How to Set Up Your Own Cryptocurrency Exchange

Jeremy BiberdorfBy: Jeremy Biberdorf

May 15, 2019May 15, 2019

How to Set Up Your Own Cryptocurrency Exchange

Cryptocurrencies have truly risen to fame over the past few years, with many traders joining in the altcoin race. But mining and trading cryptocurrencies are not the only way to make good money in the industry. Cryptocurrency exchanges and broker platforms, which act as intermediaries in the digital trading game, are necessary for the blooming industry to function smoothly. There are big names active in the sector, but with so many independent exchanges springing up, setting up your own platform might not be as much of a struggle as you would think.

Top Concerns to Address When Building a Cryptocurrency Exchange

Before you start building your own exchange, you have to consider the challenges that lie ahead, as well as the expectations of traders. A new exchange will have to offer something unique and exciting to prospective clients in order to become a contender. Depending on your angle, you could provide better fee deals, establish loyalty systems that reward returning clients, or even showcase lesser-known altcoins. The type of competitive advantage that a new platform will provide is half its success – and the other half rests on making sure that certain necessary prerequisites are met, with regard to reliability, reputation and convenience. According to research conducted in April 2018 and published on Statista, 20% of traders globally are looking for user-friendly and simple platforms that will provide a smooth, interactive user interface. A further 29% are looking for a seamless experience with their bank accounts, prioritizing expedited withdrawals in fiat currencies.

Cryptocurrency Exchange

As the same research reveals, a whopping 32% value deposit security, which has emerged as a crucial factor especially after the latest wave of hacker attacks on cryptocurrency exchanges worldwide. A great exchange platform will have answers for every one of these concerns. For instance, when building a user sign-up and sign-in account you will have to make the process as easy to use and as quick as possible, while also paying attention to installing proper cybersecurity safeguards. A WAF will analyze and inspect incoming requests on web applications like log-in apps to filter out malicious intruders and protect against OWASP Top 10 threats like SQL injection, so it is fundamental to use it. Installing two-factor authentication and prompting users to choose a complex and strong password are also necessary steps in order to sufficiently protect the assets that will be stored and exchanged through your platform. Any reputable cryptocurrency exchange also offers a strong vetting system for prospective customers, requiring proof of ID and a rigorous verification process to allow someone to open and use an account.

How to Set Up Your Own Platform

Once you have finalized every detail, how do you go about setting up your platform? A wide range of options is available, and the easiest is to go to someone else to provide that service. There are many big names active in the sector, including TD Ameritrade, Virtu Financial and DRW, all Wall Street giants that have backed a new crypto exchange startup, while Intercontinental Exchange, the company behind the New York Stock Exchange, has launched Bakkt. Seed CX is also looking to get active in the game.

Many companies specialize in white-label software that enables users to build their own exchange, including already established exchanges like OKEx. You only need to tweak the design a bit to your liking and you are good to go. Most similar solutions are priced reasonably, but since they might require a maintenance fee, this could cut back on your profits. While this option offers highly reliable solutions, as providers have tested their products extensively and offer support to users, it also makes for limited flexibility, as this software is largely a “take it or leave it” suite.

In order to ensure that your platform will be tailored to your specific needs, the best option is to build it from scratch. This means that it will reflect exactly what you are looking for in terms of features and security, while also banking all the profit. But setting everything up on your own can be costly, as it will take significant funds to hire the right experts, while it can also take quite long to build and launch. Using open-source software is a choice that stands in between these two, allowing you to customize your platform for a very low price, as most open-source solutions are free. This will allow you to deploy very quickly, as the core functionality is already set up, but it will need added time and resources to beef up its reliability as well as its security features. Yet once it is ready, setting up your own a cryptocurrency exchange can be a very lucrative activity: according to CoinMarketCap, on April 11th, 2019 the total market cap of the top 100 cryptocurrencies was a whopping $177,580,646,747. Bitcoin, the leading coin, contributed $92,045,492,281 to that figure, trading at a price of $5,218.19 and reaching a supply of 17,639,362 units.

Establishing your own exchange is no easy feat – but as cryptocurrencies continue to rise and expand their reach in the market, it could be a very smart financial move.

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Jeremy Biberdorf
Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. He's a father of 2 beautiful girls, a dog owner, a long-time online entrepreneur and an investing enthusiast.

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