Cryptocurrencies, like Bitcoin, are taking over the world. Only a few years ago, topics around blockchain and cryptocurrencies were reserved for those who were in this privileged and closed community. As the technology around it continued evolving, cryptocurrencies have opened their doors to everyone who had an interest in them without having to spend a significant amount of time learning about crypto first.
Today, we’ll show you how to start your crypto exchange by following these simple rules explained in the article.
Crypto Exchange Platform Types
Online trading offers a chance to conduct speculative transactions and profit from it because cryptocurrencies feature high volatility. Those interested in online trading can exchange crypto assets for fiat currencies on numerous exchange platforms, while other resources will allow exchanging them only for other digital coins. To use any of these platform types, you will first need to create an Ethereum wallet or any other digital wallet recommended by the platform.
A centralized exchange is the most popular type of cryptocurrency exchange platform. These platforms have a centralized operator or are using a third-party organization to help with transactions. Users on these platforms typically trust the chosen third party, which is also responsible for security, functionality, and helping find trading partners. Centralized exchanges will also manage order books recording each buying and selling transaction.
Unlike centralized cryptocurrency exchanges explained above, decentralized platforms don’t use intermediaries. Decentralized exchanges offer funds transfers directly between platform users’ wallets utilizing blockchain technology. On decentralized platforms, crypto buying and selling happen without any control of the main server or the third-party involvement.
Peer-to-peer exchange platforms offer cryptocurrency buying and selling directly between users, just like decentralized ones. However, traders here place their own bids, and other users on the platform respond to the offers and agree on the terms among themselves. The only intermediary here is the software transferring crypto securely from the seller deposit to the wallet of the buyers.
Instant cryptocurrency exchanges are simple to use. These platforms enable users to immediately exchange crypto for another due to access to the best rates of trading pairs. Instant platforms usually aggregate prices and liquidity from numerous custodial trading platforms, which offer simple registration with a basic exchange user experience. They also receive and deposit funds directly to your digital wallet.
Cryptocurrency Exchange Architecture
To begin with your own crypto exchange, the first thing you will need to consider is the architecture. Understanding the cryptocurrency exchange architecture will help you gain a comprehensive summary of the way your platform should work and how all of its components interact with each other.
However, your cryptocurrency exchange architecture will greatly depend on the type of your platform, the functions, and scalability. Typically, the most used components in the cryptocurrency exchange architecture are:
- Trading engine,
- Numerous wallets generator,
- Control panel,
- User authentication,
- User interface,
- Security functions,
- Databases, etc.
All of these components are vital for your product’s success. Each of them is relevant independently but also in interaction with other components. How you define the connections between these layers will affect data processing speed, maximum order number, platform capacity, and page loading. There are two main categories of application architecture – monolithic and microservices.
Monolithic architecture platforms are typically built on a single server, meaning their functionality will be limited and processing speed significantly lower. Microservices architecture, on the other hand, has each component located on a separate server, which results in higher throughput, customer request success, and overall system efficiency.
Cryptocurrency Exchange Design
Another important thing you will need to keep in mind is cryptocurrency exchange design. Your exchange platform will most probably serve a larger audience of inexperienced users who will need to get familiar with the platform to make the most of it. For that, you will need to ensure a seamless and intuitive user experience.
Once you decide to hire a development team experienced in building blockchain development platforms, this is what you will need to pay attention to as it is the key to your success. When talking about UI/UX design, these are the things you will need to keep in mind:
- User research. Ensure you know both your business goals and audience needs by doing user research. Prepare all your requirements in a document specified by core milestones and deliverables.
- Prototypes. Before engaging in full-fledged design, spend some time building basic wireframes and a visual prototype of what you desire your future exchange platform to be. This will enable you to assess UX solutions and address potential issues that might arise on the way.
- Robust functionality. All of the features you’ve prioritized for the development of your platform should be implemented wisely and with users in mind. If you’re uncertain about the overall functionality of the platform, start first by building an MVP.
- User-friendly navigation. Each platform used for crypto or fiat transfers must be credible and simple to operate. The user journey must be smooth and clear otherwise users will abandon your platform soon and replace it with the one that has more user-friendly navigation.