How to Create a Cryptocurrency Exchange
Published July 2, 2022.
A cryptocurrency exchange is a marketplace for buying and selling cryptocurrencies. Cryptocurrencies are transactional and value-based digital assets such as Bitcoin, Ethereum, and Cardano powered by blockchain technology. On crypto exchanges, users can sell their digital assets for their desired cryptocurrency, assets, or fiat currency, and vice versa. They also provide user accounts and a place for accessing and managing assets already owned. It is impossible to imagine what would become of the cryptocurrency market without exchanges. Trading, investment, and launching of crypto tokens essential for the continuity and growth of the cryptocurrency market take place on exchanges, and so these essential features of DeFi would not exist.
Create a Crypto Exchange in 5 Steps
1. Create a Prototype
After deciding on the technology stack, you need to develop a basic description of the exchange. Prototyping should involve UI/UX designers and business analysts. These talents are needed to fully conceptualize the project and bring it to its final state.
2. UI/UX Development
Following the development of the prototype, a designer needs to work with Figma, and the wireframe to come up with the best designs for the admin side and front end of the project.
3. Code the App/Website
The prototype and technical description of the product is sent to the developers, who then transform the simple visual presentation into live websites and apps accessible from the admin and user side. They use technology stacks such as angular, HTML5, CSS, and Nodejs to define the platform setup. For dApp, this includes building the frontend and writing the smart contract for the backend, which will be live on the blockchain.
Centralized and decentralized exchanges must be tested to spot bugs before the projects go live. For centralized exchange, QA engineers review the codes for possible errors and notify the development team if they find any. dApps can use QA engineers plus additional testing on a testnet by the community waiting to use the project. Some dApps promise to incentivize testers with platform tokens.
5. Project Launch
Launching makes the project live and accessible to users of the platform. For dApps, the smart contract cannot be changed once it is live on the blockchain. Therefore, extra caution should be taken to ensure a seamless launch and a positive experience for the users of the platform.
6 Features of Successful Crypto Exchanges
1. A Responsive Design
With the number of smartphone users worldwide set to hit 7.2 billion in 2022, using an exchange available across devices has lots of advantages. First, you can make physical transactions using your device straight from your exchange wallet, and you can also make emergency withdrawals on the go.
2. User Interface
The user interface of the exchange is how users feel when they visit the exchange. If the user interface is responsive and great, customer retention and long-term potential to stay successful in a highly dynamic space will be high. The user interface design of the exchange must be friendly, clean, and seamless to navigate. If users find it hard to explore the exchange, build a user base and community.
The exchange products include crypto lending, borrowing, perpetual swaps, and futures. The more diverse the products offered by an exchange, the wider the range of investors it will attract. Cryptocurrency investors are always on the lookout for opportunities, and one of the reasons people try out new exchanges or platforms is to try their products. Some exchanges also offer self-help tools for traders like customizable bots, trading charts, and copy-trading.
4. Legal Compliance and Availability
The law in some countries does not officially recognize cryptocurrency businesses. However, this is changing fast as there are now lots of cryptocurrency companies registered with governmental institutions. Since the financial authorities aim to protect the public and consumers, most exchanges are trying to comply with the laws and receive approval to operate.
What happens when you have a problem using an exchange? The frustration caused by little lags and missing tokens can decrease user trust and make them lose interest. Great exchanges respond on time. They always show concern by responding to complaints.
After setting up the platform trading engine, user interface, admin panel, wallet, order book, push notifications, and transaction history for exchange users, the next and most important feature is security. The security of user funds can make or break the platform. Exchanges like Binance, Bithumb, Bitfinex, and Mt.Gox have lost hundreds of millions of dollars to hackers. To avoid this, consider adding features to protect the exchange against distributed denial of service, DDoS attacks, denial of service or DoS attacks, server-side forgery, two-factor HTTPS authentication, HTTP parameters pollution, biometric authentication, cross-site request forgery, SQL injection, and data encryption.
Technology Stacks for Your Crypto Exchange
Developing a cryptocurrency exchange from scratch has many advantages compared to pre-made white label exchanges. After creating a working model for how the exchange should work, the next step is programming the exchange. The technology stack for creating a centralized exchange varies with the team and its willingness to learn. While PHP is considered a secure language, for example, Python applications have a better history regarding the security of the exchange. Even though Python is slower, it is easier to write, and it simplifies the job of data analysis.
Traditional financial firms have also built several applications using C# and C++ because these languages have low cause and effect delay, making them particularly efficient for high-frequency trading. Java and C# are also statically typed, which means developers can avoid bugs, and refactoring is easy. You can change codes in a statically typed language without changing the code's behavior. The most common routes developers take across exchanges are Java, HTML5, Angularjs, and Nodejs.