There is no doubt cryptocurrency is gaining popularity. So why not launch a cryptocurrency exchange of your own? After all, you might have an opportunity to earn a profit in addition to the capital gains on digital currencies you have invested in.
This guide will provide you with nine steps to create a bitcoin exchange of your own.
1. Analyze the top cryptocurrency platforms
Before you start putting together your cryptocurrency exchange, you must do what any good business owner does, analyze other companies and close in on your competitive advantage.
Many people have already decided to create their own cryptocurrency businesses. The drive for new businesses resulted in a boom in the number of exchanges and the number of digital currencies (there are now about 700). These exchanges offer something unique to the market, including the number of currencies they trade, their commissions, or other features they offer.
To ensure your business has a solid foundation, determine what will make your exchange unique. Will you have the lowest fees, the fastest transaction times to add fiat currencies to your account? Is your platform the easiest to use?
2. Obtain the necessary business licenses in your area
Businesses require legal considerations; in many cases, this will be one of the most complicated aspects of your new venture.
To avoid any run-ins with the cops, it is important to attain legal counsel to understand exactly what you are up against. For example, in the United States, operators will need to be a licensed Money Transmitter business and must follow SEC and CFTC rules and regulations.
In other countries, there may be little to no regulations in place. Depending on if your business wants to operate globally or in just your home country, you will require certain crypto currency licenses to operate. You can visit cryptoexchange.com if you want to know more about crypto currency licenses.
3. Get funding
As a digital platform, you will need to pay for backend technology set up, web hosting capabilities and other ongoing development (unless you have these capabilities yourself).
You may also need to hire legal counsel, purchase necessary licenses and hire a marketing agency. These costs may vary depending on the scope of your project; however, some considerations will ensure that you have enough funds to get your business going.
4. Know Your Customer
Depending on your area of operation, Know Your Customer (KYC) might be a requirement. KYC is a process where a business must verify the identity of its customers through a government-issued ID like a Driver’s License.
Asking users for their information will help to discourage money laundering and other illegal practices.
Not every country has made KYC mandatory; however, you may still decide to include this protocol at least in part. Some exchanges have allowed verified users to have higher withdrawal limits to entice users to take this step and minimize the possibility of scams.
5. Find a payment processing partner
As a cryptocurrency exchange, your job will be to exchange your customer’s fiat currency for digital currency. In most cases, you won’t be able to do this on your own; you will need to partner with a payment processor.
This partner should be trustworthy and have fast settlements of funds. The quicker a payment processor can exchange money, the more convenient it will be for your customer and the better their overall experience will be.
6. Consider the overall look and feel
Any good website has a look and feel that customers can quickly identify and use. Your website should follow the user’s natural flow, with each page blending in with the next.
You should give particular attention to your login page, which is often the first page new users will see. The page should also include protocols like Two Factor Authentication (2FA) to ensure the highest security standards for your customer. 2FA features provide added security on top of the traditional username and password combo.
The rest of your website should follow the trending best practices and will likely take the following two stages:
● Wireframing: Wireframing is a process that allows designers to create web page mock-ups to showcase key features.
● Prototype: A visualization of the user’s flow through the application. The prototype might begin as a paper mock-up and continue iterations until it is a full-fledged website.
7. Select a blockchain
In addition to a web developer who will help bring the design of your website to life, you will also need blockchain development capabilities to manage the actual processing and storing of data for user trades. Creating a blockchain starts with defining your use case, in a sense answering, “what will your blockchain accomplish?” Will it handle smart contracts? Data authentication?
After setting your goals, you can determine which consensus algorithm you will need for your blockchain to operate. The algorithm will help to determine which transactions are legitimate and ready to add to the block. Among them are Proof of Work (POW), Proof of Stake (POS), and Practical Byzantine Fault Tolerance (PBFT).
Based on your decision, you can select a blockchain platform that supports the consensus algorithm you’ve selected. Ethereum is one of the most common, but some other notable platforms include BlockStarter, EOS, and HydraChain.
8. Test Your Exchange
Once your exchange is up and running, you will do well to test it with potential users. Using a beta version of your website, you can launch your website and test the new range of features, look for any kinks and perfect them before releasing your new exchange to the world.
9. Market Your Exchange
Now that your exchange is available for use, you will need to have people find and use your new platform. A marketing team can help plan your activities, give you a budget and help you drive new customers to your website.
You may also decide to invest some of your own time in creating marketing campaigns on free platforms like social media to help meet customers where they are.
With more and more exchanges coming to life, it is understandable why you might want to dip your toes into the business side of things.
Careful consideration of all of these listed factors is necessary to ensure that you attract a loyal customer base and maintain it by providing necessary functionality and a user experience encompassing all of the above considerations.