A cryptocurrency exchange software is a perfect answer to the million-dollar or even the billion-dollar question of how technology like a blockchain and a manifestation like a cryptocurrency can make a practical use case of making a profit.
What is a cryptocurrency exchange?
A cryptocurrency exchange is a platform or a mobile app that facilitates bartering of the crypto assets. The price of the crypto assets is determined by market dynamics like demand and supply.
The exchange platform can either be centralized or decentralized. In the case of a centralized exchange, the transaction is matched between the orders, and in the case of its decentralized counterpart, it matches the buyers and sellers.
The relevance of a cryptocurrency exchange
As you all may have known, the price of crypto assets is quite uncertain. It has not only affected the lesser-known crypto coins but even some of the most prominent cryptocurrencies like Bitcoin and Ethereum. Therefore, the possibility of using cryptocurrency as a mainstream matter of transaction remains quite bleak and uncertain, at least in the foreseeable future.
It might not be a great idea for a business to accept cryptocurrency as a method of payment when a certain amount of crypto coins can be worth a pizza on one day and a car on the very next day. This uncertainty might be a deterrent for people to accept it as a method of payment, but it opens up a new stream of possibilities.
Just like the stock exchange and foreign exchange market, the fluctuation of prices opens up the possibilities of addiction and scientific extrapolation. A market expert who can predict the rise or fall of a particular crypto asset can make a profit using cryptocurrency exchanges.
The relevance of a cryptocurrency exchange is further strengthened by the fact that it is no longer possible to process the computing and the electric power required to solve the equations to add a block to the blockchain. This process called mining was one of the most prominent methods to mint cryptocurrency.
Cryptocurrency exchange as a business
In addition to providing opportunities for investors, a cryptocurrency exchange also doubles up as an excellent business in the crypto space. Every transaction on the cryptocurrency exchange can be charged a commission. Although the percentage is as low as 0.01%, the price of the crypto-assets and the number of transactions executed makes it a lucrative avenue.
In addition to the commissions, there are different other possibilities for making a profit. The methods include the direct listing of coins, otherwise called initial exchange offerings, and running ads.
In recent years, there is another new method of making a profit with a cryptocurrency exchange. To aid in enhancing the liquidity for newer exchanges in the market, existing exchanges can offer an API to route their liquidity value to the new exchange. This process is called market making.
With so many possible and promising avenues of profitability, what is left for a crypto entrepreneur is to invest in the process of cryptocurrency exchange software development.
Developing a cryptocurrency exchange software
A cryptocurrency exchange software is a grand culmination of a lot of elements including but not limited to coding, design, finance, and marketing. you can choose to either hire your own team or partner with a cryptocurrency exchange development company to build your crypto exchange. Both these methods, however, are bound to cost you a lot of time and money. Even if it demands both these resources, there is not much assurance that the end product will be free from bugs and glitches.
Alternatively, you can consider going for a white label cryptocurrency exchange software. A white label solution is available as a ready-made product. It can be purchased off the shelf. What makes the offering interesting and lucrative is that a white label cryptocurrency exchange software is highly customizable. You can garnish the product with the elements of your branding.
Another advantage exclusive to the cryptocurrency exchange in the crypto space is the magnitude of its legal acceptance. It cannot be denied that there are still elements of uncertainty plaguing the crypto world. However, even in countries like India where cryptocurrency is not accepted as a mode of payment, a cryptocurrency exchange is still considered a valid and acceptable business.
It is strongly recommended that you do a thorough analysis of the legal requirements in the jurisdiction that you wish to incorporate your cryptocurrency business. A legal team up to date with the cryptocurrency laws of the land will be a handy investment.
Liquidity is an abstract factor but it plays a major role in making or breaking an exchange. It might not be possible for a new cryptocurrency exchange to establish liquidity. The exchange, if centralized, can simulate transactions by using artificial accounts within the exchange. If it is a decentralized exchange, it can be connected with an existing exchange using an API to reap the benefits of liquidity of the pre-existing exchange. A new exchange can also become a part of a consortium, so the liquidity of all the exchanges is distributed among each other.
It needs to be noted that a cryptocurrency exchange will only be used by investors who might not have the essential technical expertise. Therefore, the user interface needs to be made simple, intuitive, and interactive. The interface should list the pairs, the existing exchange rates, and should also have a link to the profile of the user. The profile should contain information on the history of transactions, the profits, and the losses incurred by the user.
The exchange should also be linked to a suitable cryptocurrency wallet, and the wallet should easily be topped up using payment instruments like credit cards and debit cards. For this purpose, it is important to tie up with a payment gateway. The hot wallet should be linked to the network and the cold wallet should be outside the network, the latter being more secure than the former.
With crypto exchanges sprouting left, right, and center, it is important to establish a strong presence and value for your exchange through aggressive marketing. There are quite a lot of restrictions for advertising anything related to crypto on mainstream ad platforms like Google and Facebook. Alternatively, you can consider using organic engagement and crypto-specific advertising platforms.
Last but not least, the crypto exchange should be made extremely secure. Crypto exchanges have the dubious distinction of being susceptible to the most number of hacks in the world. There have been crypto exchange hacks that were responsible for the stealing of more than 7% of the total Bitcoins in circulation. Considering such events and eventualities, your crypto exchange should be made secure with simple features like two-factor authentication, multi-signature wallets, and SSL encryption.
The profitability of a cryptocurrency exchange as a business and the practicality of a white label cryptocurrency exchange solution has already been established. If you would like to embark on this profitable journey in the crypto ocean, all you need to do is get in touch with a company that specializes in the creation and customization of white label cryptocurrency exchange software scripts.
They will take care to understand your business requirements and perfect the product in line with what you need, so you can start making a profit on the crypto exchange right from day one!