Bitcoin's incredible bull run has led to a surge in public interest in cryptocurrencies. In 2017, Bitcoin recorded a phenomenal growth rate, rising from $1,000 to $19,784, which led to an unprecedented rise in the use of this financial instrument.
Interestingly, this growth was primarily driven by cryptocurrency exchanges, which can be easily understood as online platforms that facilitate the buying and selling of various digital currencies. The functionality of cryptocurrency exchanges can be compared to the foreign exchange market, as they often offer users similar trading options. However, unlike traditional exchanges, cryptocurrency platforms allow users to organize transactions without geographic or time restrictions.
Today, it's relatively easy to build Cryptocurrency Exchange Software You can start this business by approaching a development company. However, before you go ahead, it is important that you understand the nuances of this business. This article will guide you in that regard.
Exchange Type
You may have heard terms like centralized exchange and decentralized exchange, but what do they mean? They simply refer to different models of cryptocurrency exchanges. Let's see how many such models exist and what their advantages are.
- Centralized Exchanges (CEX): Trusted intermediaries manage this kind of platform, which usually supports a range of cryptocurrencies and focuses on faster transaction speeds.
- Decentralized Exchange (DEX): In contrast, DEX platforms cut out the middleman and rely on peer-to-peer interactions instead. This type of exchange is highly secure and allows users to carry out transactions using independent wallets.
- Hybrid Exchange (HEX): As the name suggests, this is a combination of the two exchanges mentioned above. Platforms in this category usually have a trusted regulating body and do not require customers to use the platform's hot wallet.
Characteristics of a successful exchange
According to CoinMarketCap, exchanges now boast billions of daily trading volumes, demonstrating the incredible market demand for various cryptocurrencies. But what does a successful exchange look like? Here are some standard features shared by various market leaders:
- Quick Registration: Complicated sign-up processes tend to deter new users, which is why many platforms have adopted streamlined registration processes that integrate social media login options.
- Lowest Rates: Most platforms try to eliminate transaction fees or limit them to a small fee, which encourages users to execute multiple orders at once.
- Security Protocol: This factor can make or break a platform, which is why multiple measures are taken to protect users and the network from external threats such as hacking attacks. Improving security infrastructure plays a major role in increasing the trustworthiness of an exchange.
Also read: How to Build a Cryptocurrency Exchange and How Much Does it Cost?
- Multi-currency support: It is common for exchanges to carry a range of cryptocurrencies, from the most popular to the very niche, in order to attract and facilitate trading among a diverse customer base.
- Automated Trading: Cryptocurrencies are a highly volatile market that requires traders to stay constantly alert. Some platforms have started to introduce trading bots that can be programmed to automatically place orders based on various parameters, allowing users to enjoy greater mobility while also increasing the trading volume of the platform.
- Easy Checkout: Users prefer exchanges that allow them to deposit or withdraw funds instantly, and many offer a variety of payment methods including online banking, debit/credit cards, and even cryptocurrencies.
summary
As mentioned above, starting a cryptocurrency exchange is no longer a difficult task. There are multiple development companies, so entrepreneurs can simply outsource the work. Most companies White Label Solutions It can be modified to suit the client's requirements. However, due diligence and necessary research and background checks must be done before selecting a development partner.
