The cryptocurrency market is witnessing a dramatic change as a large number of businesses venture into cryptocurrency development services to add new revenue streams. The rise of crypto-exchange software has led to a new revolution in the world of finance as more and more cryptocurrency software development companies transform themselves to fill the new role. However, a series of steps are required to be taken to start a crypto-exchange development company.
- Company Registration
A business needs to get legally compiled by registering its company and bank accounts. Same goes for a cryptocurrency development company or a crypto-exchange development company as well. Whether you are developing a white label crypto exchange or a new exchange from scratch, you need to get your exchange registered in the region where you intend to launch your exchange.
You should start by looking for a crypto-friendly country where you will register your company. There are various countries favourable to crypto exchange setup, such as the USA, Singapore, Malta, Estonia, Hong Kong, Luxemburg, Switzerland, and more.
Each country has a different set of rules and regulations so study the regulatory framework and government policy of different countries and choose the best-suited country according to your business model. Make sure to launch your exchange in a country that can help your business grow and if required associate with an attorney who would help you shortlist a crypto-friendly country.
- KYC and AML Verification
KYC (Know Your Customer) and AML (Anti-Money Laundering) are identity verification processes (different in each country) that validate the identity of users to ensure authentic transactions on any exchange. KYC verification includes verifying any of the users’ identity documents like passport, driver’s license, or any address proof.
Components Required for a Crypto Exchange
Crypto exchange software development encompasses the integration of various components into the platform. These components include:
- Graphical user interface
- Secure admin panel
- Trading engine
- Cryptocurrency wallets
These components are all vital for the smooth functioning of any crypto exchange. Whether it is a secure trading mechanism, unlimited liquidity, or a guarded system, they are all absolutely essential for developing a powerful crypto exchange platform.
Let us discuss all the components in detail:
- Graphical User Interface
The design of a crypto exchange is very vital. It needs to be constructed in an accurate manner so that it is not just visually appealing, but easy to understand and use as well. The framework of the crypto exchange application should be captivating for both newbies and experienced crypto exchange users. A large percentage of the exchange users are not very tech-savvy and are usually from the finance, banking, investment, or even political backgrounds. User interface as well as user experience are two components that must be focused on and made simple enough to attract and retain users.
- Matching Engine
A matching engine is something that is responsible for buying and selling orders on a platform. A matching engine that is powerful enough can very quickly match the buy/sell orders on a platform and enable quick transactions. This is one of the prime things that users of such a platform look for on any exchange platform. Thus, it is essential to make sure that the exchange is underpinned by a powerful matching engine as it will help acquire and retain more users.
- Liquidity Options
Liquidity remains one of the most crucial factors affecting a crypto exchange as it directly affects the tendency of an asset to be sold or bought. If an exchange has high liquidity, crypto traders are likely to prefer it. Various ways by which liquidity can be maximized include listing various cryptocurrencies on your exchange, adding more payment streams, and by providing your users with access to multiple order books. Another mechanism that is widely used to achieve high liquidity on an exchange is via trading bots.
- Cryptocurrency Wallet
If a person exchanges in Bitcoin, or Ethereum, or any other cryptocurrency, a cryptocurrency wallet is indispensable. Cryptocurrency wallets are decentralized wallets and can be categorized into: hot wallet, cold wallet, and deep frozen wallet. A crypto exchange needs to be integrated with a secure wallet to help store and transfer crypto assets for traders. It is also possible to have a multi-currency wallet to enable your platform users to store their crypto assets all in a single place.
- Security of a Crypto Exchange
Security is a prime concern that needs to be focused on to build credibility among a target audience, especially when it comes to crypto exchange software development. A large number of robust crypto exchange platforms have fallen victims to software hacks in the past which is why fortifying the security around the exchange is vital. The users should be provided with a very secure platform for trading.
Hacking attempts are usually carried out through severs, the administrator panel, or social engineering. In order to curb this menace, you can include certain combat strategies like including the HTTP authentication feature, data encryption, jail login, CSRF protection, Anti-DoS (Denial of Service), and Anti-DDoS (Distributed Denial of Service). These features together can effectively take care of any hacking attempts made to the system.
Cryptocurrencies are now being slowly accepted by various large global corporations and economies and rules and regulations are being formed for their easy introduction into the financial systems. As an increasing number of companies become receptive to cryptocurrencies, crypto exchange software programs are also gaining mainstream adoption. The upward trend is likely to remain so and this is the right time to delve into cryptocurrencies exchange and wallet development.