Cryptocurrency Exchange and Exchanger Development
A crypto exchange is a trading platform through which you can buy, sell and exchange cryptocurrencies. Like Forex, cryptocurrency exchanges facilitate cooperation between buyers and sellers of cryptocurrency, which ensures the reliability and security of transactions. The cryptocurrency exchange software development company works with the help of a trading engine. The speed and accuracy of operations depend on the optimization of its code. The engine registers orders in the database, and checks orders placed on the exchange for the safety of assets, that is, the availability of funds on the balance sheet. In addition, it prepares data that is displayed in a mobile application, web service or on the screen of a trading terminal.
The first cryptocurrency exchanges to emerge were centralized. The trading pairs with which these exchanges worked were only cryptocurrencies. However, as the market developed, a conditional distinction began to be clearly drawn according to the following types:
Altcoin or bitcoin exchanges. On such exchanges, only cryptocurrency is traded. Fiat currencies are not involved;
Cryptocurrency exchanges where exchange for fiat is possible. Such exchanges allow cryptocurrencies to be exchanged with each other, as well as to be paired with any freely convertible currency, for example, the euro or national currency;
Centralized exchanges (CEX). These exchanges are owned by companies that set the rules for trading. They are usually licensed and therefore required to comply with financial regulators;
Decentralized exchanges (DEX). These exchanges create P2P markets, but do not act as intermediaries; in particular, they do not store users' assets and are not subject to any regulation. On these exchanges, users make transactions anonymously via a distributed ledger;
Hybrid cryptocurrency exchanges. They combine the best qualities of all centralized exchanges – liquidity and functionality – and decentralized ones – privacy and security;
Cryptocurrency exchanges that offer the possibility of trading on margin, i.e. provide their users with trading leverage.
Some cryptocurrency exchanges can be classified into 2 or 3 types simultaneously. Therefore, it can be considered a conditional classification that is not officially cited.
The difference between a cryptocurrency exchange and an exchanger
There are two types of services for the exchange of cryptocurrencies.
Crypto exchange. This is a platform through which users exchange cryptocurrencies with each other, that is, the crypto exchange acts as an intermediary regulator between the two parties to the transaction for the purchase and sale of currencies.
Crypto exchanger. An exchanger is a trading party that participates in a trading operation. It is an analogue of a regular exchange office.
Prices in the crypto exchanger are controlled directly by the owner himself, while during the exchange the price depends on the balance between supply and demand. On the one hand, this is an advantage of crypto exchangers; however, crypto exchanges are somewhat more democratic in this regard, since the price is regulated not by one person, but by a large number of participants.
Pricing in the exchanger takes place in such a way that the owner links the rate to what is on the exchange. As a rule, the most popular cryptocurrency exchange development serves as a reference. However, some exchangers nevertheless set a rate that is significantly different from the prices applicable on large exchange platforms. In addition, in the exchanger, the user cannot choose the most suitable price for himself, since the local exchange rate is set there. On the exchange, in this case, a limit order is created and the transaction is made when the price reaches the required level.
When creating a cryptocurrency exchanger, pay attention to the following points:
efficiency of technical support;
opening hours;
the size of the commission;
variety of currencies;
simplicity and convenience of the interface;
stable operation.
Crypto Exchange Development Mechanism
A cryptocurrency exchange can be created from scratch or you can buy a ready-made development.
Development of a new structure
This is a complex approach, however, the most educated and effective. When creating a cryptocurrency exchange from scratch, you can better study the features of the cryptocurrency market and go through all the stages of development, starting with the development of the concept and ending with the final version of the product. The basic version consists of an administrative panel, a trading engine, a user interface, a database and wallet, an analytics and records management system.
The advantages of this approach
You get an individual product.
Safety guarantee.
Ability to improve or modify the exchange.
The disadvantages
The final cost of the turnkey exchange will be higher.
Launching an exchange takes more time than getting a ready-made solution up and running.
White label solution
This is an adaptation to your brand of a product that has already been developed. A cryptocurrency exchange running on a ready-made engine can serve as a temporary alternative or an additional service that you can offer to your users. Most of the time, the main activity of a buyer purchasing a white label product is not related to cryptocurrencies; however, it is very similar in terms of subject matter. The crypto platform is necessary due to the increased demand and current trends.
Benefits
Startup and setup takes much less time.
Initial costs are not that high.
The disadvantages
You don't have access to the source code, so you can't be 100% sure it's secure.
You depend on third parties.
With the revision, there will be some difficulties, and in the end, it will cost much more than the engine.
Financial and legal aspects
When creating a cryptocurrency exchange, most of the time is spent not on solving technological problems, but on financial and legal ones. It really takes a lot of time and effort to sort out this issue.
Registration as a legal entity
First of all, you need to choose a jurisdiction that would be most loyal to cryptocurrency services. In practice, this is not so easy to do, since so far cryptocurrencies have not received widespread recognition and have not been approved by the state apparatus of most countries. The following jurisdictions are most loyal to cryptocurrencies,
UNITED STATES
Malta
Estonia
Netherlands
Switzerland
In conclusion, creating a cryptocurrency exchange development solution or exchanger involves complex technical, financial, and legal considerations. While centralized exchanges offer high liquidity and compliance, decentralized exchanges provide privacy and autonomy. Hybrid exchanges strive to blend these features, offering a balance of security and flexibility. Developers can choose between building a custom exchange from scratch, offering customization and control, or utilizing a white-label solution, which is faster and less costly but may compromise security and flexibility. In addition to development, thorough planning for regulatory compliance is essential, with jurisdictions like the United States, Malta, and Switzerland showing the most openness to cryptocurrency platforms.