There are three different ways to build cryptocurrency exchange software. The first is to use the white label cryptocurrency exchange, the second is to modify the open source and the third is to develop a new cryptocurrency exchange. Let’s see the pros and cons of each solution.
The solution of developing white label exchange
Some companies offer white-label cryptocurrency software. Even OKEx, one of the largest cryptocurrency exchanges, announced the launch of a white label service. You only have to buy a ready-made solution, adjust its design according to your requirements.
- Quick deployment: You don’t need to build anything. All the essentials of a cryptocurrency exchange website have been developed. All you have to do is deploy, install and configure it in your requirement.
- High reliability: When you buy a white label website, you can be sure that it will work reliably.
- Reasonable price: Buying a ready-made solution is cheaper than developing it from scratch. Self-hosting solutions cost an average of $ 30,000-50,000 annually when internal development costs around $ 200,000.
- Low flexibility: White label software vendors rarely allow customers to change design and functionality significantly. This is why many exchange platforms look very similar and the same features.
- Reduced profit: The price of white label exchange software usually includes a one-time activation fee or monthly/annual fee. In addition, suppliers often consider commissions based on exchange volume. You have to pay even if your profits are low.
- Difficulties in support: Because providers have many customers, you may have difficulties in getting quick support. It may take a long time to find an internal developer to maintain your bitcoin exchange site because of the specificity of the project.
Open source cryptocurrency exchange solution
This type of software can be used for any purpose freely.
- Free: you don’t have to pay for using open source solutions
- Short deployment time: Because open source software has all the core functions, you can deploy your exchange quickly.
- Poor reliability: Some open source solutions lack quality because they have never been thoroughly tested.
- Weak security: It is very difficult to have a highly secure open source solution with database encryption
- Lack of support: Remember that the open-source solutions are rarely well supported. Sometimes owners stop developing solutions and you have to solve all the problems yourself.
There are not many open source cryptocurrency exchange solutions on the market, but you can find some:
Develop customizable cryptocurrency exchange software
The third way to build your own bitcoin exchange site is to build a new cryptocurrency exchange. It requires more efforts but brings greater profits to exchange owners.
- Full features: With your own development team, you can develop cryptocurrency exchange software with any features that you want.
- High security: A team of strong expertise in developing cryptocurrency exchange websites can provide secure software such as banking systems. Vakaxa’s developers have experience in private key security, DDoS attack protection, two-factor authentication, etc.
- All profits are yours: You don’t have to share your profits with others. It means you earn more money, as well as setting up lower transaction fees for customers. Stories of OKEx and Binance show successes come from small fees.
- Long-term project: It often takes 6 months to build a new cryptocurrency exchange website. Large projects with large numbers of features may take a year or longer.
- Difficulties in finding experts: cryptocurrency exchange is a new major. The first exchange appeared in 2010 and currently only has about 200 successful operating platforms. Therefore, there are not many experienced cryptocurrency exchange developers in the world.
- Huge cost: In order to hire a dedicated development team, you have to spend about $ 200,000
Types of cryptocurrency exchange
As written above, choosing software and technology is really vital. However, before you develop your exchange you must decide: which type of exchange you choose? There are two popular types of cryptocurrency exchange:
- Centralized: Centralized exchange is intermediaries between buyers and sellers, handling their assets and earning transaction fees. Such platforms have highly liquid, fast transactions. But centralized exchanges are less secure because customers must provide private keys to transfer their digital assets from wallets to exchanges, which could lead to keylogging attacks.
- Decentralized exchanges: All transactions here are peer-to-peer, they are implemented directly among users through smart contracts, so there does not have an intermediary. Only users can manage their assets and private keys. However, this platform has higher entry barriers and slower transactions. Therefore, liquidity and trading volume are much lower.
Developing cryptocurrency exchange
Types of architecture cryptocurrency exchange
In order to build a trading platform, it is necessary to select an architecture. There are three main types:
- Synchronization (small): These exchanges are simple and easy to set up because a request can be completed in a transaction, but they are limited in the size and volume of transactions;
- Asynchronous (medium): It is distinguished by a greater number of transactions. Each feature of exchange runs as a separate layer, usually located on a different machine or server. Most exchanges are asynchronous;
- Distribution (large): It is similar to an asynchronous type, but it divides customer requests into segments. These segments operate independently and based on such an exchange cloud scale can grow infinitely.
Key elements of cryptocurrency exchange software
The exchange is a rather complex structure. We will explore the key elements that are important for the operation of the trading platform.
1. User management
Effective user management is very important for a cryptocurrency exchange website. In early 2018, some crypto exchanges had about 100,000 users per day. It leads to significant delays in account creation.
- Login / Register: Although exchanges require a lot of personal user data, their registration is very simple. This helps users register quickly and easily. In some cases, some exchanges developer uses Google Authenticator to deploy 2-step verification service.
- Create users: Most exchanges allow users to create accounts themselves. But some platforms are for small groups of people, like customers or partners. In this case, the user is created by the administrator.
- User Verification (KYC): Identity verification procedures are needed to comply with Know your customers (KYC). Most exchanges offer multiple types of verification that define account limits. Types of verification may include phone numbers, personal details, photo ID, SSN, etc.
2. Cryptocurrency wallet
The cryptocurrency wallet is a software program that allows people to deposit and withdrawal cryptocurrency (coin).
- User wallet and system: Different types of wallets can be provided to users: hot and cold Cold, mobile and desktops wallets, etc. The cryptocurrency of the platform is kept in the system wallet.
- Deposit / Withdrawal: Users can deposit or withdraw money by wire transfer, QR code, email, ATM, etc. Normally, deposits and cryptocurrency transactions are allowed without account verification. But to withdraw money, you need to verify your account.
- Transactions: Every user will be able to buy currency and sell it to other users. It is important to focus on transaction speed and smoothness (no system errors). The ability to create orders allows users to choose the most convenient order at the moment.
3. User interface (UI)
The site’s user interface must be attractive and quite simple to support the great user experience. Its development can be challenging, taking into account any complex interface. It is important to allow users to create orders, view individual transaction history with filter options, have access to graphics and indicators and discover all activities on the dashboard.
API is a set of functions and processes that allow external applications to access operating system features or data.
- Public and private APIs: Private APIs are used within the system. For example, you can write a bot that will help you trade. Public APIs can be used by third-party developers – for example, to build an analytical tool that shows the current situation on various cryptocurrency exchanges.
- Websockets: This is a technology used to send information about transaction changes, market moves, etc.
- The FIX protocol is a strict standard for every trading platform, regardless of the asset it trades (coin or fiat). FIX allows external developers to integrate with multiple trading platforms quickly because there is no need to dive into specific API features.
5. Trading tool (Trade Engine)
The trading tool is the heart of a trading platform. It matches buy and sell orders, performs transactions and calculates balances. To speed up, they are processed immediately and automatically. Develop your own trading tool requiring deep domain knowledge. If you want to make this task easier, look for open source solutions or hire a company to develop cryptocurrency exchange software.
The market is necessary to provide internal exchange liquidity. Integration with other exchanges via API connection allows drawing external orders into local orders. In addition, there is often a special role – market maker – who controls liquidity.
7. Admin user interface
Cryptocurrency exchange administrators are responsible for monitoring transactions and managing users. Depending on their access level, they can see user information such as ID, name, email, etc. and transaction details, such as transaction ID, timestamp, amount, description, etc. Therefore, the admin panel interface should be quite simple but fully functional.
- Diary: A complete diary history helps analyze activities on your cryptocurrency trading platform.
- Chart: This useful feature allows you to create different charts for a better view.
Usually, there are two databases behind a cryptocurrency exchange website. For example SQL and REDIS databases. One is very reliable continuous storage, but quite slow. The other is a storage device that works fast enough, but not for storing confidential data.
These are the main elements of the cryptocurrency exchange. The list of valuable features can be done much longer. Contact Vakaxa to get detailed information.
Because cryptocurrency exchanges hold personal user data and operate in large amounts, they must meet extremely high-security standards. Let’s look at the security issues you must consider when building a cryptocurrency exchange system.
DDoS attack protection
Distributed denial-of-service attacks mean overwhelming a website that has traffic from multiple sources to circumvent its service. Like banks and online shopping platforms, coin trading floors must deal with the threat of DDoS attacks. These DDoS attacks have led to users losing money through unsold margin orders, or by panic selling shares. This is why it is important to automatically detect and minimize attacks.
Secure private key
A private key is a secret number that allows cryptocurrency to be spent. When a user’s private key is compromised, one can transfer all the coins to another person’s wallet. Private key security is essential for cryptocurrency exchange and there are several ways to store them.
- Hot wallets are stored by cryptocurrency exchanges and can be accessed from anywhere in the web portal. Hot wallets are the easiest to hack and are suitable for frequent access.
- The cold wallet is offline and safer. We strongly recommend cryptocurrency exchange to provide cold wallet options. When users keep a large part of their coins offline, the risk of hacking will decrease.
- The HD-enabled wallet allows creating multiple private keys. This means avoiding backups after each transaction and they provide a high level of security.
- A paper wallet is a type of paper with a private key printed, usually in QR code. It is stored out of anyone’s reach except its owner (ie in a safe). This type of wallet is the safest among others.
- Multi-level means that many private keys are required to authorize a transaction. For example, one of Bitfinex’s wallet is the multisig 3 address of 6.
Because administrators have privileged access to the system, their account responsibilities and limits need to be clearly defined. You should let people only manage a small part of the system.
There is more than one way to build your own cryptocurrency exchange. White label software needs relatively low initial cost and significantly shortens deployment time, but reduces your profit due to ongoing payments and fees. Open source solutions are free, but may not be reliable and difficult to support. Building your own exchange from scratch with experienced software developers has a higher cost, but allows you to get higher profits and make special features that will attract customers. Key exchange site elements include user management, databases, commercial tools, market creation systems, administrator dashboards, reports, APIs, websockets, FIX, wallets and key webpage. DDoS protection attacks, cold wallet, multi-level and administrator account limits are necessary to meet basic security requirements.
If you want to build your own bitcoin exchange site, please contact Vakaxa and ask any questions.
Contact information for Vakaxa company
VAKAXA TECHNOLOGY JOINT STOCK COMPANY
- Address: Room 0722 – The Pride Building – To Huu– La Khe– Ha Dong – Ha Dong
- Hotline: +84963.324.888
- Website: https://vakaxa.com/
- Email: [email protected]
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