Unravelling The Bitcoin Exchange Software – A Not-So-Brief Guide
There might be a lot of businesses that are enabled through some revolutionary technology. These businesses might not always be confined to people who are technologically advanced and knowledgeable. One such business is the Bitcoin exchange software. Making a profit out of a Bitcoin exchange software business does not mean that you will have to be well-versed in cryptocurrency and blockchain.
In this article, we will learn about the possibilities of business using bitcoin and how the Bitcoin exchange software business stands out as one of the best and the most lucrative business idea.
The entry of cryptocurrency
Very few businesses have skyrocketed to become extremely profitable within 10 years. If there is one business that can be quoted in this category, it is the business of cryptocurrency and bitcoins.
Bitcoin is a classic case of how a brand is more popular than the line of products itself! It would not be a surprise if people know about cryptocurrency only because they know what a Bitcoin is.
The Bitcoin has come a long way in its value. It was worth close to nothing in 2010, and it grew to a value of a staggering $20,000 in 2017. It did not stay aloft for a long time, it fell back to $3000 within a year, and right now, it keeps hovering around the $6000mark. Anything said, a person who processed 10,000 bitcoins in 2010 is right now a millionaire.
Bitcoin, being the flagship of cryptocurrency and blockchain technology has mutated itself into a wide variety of business ideas.
The Bitcoin and cryptocurrency, in general, have been an inspiration for a lot of business ideas, and not all of them were born at the same time.
One of the business ideas that complement Bitcoins is the creation of cryptocurrency wallet services. These wallets, as the name implies, serve the purpose of storing Bitcoin and another cryptocurrency in one place. These services also incorporate security and usage optimization for implementing in large organizations. Of late, there have been technological advancements in the field of crypto wallets, classifying them into hot and cold wallets.
Perhaps the most classic method of earning with Bitcoin is mining. Mining is one of the most simple and straightforward processes of earning cryptocurrency. It simply means that you connect your computer to the blockchain and share its processing power. This processing power and electricity helps in solving mathematical equations that ensure that information regarding the last transaction is added to the blockchain. The complexity of the mathematical equation increases with every block added. Therefore, investing in such a machine where the RAM runs in the capacity of terabytes is an expensive and impractical affair right now.
One of the inherent properties of the blockchain is its self executing and conditional programs called smart contracts. As the name implies, smart contracts have been designed to replace the traditional paper contracts, and unlike the traditional contracts, the smart contracts are immutable, permanent, and rigid. You can also make money by creating proper smart contracts that hold value in the real world of business and economics.
The fourth one that we will be focusing on right now is the cryptocurrency exchange.
What is a bitcoin exchange?
A bitcoin is very much like the money that we use in our everyday life. However, instead of existing as a note, it exists solely on the blockchain and in a digital form. Just like how our everyday money, commonly addressed as fiat currency, can’t be traded on for an exchange, even the Bitcoin can be traded on Bitcoin exchanges for other cryptocurrency and even for the fiat money.
Sucha platform that facilitates this trading is called a cryptocurrency exchange. A cryptocurrency exchange or a Bitcoin exchange is generally a web application, and sometimes, a mobile application. It functions more like a platform to bring together buyers and sellers. The rates of exchange are fixed by market dynamics.
There are different kinds of crypto exchanges, and they can be classified as centralized and decentralized exchanges.
How do bitcoin exchanges make money?
No business is complete without a proper revenue model, and a bitcoin exchange software is not an exception to this rule. There are different channels that bring revenue to the cryptocurrency exchange business.
The first channel of revenue is called the exchange fee. It is collected as a commission on every transaction on the crypto exchange. In addition, there might be some fees that is charged as the percentage of profit made in the transaction.
It is to be noted that the transaction charges apply irrespective of the trader making a profit or not. This goes to prove that a Bitcoin exchange is one of the most profitable and promising business opportunities in the crypto space.
The key features
Any cryptocurrency exchange must be backed with certain mandatory features that make it complete and user-friendly.
A cryptocurrency exchange must ensure that the security is top-notch. Cryptocurrency is, by default and by definition, decentralized. However, when all the bitcoins are deposited in a cryptocurrency exchange, it becomes a centralized entity. This becomes a ripe target for hackers and people with malicious intent. In addition, since the cryptocurrency ecosystem is largely unregulated in a lot of countries, it is quite possible that legal regulations might bounce upon your cryptocurrency exchange business in the most unexpected time, driving you into an endangered zone.
Therefore, ensuring the security of the crypto assets of your investors is of paramount importance in any Bitcoin exchange software.
Swiftness and adaptability
The cryptocurrency exchange business is extremely time-sensitive. The value of currencies fluctuate from time to time, and it is important for the exchange to be updated. This is something that your traders will appreciate and it also positions your exchange as a dependable and robust one, passively helping in marketing.
The factor of anonymity has been subject to multiple perspectives. On one side, there are exchanges that insist on the KYC/AML formalities because they need to know their customers, and also ensure that the money does not go into the hands of any unwanted forces. On the other hand, there are people who say that anything related to crypto should be anonymous, and gathering personal information might compromise the privacy of the users.
Anything said, the person who receives the crypto should not know anything about the person who sold them irrespective of whether the exchange collects customer information or not.
What makes the exchange is the cryptocurrency exchange software that resides under the hood of the intuitive user interface of Bitcoin exchanges. The software is responsible for matching the buyers and sellers, and the code of the software is called the matching engine or the trade engine. You can either consider building the software from scratch or use white label bitcoin exchange software solutions. These white label solutions are easy to customize, and help you launch your exchange without any hassle.
Any cryptocurrency exchange business should take into consideration the legal requirements. It includes but is not limited to the rules that govern financial institutions and businesses. In addition, since it involves using a technology that has always been in the grey legal area, it is important to ensure that the compliance does not suffer any lapses in the future. For this purpose, it is vital for any exchange business to follow the legal guidelines.
There are certain countries like the United States that have been quite transparent and clear about the regulations that apply for cryptocurrency exchanges. On the other extreme, countries like China have been quite hostile towards the entire crypto space, completely banning cryptocurrency and anything related to Bitcoin.
It is the countries in between these two that present challenges. There are countries like India where cryptocurrency exchanges are considered illegal business but Indians were not allowed to trade until recently. There are so many variations in the law that govern cryptocurrency exchanges, and it is important for your legal team to completely understand them, so your business does not run into trouble and damage its reputation.
As much as there are abstract things like software, security, and compliances, having a proper set of skills to run your exchange is equally important. Cryptocurrency exchanges are not resource-intensive. However, it requires some super-specialized skills. About 90% of all the exchanges that run on this planet operate with less than 10 people working in them. Even Binance, the largest crypto exchange, does not have more than 50 core resources.
Your Bitcoin exchange will need to have a quantitative strategist who works on television pricing, and operations manager who coordinates activities like HR and IT, a PR and marketing manager to ensure that your exchange gets enough visibility using brochures, social media, and press releases, and a regulatory compliance officer who ensures ongoing legal compliance.
The cryptocurrency exchange business is a sure shot profit business but it takes time. During this period, your exchange might spend more money than it earns. Therefore, it is important for you to have a continuous supply of funds. There have been instances where Bitcoin exchanges have ceased to operate midway because they ran out of cash.
There are different ways in which you can raise your funds. You can consider approaching dedicated platforms like DropDeck that use tokens to fund your project. You can also consider launching your own ICO (Initial Coin Offering) as a fundraising campaign for your crypto exchange.
The Bitcoin exchange software is the clearest indicator that such an innovative technology like cryptocurrency does not mandate in-depth knowledge to make a profit out of it. This makes it one of the most lucrative business opportunities because your target audience are not just confined to cryptocurrency experts but traders at large.
If you are one of those aspiring entrepreneurs who would like to create your own Bitcoin exchange, all you need to do is to invest in exchange software. You can either consider developing the software from scratch or consider using white label bitcoin exchange software solutions. If you would like to use white label solutions, all you need to do is get in touch with the company that specializes in these. They not only take care to deliver your crypto exchange software but also customize it according to your requirements, so you are all set and ready to launch your Bitcoin exchange business!