How do crypto exchanges make money & how to create an own crypto exchange business platform?

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In the past few years the cryptocurrency market skyrocketed. Eventually, the already leading cryptocurrency reached new heights when it surpassed its all time high of $ 63k+ in April 2021. As a result, the overall crypto market got a huge hype & boosted several cryptocurrencies like Ethereum, Binance Coin, Litecoin & etc. The crypto investors & traders were able to make hefty returns. Speaking of crypto trading, have you ever thought – how the cryptocurrency exchange makes money? How much revenue do they generate per year? What are their revenue models? Well, allow me to fill in with the necessary answers to your question. 

A cryptocurrency exchange is a platform that allows people to buy, sell and trade digital currencies like BTC and Ether. These cryptocurrencies can be traded with other conventional fiat currencies or fiat currency associated with a specific digital currency. Are you worried about the authenticity of a cryptocurrency exchange? If yes, then I can assure that it is completely trustable. The technology beneath the creation of such exchanges enables the users to trade in a highly flexible and liquid market. As a result, the exchange can prevent the situation where one type of digital currency outruns another.

Are you wondering about the potential profit that can be generated when you run your own exchange??? Evidently, the amount of revenue generated by the top cryptocurrency exchanges all over the world is humongous when compared with other sector businesses. These statistics are very recent and therefore they give you a clear idea about the cryptocurrency exchange business.

Exchange

Name

 

Volume

Traded

(in $Bn)

No. of

Supported

Cryptos

Supported

Fiat money

Trading

Commis-

sion

Revenue generated

(In USD)

Binance

11.76

374

46

0.10%

570Mn

Paxful

5

3

100+

0.50%

49.5Mn

Remitano

4.2

6

100+

1%

20.8Mn

Coinbase

1.35

74

3

1.49%

370Mn

Kraken

0.50

69

7

0.26%

12.3Mn

Huobi Global

 

2.80

331

50

0.20%

66Mn

Bitfinex

0.40

139

4

0.20%

21.4Mn

Bitstamp

0.20

30

3

0.50%

54.5Mn

Luno

0.02

14

10

0.25%

4.7Mn

As we have all seen, successful cryptocurrency exchanges are capable of generating hefty profit returns. This is possible through several different methods where an exchange can create profit revenues. They are:

Deposit fee:

Almost all the existing exchanges charge a fee for currency transferring which is called a deposit fee. A deposit fee is different from a transaction fee where you are obliged to pay when you carry out a trade or purchase from the exchange.

Withdrawal fee:

These are typical fees charged when you withdraw digital currencies to your wallet. These withdrawal fees may vary depending upon every cryptocurrency exchange.

Trading commission:

Earning through commissions is probably the most common way to generate revenue for cryptocurrency exchanges. This is an essential commission that acts as a service charge for brokering trades between two parties.

Listing fees:

 The starting phase of any newly formed cryptocurrency exchange will generate minimum volume inevitable. Due to this situation, exchanges cannot depend completely on commission revenues. An exchange may also collect a percentage of the raised funds from an IEO, ICO or a STO service.

Margin Trading:

This is a trading strategy that includes investing in borrowed assets from a third-party. It provides the trader with added capital sums and thus allows them to leverage their positions. The risk factors involved in margin trading are very high.

IEO Launchpad:

Another method of generating revenue for the exchange is to equip the platform with a fundraising module. This allows other companies to conduct a token sale on the platform. In this scenario, the exchange acts as a repository for people to buy tokens.

I believe now you will have a clear idea about how crypto exchanges generate their revenue. Evidently, last year’s (2020) pandemic situation did not affect their business as it did with other sectors. Infact, the crypto ecosystem grew tremendously during the pandemic. So, If you are an emerging entrepreneur willing to start a business in the crypto/blockchain ecosystem, then setting up a Cryptocurrency Exchange might be the best approach. Here I’ve plotted out some easy steps to launch a crypto exchange business platform. 

Steps for creating own cryptocurrency exchange:

Creating your own cryptocurrency exchange involves a series of steps to be followed before you can completely establish your exchange. These steps are vital as they play an important role in designing your exchange entirely. They are as follows:

Region of operation:

Before starting a crypto exchange, it is important to decide your area of operation. In other words, you must decide if you’re going to operate within a confined region or on a global scale. The best way is to launch your crypto exchange in a crypto-friendly territory for avoiding any external issues.

Market research:

Starting a cryptocurrency exchange will require extensive research regarding the current market trend. Make sure you are launching an exchange where the service is abundantly welcomed by the people of that particular region.

Choose exchange type:           

This step is very crucial because this can define the type of cryptocurrency exchange you’d want to run. There are primarily three different types of cryptocurrency exchanges, viz., Centralized crypto exchange, Decentralized crypto exchange and Hybrid crypto exchange. Each exchange has its own ups and down along with several added benefits to it. However, the basic difference lies in the involvement of an intermediary.

Getting license:

For commencing a cryptocurrency exchange, you will need to get a license from the local authorities. The procedure for getting that license may vary for different locations. Licensing is very crucial for gaining the customers’ trust initially. That is because people from a locality mostly trust their government for providing solutions. In that regard, if your exchange is approved by their government authorities, it will also gain customer trust as well.

Hire legal counselors:

Establishing a cryptocurrency exchange has its own legal issues that come along with it. Therefore, hiring a legal counsel team will help you with all the legal issues that come with launching a crypto exchange.

Financial backup:

 The volatile nature of the cryptocurrency environment needs a certain amount of financial aid for a healthy long run. So, keeping a strong financial backup is always recommended if you are planning on running your own cryptocurrency exchange.

Finding a trust-worthy white label crypto exchange provider:

The recent trend of doing business related to the cryptocurrency space saw the introduction of several inexperienced script providers. To avoid such a scenario, you must choose the best cryptocurrency exchange script provider in the current market.

Connect with partners:

Connecting your exchange with other leading exchanges will ensure high liquidity in your exchange. Liquidity is the ease with which the transactions are carried out. When partnered with multiple exchange pioneers, you will have liquidity even when some of them are temporarily paused for maintenance.

Integrate payment processors:

Partnering with other financial institutions or banks will ensure you have a seamless working payment portal. Having a smooth payment process is vital because it paves way for more transactions from the customers. 

Essential Features:

  • User console
  • Administrator console
  • Payment gateway
  • Mobile application for Android and iOS
  • Liquidity API
  • Wallet integration
  • IEO integration

 

Have a solid security setup:

Having a solid security setup for your exchange is another very important aspect that comes with launching cryptocurrency exchange. Security features are the foundation that lies beneath the client’s trust over the exchange. Having a tightly secured system will ensure an increase in user base.

Conduct beta testing:

It doesn’t matter how perfect your coding is, if you don’t conduct beta testing you won’t be able to fix any technical issues. It is normal for newly developed exchanges to encounter minor technical adjustments. Beta testing will identify these loose ends for the developers to fix it before it goes completely active.

Provide 24×7 user support:

 Caring for the clients who are seeking your exchange is a very crucial factor for future development of your exchange. Providing customer support round the clock will improve the user-exchange relationship on a positive scale.

Conclusion:           

As we all know, the level of impact created by the cryptocurrency ecosystem in e-commerce is a monumental milestone. Cryptocurrency community has achieved this feat. in less than two decades from its advent. For other sectors, this level of influential power comes at least after two generational gaps. This is enough to measure the true potential of digital currencies. For any upcoming entrepreneur looking for a business career, considering starting a cryptocurrency exchange platform has turned out to be a natural choice. The sheer profit margin and potential growth that comes along with starting a cryptocurrency exchange platform is very humongous.

Just like any other business, you will be prompted with false hopes and allegations at the beginning. But, it is an undeniable universal fact that the cryptocurrency exchange business has a huge potential with a very wide scope for success.

2 Responses

  1. Starting a cryptocurrency exchange business is the beginning of an exciting and sometimes challenging period in your life. starting a cryptocurrency exchange involves planning, doing market research, financial decisions making, marketing, and acquiring knowledge in areas you never thought you would learn about before.

    Here I would like to suggest the guide on how to start a cryptocurrency exchange – 12 simple steps answers all your queries about cryptocurrency exchange launch. I hope it will help you to create a successful cryptocurrency exchange platform effecitvely.

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