Beginners have many questions about this business. Obviously, the cryptocurrency exchange has a lot of nuances, having missed that you can fail a lot. But any idea always has a beginning. In this case, there are many successful trading platforms. On their example, we managed to highlight key aspects that need to be paid attention to when creating the exchange platform.
Essence of Crypto Exchange
Without an understanding of the tasks of the exchange it is impossible to create a quality service. Here it is important to remember that Bitcoins and altcoins are decentralized, digital assets. Therefore, such a trading platform is practically the only way to buy or sell a cryptocurrency (if you do not take into account direct settlement).
Types of exchanges
Due to the high popularity of such platforms as Binance, Poloniex or Okex, many people believe that all exchange platforms are the same. But the variations are much greater. Turnover, types of orders and even data storage depend on them.
Thus, the crypto-exchanges are divided into centralized and decentralized. The first are characterized by the presence of management personnel, the collection and storage of personal user data and the storage of transaction information on their own servers. In addition, the purpose of creating a centralized exchange - making a profit. Examples of such sites include GDAX, Bittrex, Kraken and others.
There is no administration in decentralized ones (there are only developers who monitor stability and security). There is also no need to provide personal information, and all transactions go directly through the blockchain of the traded cryptocurrencies. Famous decentralized exchanges include Bancor, Bitshares, Loopring, Waves.
An important difference between these two exchanges, which you should definitely consider when developing your platform: there is no mechanism for adding fiat wallets to decentralized exchanges. Because they are less convenient and less popular among users.
The next branch is the administrator-user type exchanges, margin trading exchanges and peer-to-peer platforms.
Admin User. Transactions are carried out directly between the client and the owner of the site. Courses are fixed and set by the administration. In fact, it is a cryptocurrency analogue of ordinary currency exchangers.
Peer-2-peer. Here deals are made between users. Such platforms are most often used for trading, as earnings on cryptocurrencies.
Margin Trading Exchanges. A variation of the previous version. The difference is that there are no direct deals on the number of coins. In this case, users trade in futures, contracts and cryptocurrency derivatives.
Ways to create
The first option that comes to mind is the development of a platform from scratch. This is a great way to bring more benefits. You can get your own reliable stock exchange, the profits from which you will manage on your own. At the same time, it takes much more time, money and effort.
The second way is to buy ready-made scripts, better known as White Label Solution. It is cheaper than the previous version. At the same time, the main modules will be ready, it remains only to customize the site. However, you will have less control over it, you will need to contact the supplier to make changes, and you will have to pay interest on the profit.
The last option - the use of open source (Open Source Solution). This is a free way. Again, the foundation is ready: you only need to make edits to unique the system. But in this case, the security of the service suffers a lot, and you can’t wait for support.
When building a web platform, its structure plays a very important role. The speed of information processing, page load and the maximum possible number of applications depends on this. Also, architecture has an impact on site safety and sustainability.
Monolithic platforms are usually built on a single server. Thus, their functionality is limited, and throughput and query processing speed is low. Such exchanges are fairly cheap in creation, but their profit is insignificant.
Modular systems are characterized by the location of each component on separate servers. Thanks to this, higher throughput and system efficiency can be achieved.
In distributed systems, each module has a so-called submodule. In other words, several servers can be allocated to one element. Such a system is not cheap to maintain, but can significantly enhance the capabilities of the platform.
Script for platform creating
Writing a script is like a full-fledged development of the exchange platform. This can be done independently or ordered from specialized companies. The advantages and disadvantages are also similar.
The main elements of the script
If you take ready security, you only need to check the quality of each module. It will take a few days. But when creating a stock exchange from scratch, it is necessary to devote a lot of time to each element so that the platform is stable and highly efficient.
Trading engine. This should be a separate point of the entire development, on which the whole team should work. The trading engine gives access to the book of orders, connects buy and sell orders, executes transactions and calculates the balance after each operation. The slightest mistake can lead to significant losses for both the user and the owner of the exchange.
User interface. Programmers used to call this element "front-end." From this module depends on how the client will see your platform. Create an environment for users to enjoy the trade. In other words, you need to develop a clear and practical interface.
Provide quick and easy access to features like:
- registration and authorization;
- replenishment of purses and withdrawals;
- management of funds;
- view the book of orders and transaction history;
- creating orders;
- communication with technical support.
Administration. This module is very important for developers and the owner of the exchange. It depends on the management of all processes on the site.
Required availability of such functions:
- spread correction;
- setting commissions;
- checking user accounts for the KYC procedure;
- adding new cryptocurrencies (connecting the exchange to their blockchain);
- execution of withdrawal requests;
- redirect requests to technical support.
Trade traffic generation. Creating order history is a separate task of the script. Based on it, charts are formed on the stock exchange. Of course, this process can be entrusted to the trading engine. But then the speed will be slightly lower. To provide instant information about quotes, you can select generation into a separate component.
Providing liquidityUsers rarely come to services with low trading volume and an empty book of orders. Because many exchanges are faced with the problem of liquidity. You can fix it in the following ways:
- personally simulate trading activity on the exchange, creating orders through artificial accounts;
- join the network of exchanges, within which a constant unhindered exchange is ensured;
- implement an API interface that connects your exchange with another similar.
- Choose a stock exchange as a liquidity provider.
- Integrate its API into your Bitcoin exchange software between two sites.
- Change the script code by adding the Exchange Remarketer module.
Thus, this module plays the role of all artificially created account and missing traders. However, it is important to correctly write the code so that Remarketer performs operations only when necessary. Otherwise, ordinary users will not exchange with each other, which will lead to quotations failures.
A cryptocurrency exchange is a resource that works with finances, as well as personal data of users. Therefore, protection against hacking attempts and theft of funds or information must be top notch.
First of all, you need to buy your own servers, and not to rent on the hosting. Even in your team’s environment, only those closest to them should have access to them. Trust is good, but in this case we can talk about large sums, and therefore huge losses in case of theft of funds or the disclosure of someone's data.
The script also contains a security module. Thanks to him, most of the protective processes will be provided. In addition, the ability of account protection by the client depends on the structure of the script. Since they work with money, it is advisable to provide maximum two-factor authentication (2FA) methods.
Effective protection is provided only by testing. Therefore, create a list of various ways of attack on the system and check the protection for each one.
Paperwork and implementation procedures
Many rules are understandable to users on an intuitive level. For example, the administration can not be held responsible for transferring access to a third party account or entering data for authorization on third-party resources.
However, all this must be specified in the rules for using the service. In case of disputes, you will need to rely on something. In the case of online exchanges, such rules are the only document that can explain to the user any action on the part of the administration. And only with the help of the rules the client will be able to understand to whom and how to contact in case of problems.
Cryptocurrencies have long been the main subject of most money laundering scandals. Legalization of income passes, as a rule, through the exchange. Therefore, it is necessary to introduce KYC (know your customer) and AML (anti-money laundering) procedures. So users will clearly understand why they provide their personal data and what the consequences may be in case of committing offenses through your exchange.
Always look for ways to improve the exchange
Good service should not stand still. Innovation is the king of any industry. One of the required items is adding new cryptocurrencies to the list of exchanges. In many forums, you can find frustrated users of Coinbase, which for a long time offers access to a limited number of cryptocurrencies.
Another option is trade automation. Quite often, users make several orders with the same source data. So why not allow the creation of several templates that can be added to the book of orders much faster?
Track changes in the market and introduce the best solutions on your site. Then the flow of users will never decrease, which means that the profit from the exchange will not fall.