How to Build a Bitcoin Exchange: A Complete Guide

People have been asking that question a lot, so here we are with another in-depth article on how to build a Bitcoin exchange? If you’ve been thinking about it too, you might find this article insightful.

A cryptocurrency exchange is a digital assets trading platform. Investment in exchange development has led to incredible revenue generation, as can seen for Binance, which raked in huge profit of $78 million in Q1 2019.

“If you have a cryptocurrency exchange platform, you’ll earn a transaction between users regardless of Bitcoin’s current price”.

How to start a Bitcoin Exchange?

Initially, you would need a website (a trading platform) and a wallet. Website is where a user will trade his Bitcoins and a wallet is where he stores those Bitcoins.

You can either go for full-fledged exchange development, which will obviously involve more time and cost, or you can opt for white label exchange development. A white label exchange is a market-ready solution with ready-made backend and database and the privilege to customize the frontend according to your own business needs. White label exchange development saves time and money both.

The Jurisdiction of the place where you are willing to setup your cryptocurrency exchange business matters so make sure to comply with your jurisdiction. Besides, comply with all the KYC and AML rules and regulations. The best option here is to work in the countries that officially allow Bitcoin as a means of payment.

Next step in the process of Bitcoin Exchange Development is to list cryptocurrencies in the exchange.

Integrating more than one cryptocurrency will help you gain more audience coverage and high interest to your exchange platform. The process of integration might take some time considering that Ripple, Litecoin, Ethereum, Dash, Dogecoin and other coins need to be integrated manually. You can even create your own cryptocurrency and launch an ICO.

Many companies like Binance and Exmo provide discount by using their coins as an internal volume. While users benefit from discount, the exchange enjoys high volume.

Before you dive right into the launching part, here are some important features that exchange software must have,

• Flexibility in customization
• Scalability
• Ease of management
• Low delay time for the user

Security and protection of the exchange

User’s accommodations:

Your user’s personal information is highly confidential and should be protected at any cost. Access to the system must be strictly regulated; here is how it can be achieved:

• Secure and protected libraries and frameworks
• Two-factor authentication via Google passcode
• (KYC and AML) documents
• Manual confirmation from the administrator of high volume transactions and/or their large amounts

Admin’s privileges:

Whether the application is Blockchain based or a usual one, every platform needs an admin and an admin panel. To protect this layer of your exchange:

• Distinguish responsibilities and privileges of administrators;
• Create additional groups, and roles
• Team solution. Administrators from different groups must agree to the changes being done
• Development and production are two separate areas
• Limited access to each group
• Manual database transfer, which is controlled by executives, CTO for example

Malicious processes:

Malicious attacks are caused because of an intruder or malicious software. Here are different types of attacks and how you can prevent them:

• DDoS attacks can be prevented by safeguarding the exchange against overwhelming traffic originating from multiple sources.
• Firewall vulnerability can be avoided by professional system administrator, or with a strong hosting. AWS is probably the best hosting service.
• Unauthorized access can be handled with 2FA (2 Factor Authentication) or Google Authenticator.
• Notification of administrators about suspicious activity. Well, you and your team should be up-to-date with current stage. 

Technical issues

Technical issues can be of different types like software issues or damaged hardware. Everything should be monitored regularly and you should have a backup at a safe place. Here is what else you can do:

• Validation of sum
• Regular backups
• Available user log files
• Administrative notifications in case of inadequate activity

Take Away

The global adoption of Bitcoin and its acceptance as a means of payment for goods and services have elevated Bitcoin trading and thus the demand for Bitcoin exchange development. A well-developed, feature-rich Bitcoin exchange means regular cash inflow. Thus, if you are planning to build your Bitcoin exchange, reinforce it with the right features for world-class security and user experience, to gain essential competitive edge.