How To Build A Crypto Exchange From Scratch

The cryptocurrency industry boom has created a market that is now valued at a staggering $400 billion globally. With rising acceptance and greater integration offered by many financial institutions, this decentralized open-source monetary system is soon becoming a thriving and lucrative free-enterprise economy.

In this article, we discuss in detail how you can start your own crypto exchange or trading platform with ICODA and creating a lucrative cryptocurrency exchange business easily!

Before we begin delving into the technical aspects of starting a crypto exchange platform, you need to understand how cryptocurrency exchanges work. As you will be aware, a Bitcoin or any other cryptocurrency “token” is a string of code that carries a value due to its non-changing nature.

Each string of code constitutes a “block” of information, and when a transaction is conducted, the transfer of funds is recorded in a public ledger known as the Blockchain. The Blockchain is literally termed as it is a chain of blocks of information, where each new transaction is added to this chain in the form of a new block of code.

This public ledger is updated across each participating node and retains a similar copy of the whole chain on each node. In this way, it is highly transparent and can not be manipulated or modified by a single entity or used for things like money laundering, due to its security architecture and implementation, unlike the traditional banking system.

Through a crypto exchange users who would like to obtain specific cryptocurrencies can do so using a variety of means. You can allow users to create a cryptocurrency wallet and accept cryptocurrencies from others in exchange for services or products. through a crypto exchange business, users can also obtain cryptocurrencies by buying them directly using fiat money.

These activities will be supported by your cryptocurrency exchange platform, which functions as an open market where users can buy, sell, or trade their cryptocurrency tokens and fiat money.

A cryptocurrency exchange software is a platform that allows different users to interact with each other and trade between fiat currencies and cryptocurrency tokens using blockchain technology. There are various kinds of exchanges, each having specific capabilities and limitations.

A cryptocurrency exchange work by providing a framework where users can trade services, fiat currency, products, or digital goods in exchange of cryptocurrency.

The terms cryptocurrency market and cryptocurrency exchange are often used interchangeably, although there are a few defining differences between them. The primary focus of a cryptocurrency market is to allow users to PURCHASE cryptocurrency tokens using FIAT currencies. 

On the other hand, a crypto exchange’s primary purpose is to enable users to TRADE services, products, and digital goods in exchange for fiat currencies or cryptocurrency tokens. It functions as a stock exchange and allows users to conduct currency exchange and trading activity.

There are two significant kinds of cryptocurrency exchange software you can build. The first kind is called a traditional exchange. This kind of exchange will allow users that visit your website to post listings or offers that comply with a pre-defined set of terms and conditions. Interested buyers will avail of these offers and deals without being able to interact with the original merchant. Each transaction will be conducted through an online order book that acts as a middleman for each transaction.

The second kind of crypto exchange you can build is called a Peer-to-Peer exchange. In contrast to the traditional exchange, a P2P exchange will enable vendors and sellers to create listings, deals, and offers while dictating their own terms and conditions. The merchant/traders and the buyer can also directly message each other through your crypto exchange platform. Each transaction is conducted directly between the merchant/seller and the buyer. The goods are stored in a “vault” until both parties submit their part of the deal. 

The choice of what cryptocurrency exchange to use is often left to the client based on their preferences. When deciding how to create your own crypto exchange, it is best to consult with specialists, experts, and developers before making the final decision.

You can build a crypto exchange website to offer users the facility to their requirements for trading and obtaining Bitcoin and other cryptocurrencies.

Our software development teams can help you build different kinds of exchanges which can generate revenue through a variety of means. This includes charging a small deduction from each transaction that occurs through your website.

Your crypto website can also include additional trading fees and deductibles to each transaction and paid membership schemes, which will allow your company to generate passive income. You can also offer commissions to agents that help promote your website and reduce the cost of the advertisement. In this manner, building a cryptocurrency exchange will prove to be a lucrative investment that can create a profitable business for your company through multiple channels.

Asking this question too early will affect your expectations and limit your capabilities. It is best to begin with a rough idea of everything required to create a cryptocurrency website before you finalize your budget and investment.

The total development costs of programming, testing, and marketing a new cryptocurrency exchange depend on several variables, such as your target audience, the number of users supported by your platform, the features of your platform, the programming language, the cost of interconnected apps, and other such resources.

We’ll have a look at each of these features to help you learn how to build a crypto exchange.

Below we discuss a list of factors that you can consider before we begin creating Bitcoin exchange software for your company.

Initially, we conduct a detailed review of your competition. Through this process, we develop an understanding of your target market and determine the best features and capabilities to include in your crypto trading website. The survey helps us know your customer and find space for innovation by identifying gaps in the services being offered by your competition that you can fulfill with your new cryptocurrency exchange.

The next step conducted by our team is to determine the USP’s (Unique Selling Point) that will help you catch specific market segments and create a challenge for your competitors. Your USP can be based on advancements in existing capabilities like those offered by your competitors, or completely new functionalities that we develop based on the identified gaps and demands of the target audience. 

Selecting your niche market is also an important aspect to consider before you begin the development process. By targeting a specific market, you can create a directed campaign that focuses on that population’s demographics. We review the limitations that might be applicable to your specific case and develop a strategy to help you target a global or niche target within your market.

A quick review of any geographic or area wise regulations and policies is conducted to help you create the best service possible within the existing framework of the legislature.

From registering your corporation through licensing and regulations of each location for proper compliance, to helping you leverage similar jurisdiction among countries to target a whole group of locations, our team will be with you every step of the way.

Certain countries such as the European Union, the United States, Eastern Europe, India, Japan, Switzerland, Germany, Ukraine, and Estonia facilitate crypto trading in all forms. Some places such as Russia, Pakistan, and China outlawed or banned crypto trading.

We help your company identify its financial goals and choose whether you would like to enforce transaction limits and other restrictions on your crypto exchange website. The option to scale up as your business grows is always available, and we help you determine such factors before development to ease the process.

Through our legal team, we help your organization review the terms and conditions under which your cryptocurrency exchange will operate. This includes a complete business strategy that will define the way your company functions, the finances, the means of profit, documentation, and all other legal and commercial aspects of your venture. This is how we work at ICODA! 

Based on our study of existing cryptocurrency exchanges across the web, we have compiled a list of features and capabilities common to all successful exchanges, to help you learn how to start a crypto exchange and narrow down your approach to determine prospects for innovation and advancement of capabilities. 

1. Multiple Cryptocurrency Support

Almost all popular exchanges support multiple cryptocurrency tokens for the trade conducted through their platform. Although this number can be limited to a few popular tokens, you must enable your users to utilize a significant range of cryptocurrencies. Bitcoin exchanges that focus on only one primary token also exist but do not receive as much interaction as those that support multiple tokens. 

2. Multi-Currency Support

As your cryptocurrency exchange will no doubt need to allow trading with fiat currencies, you must also enable your users to utilize different currencies through your website. 

3. Support for Bank Transfer

We help your company initiate partnerships with local banks to help you conduct transactions using fiat currencies properly. A much-demanded aspect supported by various successful cryptocurrency exchanges is the capability to initiate direct bank transfers for trading through the platform. It is a useful feature to include in your cryptocurrency exchange platform when you begin development with ICODA.

4. Support for PayPal

Users across the globe utilize their PayPal accounts for purchases and transferring money. By incorporating support for PayPal transfers through your platform, we help enable your website to attract a large user base searching for a convenient way to trade through cryptocurrency exchanges without needing to go through complicated and lengthy financial procedures.

5. Support for Credit Cards

A growing number of cryptocurrency exchanges are now rolling out support for various standardized credit cards to allow trading through their platform. By integrating credit card support for your cryptocurrency Bitcoin exchange, you can generate a secondary stream of revenue through partnerships with popular banking chains and credit card providers. 

6. User Interface

An essential aspect of a successful cryptocurrency exchange is providing a user friendly, engaging, and convenient interface that simplifies the whole process for visitors and does not require complex training or a steep learning curve and provides a consistent trading experience. We create a clean and intuitive user interface that will help you retain clients and convert users who are merely exploring your site. 

7. Wallet Integration

A critical functionality that can provide massive leverage to your cryptocurrency exchange platform is integrating various Bitcoin wallets. We can also go a step further and build a crypto wallet connected to your platform that lets users deposit money and withdraw funds from the user’s account.

8. Price Predictions

Most cryptocurrency exchanges take an informative approach with their users and seek to provide as much knowledge to visitors as possible. To this end, we can integrate a price prediction feature that utilizes various sources to determine the future price or value of a token, helping users decide which cryptocurrencies are best for investment or trading at a time.

9. Live Price Monitoring

Another great feature that will help your cryptocurrency exchange stand out is the delivery of a live price monitoring system that enables your users to view the current global prices of different tokens and the exchange rates provided by your platform each cryptocurrency token and Altcoin.

10. Easy Onboarding

When we build your cryptocurrency software, we provide a quick and easy onboarding process that helps new users learn your platform’s intricacies in the shortest possible time frame. This will drive more conversions and help you retain clients by appealing to their need for ease and convenience. The onboarding process will allow your clients to learn how to set up a bitcoin exchange and best practices for engaging with the site. 

11. Transaction History

A popular feature we include in your cryptocurrency exchange website, whether traditional or P2P, is providing a detailed transaction history feature for all user accounts that displays withdrawals, deposits, and current account details.

12. User Profiles

To enable different users to register and create an account on your website, we include a user management feature for your crypto website. This will allow registration of new users, administration of account options, customization, the ability to view deposits, and account balance, along with other details. This also includes adding the feature of an admin panel to monitor accounts on the site and provide customer support.

Now that you have conducted a review of your competition and moved forward from the initial planning stage with a clear idea of the features and capabilities you would like to incorporate in your new exchange, we can now begin the development of the prototype! 

1. Set a Schedule

The first thing we do is to determine a tentative schedule for your project to ease out the process of financing the development and help the development team create a transparent scheme of deliverables that must be provided to your company. 

2. Supported API’s and Integration

Through a detailed discussion with your development team, we determine the list of APIs to integrate with your new exchange platform. This includes a complete review of all the features you wish to provide and the interconnected APIs required for the provision of each component.

3. Web and Device Based Apps

Next, we select whether to develop a web-only application or also to include supported mobile apps for Android and iOS. Mobile apps can be either cross-platform hybrid apps or native apps for each OS you wish to keep. 

4. Front-end & Back-end Frameworks

The most important aspect of the software development phase is the choice of frameworks and technology stack for the design and development of your new exchange platform’s front and back end. 

For the front-end, we utilize modern asynchronous open-source frameworks and java libraries such as Node.js, React.js, or Ractive, which provide a fast and clean user interface for your platform’s UI.

For the backend, we utilize a combination of stable frameworks from various options such as Laravel, RubyonRails, Perl, Python, or Apache, to name a few along with suitable databases.

5. Planning with Reliable Servers

No matter what framework you choose for the backend, you must create an actionable strategy that supports future scalability and expansion. By utilizing a flexible framework, we can make space for future growth by choosing stable, reliable, and scalable backend technologies to help you grow as your business multiplies.

Now that the software development side of things has been reviewed, we must begin to consider a few critical aspects before you can launch the new platform you have developed.

1. Security and Encryption

A significant concern when it comes to launching and developing a new cryptocurrency exchange is the security practices you can ensure for the platform. As the platform will be dealing with financial information and transactions daily, we make sure to deliver a secure encrypted infrastructure that is safe from malicious activity by utilizing a multi-layered protocol. This includes maintaining proper web certificates and incorporating multi-factor authentication and other security features that allow users to safeguard their information.

2. Prototyping and Testing

As development progresses, we build a prototype that will be used for beta testing and further optimization before the MVP or Minimum Viable Product Development is initiated.

3. Distribution and Marketing

After the prototyping, testing, and completion of development, we begin rolling out your new cryptocurrency exchange to your selected platforms (browser or mobile). This is the stage where we start marketing your app by utilizing the services of a brand marketing agency to spread the word about the new exchange to your target audience and initiate a successful campaign.

4. Creating Liquidity and Traffic 

As the first users come rolling into your platform, we first initiate a scheme of transactions that helps create liquidity for your new cryptocurrency exchange. We do so by creating administrator run profiles on the exchange to create trading pairs which help generate traffic and attract new customers by driving engagement statistics that are indexed by search engines and ISP servers.

5. Client Discovery and User Creation

Once your site is up and running, our primary focus is to enable new clients to discover your platform and engage in profitable trading. To invite new users and help them discover and explore your exchange, we can create limited-time offers and deals that entice visitors to interact with the exchange in the interest of turning a quick profit.

Starting a cryptocurrency exchange software to allow the trading and exchange of cryptocurrencies is a great way to develop your business and create a lucrative means of profit. 

The process listed above provides a clear idea of How we Build a Cryptocurrency Exchange at ICODA.

For a quick discussion regarding your next venture, contact us through our customer support at ICODA, and we will do our best to address your questions.