Cryptocurrencies have become the gamechanger in today’s world by becoming a highly demanded digital asset. As more business firms gain interest in developing customized cryptocurrency exchange software as per their business requirements, it is important to follow the proper process for getting the best results.
Bitcoin is the leader of the cryptocurrency industry with a high market share. In this blog, we will see the steps to keep in mind for starting a Bitcoin exchange.
Decide the scope of operations – Every firm must decide if it is going to go local or become global in its operations. In the initial stages. It is better to restrict business activities to a particular region or nation for convenience. As a business grows in size and scale, it can cater to international markets. Every nation will have its own set of policies and guidelines regarding licenses and approvals. Since the rules vary from place to place, it is ideal that a business firm turns to a legal expert for a consultation to comply with rules effectively.
Assessment of KYC and AML norms – Most of the governments in this world will require a Cryptocurrency Exchanges to stick to Know your Customer (KYC) norms. KYC refers to the task by which a business verifies the identity of its customers through government-issued ID cards. This is done to prevent incidents of money laundering where funds of the exchange get misused for illegal activities.
Form a relationship with a Bank or Payment service provider – A White label cryptocurrency exchange must collaborate with a financial institution or a payment solutions provider to process online payments via fiat currency. Importance must be given towards developing a robust structure for smooth settlement and remittances. It is a necessity for customers who live in developing and underdeveloped countries. A smooth payment gateway will lead to better user retention, improved convenience, and higher trust in the system.
Ensuring liquidity on the exchange – No cryptocurrency exchange can operate well without possessing adequate liquidity. Customers will be hesitant to invest their hard-earned money if the exchange does not have a full order book. There are some ways of sorting out the liquidity crisis. Some commonly used techniques are – Buying and selling between two artificial accounts within your own exchange, developing an Application Programming Interface (API) which will connect existing Bitcoin exchanges to other well-developed crypto exchanges, and all leading crypto exchanges in the market can be tied up together in form of a network creating a Trust-Deposit.
Priority to security – High importance must be given towards safeguarding customer’s data. A firm must invest in a strong digital infrastructure for ensuring utmost confidentiality. Since cryptocurrency exchanges attract a lot of public attention, exchanges must be in control of the funds of traders and investors. There are many cases where incidents of hacking, data breach and identity theft have occurred in cryptocurrency exchanges. Bitcoins have been stolen and funds have been swindled. So, exchanges must not compromise on the issue of security at any cost, to keep its reputation in the industry intact.
Components of a successful Cryptocurrency Exchange Software
Trade Engine – Every exchange software needs to possess a robust trade engine which can handle a huge volume of orders daily. It should also execute transactions seamlessly, match buy/sell orders correctly and calculate the balance of users correctly. If the trading engine does not function smoothly, it can harm the exchange’s operations and affect growth.
User Interface – A comfortable user interface is a difference between a great exchange and a poorly performing exchange. Aesthetics and speed must be kept in mind while designing the interface. It should ensure a seamless and glitch-free trading experience at an affordable cost. Apart from websites, importance must be given towards the development of a mobile application too. This is because the number of sign-ups via smartphones has increased by many notches. An ideal user interface must include registration of an account, facility to deposit and withdraw cryptocurrencies and fiat currencies, managing orders and transactions, charts and graphs which show vital statistics, and a support mechanism.
Wallet – A wallet is a place where Bitcoins of traders are stored securely. It requires high-security as a large amount of funds are involved. Every White label Bitcoin Exchange Software must develop at least two wallets, a Hot and a Cold wallet to diversify risk and manage the money effectively. A hot wallet allows customers to withdraw Bitcoins automatically to their external wallet. There is no need for getting approval from an exchange for this activity. The balance in the account must be positive which depends on the turnover of the exchange. On the other hand, a cold wallet is used for storing the remaining Bitcoins. It acts as a buffer fund in case of an emergency and can be used offline. It can be operated with the help of a private key. Users must split their funds between hot and cold wallets for convenience and better fund management.
Admin Panel – An admin panel acts as a monitor towards the exchange software. It helps in effective control and management of the daily operations. Its core functions include alteration of liquidity based on market movement, analyzing the spread of cryptocurrencies, fixing the trading fees, approving user accounts for operations after verifying KYC and other compliances, managing multiple cryptocurrencies and fiat currencies, permitting debit/credit transactions, and addressing queries of users.
Overall, these features must be included in a white label cryptocurrency exchange software. Opting for a white label bitcoin exchange software has enormous benefits for businesses in the form of reduced costs, improved customization, and savings in time than developing an exchange software from scratch.