Creating a crypto exchange is a promising business opportunity, driven by the rapid development of digital assets. Cryptocurrencies are becoming increasingly accessible and are beginning to be widely used as investments and payment methods. They were created as an alternative to existing fiat currencies and offer numerous advantages.
Opening a crypto exchange is a full-fledged financial undertaking that requires investment and a business plan. What are the functions of an exchange? On an online platform, clients exchange one cryptocurrency for another or convert digital assets into fiat currencies and vice versa. Crypto exchanges are attractive to regular users because they provide easy access to transactions with tokens, crypto, and various digital assets.
How a cryptocurrency exchange works
Cryptocurrency exchanges have one important feature for their owners: consistent profitability, as it depends on transaction fees. Regardless of fluctuations in the exchange rate or liquidity, income comes from the commission charged for transactions.
While the basic user flow seems straightforward, the underlying system must handle high-frequency trading and maintain sub-millisecond latency. This is why professional centralized exchange architecture development focuses heavily on the matching engine and liquidity aggregation layers. Without a robust core, even the most intuitive UI will fail under significant market volatility.
For users, the exchange process follows this algorithm:
- registration on the platform;
- verification (not always required);
- selection of currency pair for exchange;
- determining the course for the selected operation;
- filing an application;
- the transaction itself.
Transactions are made according to the following business deals: Crypto > Fiat, Fiat > Crypto, Crypto > Crypto. So why should you create your own crypto exchange? The amount of crypto held by the population is constantly increasing. Digital assets are increasingly used in circulation.
Cryptocurrency exchange operating modes
The online service can operate in the following modes:
- automatic, operates without operator intervention, valued for its efficiency;
- manual method is necessary for carrying out complex and large transactions;
- semi-automatic, partially under the control of an administrator who checks the correctness of the data entered;
- a hybrid where small operations can be processed automatically, while large ones are handled manually.
Each mode offers its own advantages. All create accessible and simple user experiences. In automated mode, clients independently enter all information into an online form, generate applications, and quickly process transactions. Manual mode offers a personalized approach, enhanced security, and precise transaction control. Combining these approaches in the hybrid version optimizes the exchanger's operation, making it convenient and secure.
Steps to creating a crypto exchange
Before deciding to create this business, you need to research the market. This research includes analyzing competitors, identifying the target audience, and compiling a list of optimal services and features for the future platform.
Next, you need to follow the following algorithm:
- obtaining a license and studying the regulations of the markets of the countries where the online service will operate;
- development of an optimally effective and user-friendly website design;
- choosing the type of exchanger, which we will consider in more detail below;
- definition of the technical stack: type of blockchain, database and other technologies;
- testing of work, error correction, regular maintenance.
It's important to constantly respond to technical issues. Technical support will ensure the service's stable and productive operation.
Types of cryptocurrency exchangers
Cryptocurrency exchanges can operate using various principles. What types of online services exist, and what algorithms do they use?
CEX (centralized system)
A centralized exchange platform where all operations are conducted within a single system. All data, transactions, and assets are controlled by a single central authority. The advantages of such a system include:
- simplicity and convenience for customers;
- high liquidity;
- large selection of trading pairs.
Such systems are at high risk of hacking and asset theft. All client data is monitored.
OTC (over-the-counter trading)
Digital asset trading is conducted off-exchange. The advantages include high liquidity, relative flexibility, and anonymity. However, security is low and pricing is opaque.
DEX (decentralized platforms)
Transactions on such decentralized services are conducted directly between the parties involved, without intermediaries. They offer a high level of security, confidentiality, and the ability to independently control your funds and transactions. The downsides include low liquidity and a complex transaction process, especially for beginners.
Combined approach (hybrid type)
These services combine the best features of centralized and decentralized platforms. The hybrid of secure storage of funds like CEXs with the security and anonymity of DEXs enhances the functionality of these types of platforms.
Important aspects when creating a cryptocurrency exchange
To create a crypto exchange, you need to consider technical and legal aspects, financial investments, and marketing strategies for promoting the project. This business plan specifically includes:
- website operating technologies - software and other technical base;
- obtaining a license in a specific jurisdiction, registering a company, opening an account and complying with MiCA requirements, AML policies, KYC/KYB;
- financial resources to pay for technical and legal steps, creation of a reserve fund that will ensure liquidity;
- platform promotion is necessary to attract the maximum number of clients, which will allow the service to become profitable.
The technical foundation determines the convenience, stability, and functionality of an online service. When choosing a jurisdiction, the terms and legality of the operation are taken into account. Ensuring maximum transaction security and asset safety is an important consideration. Thoughtful advertising campaigns and attractive offers to clients will help increase company awareness and attract users.
Promising countries for obtaining a license
Legal registration is necessary for the legitimate operation of a crypto platform. Let's consider several location-based jurisdictions:
- to register in Estonia, the authorized capital must be 100,000 euros, an account in an EU bank and a 2-year business plan are required;
- in Lithuania, it is necessary to register an LLC, and board members and owners must prove their reputation by having no criminal record;
- in the UK, they register a legal entity with the FCA and open a bank account.
Why is the cryptocurrency exchange business promising and profitable? The widespread and rapid adoption of cryptocurrencies worldwide and their accessibility are attracting a huge number of customers. Alternative digital assets have replaced traditional transactions in many areas. All cryptocurrency transactions are instant and anonymous. And the applications of digital currencies are constantly expanding.
Cryptocurrencies have become a profitable investment and a hedge against inflation. Many people keep their savings in digital assets. And traders consistently make profits by playing on the exchange rate differences between various virtual currencies.
Opening a crypto exchange is undoubtedly a promising area of modern business. Despite some difficulties, crypto transactions can be profitable thanks to the fees charged for exchanging and purchasing assets.