Cryptocurrency exchange development for trading and exchanging currency by users is a great business startup, but it is important to remember that a cryptocurrency exchange is not an ordinary website or a corporate website. A cryptocurrency exchange is a trading platform that allows buying, selling and exchanging various cryptocurrencies. A cryptocurrency exchange brings together buyers and sellers of currency (in this case, cryptocurrency), ensuring that transactions are reliable. Like any exchange in general, it operates on a trading engine; the correctness and speed of transactions depend on the optimized code. The engine checks the placed orders for asset backing (i.e. the availability of funds on the balance), keeps records of orders in the database and generates data for display on the web/mobile app or in the trading terminal.
Centralized cryptocurrency exchanges
A centralized cryptocurrency exchange is suitable for users who do not have much experience in buying or selling cryptocurrency. There is a simple interface with convenient features and navigation. The exchange between the user and the administrator (the exchange) is carried out instantly.
The exchange gets profits from the exchange margin. If the current exchange rate of bitcoin is $10,000, you can sell it for $10,500 if you have bought it for $9,500 from another user. The difference of $1,000 is your profit. Generally, the spread ranges from 3 to 5 percent of the current market rate.
Peer-to-peer [p2p] exchanges
A peer-to-peer exchange is very similar to the previous option, but it works with the blockchain directly. An additional difference is that there is no point of control. Transactions take place between the users who are directly connected by the exchange. The revenue comes from a percentage commission for the exchange from each transaction.
Decentralized cryptocurrency exchanges
Decentralized cryptocurrency exchanges are fully blockchain-based. As the name implies, they have no centralized management of exchange transactions. There are different types of decentralized exchanges, such as on-chain, off-chain and cross-chain.
White label cryptocurrency exchanges
Such white label cryptocurrency exchanges can be decentralized either fully or only partially. They have some functions for working with blockchain. The wallet and registration modules are generally decentralized. Decentralization provides a higher degree of security since the funds are not held by the exchange. However, the functionality offered by such an exchange is rather limited.
Cryptocurrency exchanges with margin trading and leverage level
Cryptocurrency exchanges with margin trading and leverage level are not a new trend. Cryptocurrency exchanges with margin trading help the trader create contracts in terms of money. This increases profits in proportion to risk.
The transaction amount can significantly exceed the volume of funds on the trading account. The margin is a trader’s collateral to back up a margin transaction. At the slightest fluctuation of the asset value in the direction opposite to the position set by the trader, the transaction is automatically closed and a part of the margin is lost. The higher the leverage, the greater the chance for the trader to suffer losses.
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The trading core is the backbone of the exchange. The trading core forms the order book, combines buy/sell orders, conducts transactions and calculates balances.
A cryptocurrency exchange’s wallet is a background process that is constantly active in the exchange server’s memory. It provides storage of bitcoins (of the operator and traders).
A cryptocurrency exchange should have a user-friendly, intuitive and adaptive interface. The interface should include charts of a user’s exchanges, the ability to place orders, registration and access to the trading account.
The user interface gives users control of liquidity, control of currencies and currency pairs, documents spreads and fees, allows account approval and documents withdrawal and deposits in traditional currencies.
Charts display of all fluctuations of currency pair exchange rates. Usually, so-called Japanese candlesticks and trading volume charts are used for stock exchanges.
Forms for placing buy and sell orders
With forms for placing buy and sell orders, the rates of users waiting for a counter offer are displayed. The user should always see an up-to-date picture.
The trading history is the history of already closed transactions. The user should be able to follow the statistics to predict future market behavior, so this part of trading is very important.
Keep track of the balance
Users can keep track of their balance for each currency with a display of the addresses of all wallets on the exchange. Usually, developers also place deposit and withdrawal forms here.
Cryptocurrency wallets on the exchange
If you are planning to go international, you will have to direct the cryptocurrency exchange development company to connect local payment systems for each country, which multiplies their number.
Operation of any cryptocurrency exchange includes the following points:
Each architecture has pros and cons, and it is important to define your goal before starting to develop a cryptocurrency exchange. As a rule, different models feature a similar operating principle. As of today, the most efficient API for data transfer is in JSON format.
The server part of a cryptocurrency exchange is one of the most important aspects. This is the heart of the entire system, where transactions and calculations are performed by means of the main scripts. When developing the project architecture, the main attention should be paid to this part, while other aspects of the exchange may be of secondary importance.
It should be noted that the end user does not really care about ins and outs of coding, which are part of the core development. The user wants to have a convenient and intuitive interface. The user interface is the first thing that catches a user’s eye. At the same time, the growing number of smartphone users forces the website to be compatible with the displays of mobile devices. It may not be necessary to create a mobile app at the very beginning, once you decide to develop cryptocurrency exchange, you will need one eventually for both iOS and Android platforms.
A wallet consists of two parts: a cryptocurrency wallet and a fiat wallet. This allows linking the blockchain to the currency deposit and withdrawal functions.
There are different ways to integrate your wallet with the main banking system. In manual mode, it can offer direct bank transfers, and in automatic mode, you can use Visa or MasterCard services. Money is deposited directly into your bank account.
Liquidity is one of the key aspects of any exchange, including traditional exchanges. The order book shows how popular a stock exchange is. Therefore, a cryptocurrency exchange should show exactly the same order books to display liquidity.
You can choose a liquidity provider or simulate trading activity within the exchange with the help of bots. The first option will increase the cost of business, which will negatively affect customer interests.
A trading engine is the core of your exchange that connects buyers and sellers. The exchange speed and performance is directly dependent on the trading engine. Most p2p cryptocurrency platforms use limit and market orders to ensure high performance.
Some systems allow placing stop-limit and stop-loss orders. These are preferred by experienced traders.
An admin panel is the control center of the exchange. The owner or administrator should have access to all important functions and be able to perform key actions, including user management and wallet and transaction management ( including KYC and AML control). If necessary and depending on the exchange size, you can even delegate roles to other users with limited authority.
For any system that deals with a huge amount of funds, security is of paramount importance. Most hackers try using several methods at once to disrupt the ecosystem security.