A cryptocurrency exchange is a service provided for trading cryptocurrencies. Users can trade on crypto exchanges in the same way they would trade traditional currencies or stocks with their funds or account balances.
Recently, cryptocurrency exchanges have gained popularity, given that many people want to get into the trend of digital trading over buying and holding virtual coins. The more demand for converting fiat money into cryptocurrencies or vice versa, the more cryptocurrency exchanges are needed to facilitate this type of transaction. You may think to yourself whether you should start your own crypto exchange.
The following are some of the basic things that you need to know before starting crypto exchange:
Ø License – Some countries require you to acquire a license to build cryptocurrency exchange. Otherwise, you may face penalties for operating without one.
Ø Website – An exchange needs customers to stay in business, so it is crucial to have a website that users can access easily and quickly. Once you’ve set up your website, investors will want to know how secure it is before putting their money into the platform. The best option is having an SSL certificate, which gives customers a safe connection to your website.
Ø Security – Cryptocurrency exchanges are easy targets for thieves, who can run off with investors’ money. Therefore it is essential to have a bug bounty program that offers hackers rewards for finding vulnerabilities in your system.
Ø Customer support – Users must be able to contact you in case of problems or concerns. Setting up a phone number and email address for this purpose is recommended.
Ø Promotions – Customers will want to see what you have to offer on the platform, so you have to give them an idea of it by organizing some promotions before you open your doors.
Ø Maintenance – Before your platform goes online, you have to test it with some dummy data to ensure it runs smoothly. Some things might go wrong, so be prepared for them by having a security audit and a focus group testing.
Ø Funding – Your platform needs initial capital to get started. This may come from your pocket or by attracting investment.
If you want to create cryptocurrency exchange, you need to understand the risks of starting one. The following are some of them:
Ø Scalability – When you’re just starting, it will be challenging to handle many transactions due to bandwidth congestion or other problems that may occur during peak hours.
Ø Liquidity – Another factor that investors should consider when they create cryptocurrency exchange is liquidity. Setting up too few trading pairs will limit the speed of transactions and the amount of funds you can attract.
Ø Regulation– Your operation must comply with international regulations on money laundering, taxation, and other relevant laws. This may become a problem if you fail to take the necessary measures. Hence, pay incredibly close attention to regulation starting crypto exchange.
Ø Security – Users will entrust you with their funds, so it is vital to have a foolproof system in place that can prevent theft or fraud. Hackers are another source of insecurity, as they might compromise your website and make off with investors’ money. This can be prevented with a security assessment and implementing best practices such as using strong passwords.
Ø Identity theft – Fraudsters may use your platform to steal people’s identities by pretending to be the exchange itself. This is another challenge that needs to be considered when creating a crypto platform.
It is not an easy task to start cryptocurrency exchange; however, these points will help you achieve it. Scaling issues are one of the main challenges you will have to tackle but having a good idea of what your target audience is looking for can help you reduce these problems. Security measures are crucial, so it’s recommended that you take advantage of expert advice before launching the platform.
Having a supportive community and enough capital to provide liquidity and funding can help you keep your exchange afloat. Most importantly, make sure that the legal requirements under which you will operate are within reach to avoid sanctions from authorities.