Cryptocurrencies have entered the mainstream, and even the most conservative governments are starting to realize that they are poised to affect the global economy in the future. The market for cryptocurrencies is projected to be worth $2.2 billion within the next five years. Growing adoption is a major driver, and the market is expanding quickly despite its volatility.
Investors and traders are going to continue buying and selling digital coins. The demand for crypto exchanges will only grow, so creating your own platform is a viable business idea. There are many factors to consider, from licensing to animation for crypto business, but the pros outweigh the cons. Here are five key steps for aspiring founders.
1. Pick the Right Type
The centralized model is well-established. It is a managed environment that bears responsibility for the users’ funds. Clients are attracted by flawless UI and UX, simple registration, excellent support, multiple tradable pairs, and access to fiat gateways. On the downside, such exchanges are vulnerable to hacking as their participants do not own their private keys, and not everyone is happy about the KYC procedures.
In decentralized systems, all transactions are performed through smart contracts, and no entity can manage the funds. As long as the contracts are properly written, such exchanges are impenetrable for hackers. The disadvantages include inferior liquidity, unimpressive UI, slower execution, lack of support, and absence of fiat gateways. You may combine the benefits of both models in a hybrid exchange — i.e., offer fast execution and substantial liquidity while letting users control the private keys. Such systems are still emerging.
2. Pick the Regulation
What jurisdiction will your platform operate in? Governments are likely to continue expanding control over the cryptocurrency realm. The location determines applicable legislation, taxes, accounting standards, management procedures, and integratable payment systems. An absence of regulation is not an advantage, as the void may be filled. For example, the current regulation in Switzerland and Singapore is expected to change soon.
3. PIck the Software
The quality of the digital environment affects all monetary flows. The two critical factors are the price and implementation time. To cut costs, you can opt for white label software — a fully functional platform you can use under your own brand.
4. Find Provider of Liquidity
High liquidity means traders find buyers and sellers quickly, as it is easy to find a counterpart for a transaction. Users are always searching for exchanges with impressive liquidity and tight spreads — the gap between prices for sellers and buyers. To find the best provider, consider the following:
- the number of available instruments;
- trading conditions;
- availability of leverage;
- Protocols (Web REST API, Socket API, Fix API).
Once the platform has been launched, you can spread the word through different marketing channels. Typically, crypto campaigns include direct advertising, brand promotion, loyalty encouragement, and improvement of functionality. Setting up an attractive exchange is only the first step. You will also need to devise loyalty systems and other incentives, so users will stay within the environment.