With the spread of the first cryptocurrencies, the need to freely exchange between them and also for fiat currencies arose. The first crypto exchanges then appeared, making it easy to exchange bitcoin for altcoins and even fiat, as well as deposit and withdraw currency via electronic money, bank cards and accounts. This provided a powerful stimulus to the development of cryptocurrencies, leading to a sharp increase in prices. The number of different trading platforms has grown along with them.
A crypto exchange is a trading platform where various cryptocurrencies can be sold, purchased, or exchanged. Similar to Forex, a crypto exchange brings together buyers and sellers of a currency (in this case, cryptographic), ensuring the reliability of deals. As with any exchange, it works on a trading engine, with the accuracy and speed of operations depending on the optimisation of the code. The engine verifies placed orders to back with assets available on balance, maintains records of orders in the database, and prepares data for display in a web/mobile application or trading terminal.
The first crypto exchanges were centralized and only cryptocurrencies were traded there. As the market developed, they began to be conditionally classified by type:
According to Coinmarketcap, there are more than 500 cryptocurrency exchanges operating on the market. Each of them tries to provide users with special conditions.
When creating a cryptocurrency exchange, keep in mind that traders pay attention to such characteristics as:
Today, the largest and most popular are Binance, Coinbase Pro, Bitstamp, Kraken, and Kucoin.
Binance was launched in Hong Kong in 2017 and moved to Malta in 2018. Within the space of just a few years, it has grown from an ordinary exchange to an entire ecosystem where 12 projects are currently operating. Binance offers 8 services for regular trading and 7 for derivative trading, plus 10 earning and investing services.
Specifics of Binance:
The company Coinbase was established in California, USA in 2012. The initial version of its exchange was called GDAX, while the Coinbase Pro version was launched in 2018. Coinbase offers 13 services to private users, 9 services to institutional investors, and 10 tools to developers.
Specifics of Coinbase Pro:
The company Bitstamp was established in Slovenia in 2011, opened an office in London in 2013, and moved to Luxembourg in 2016. The exchange offers a standard trading interface for private users, a pro version for professional traders, and a separate one for institutional investors.
Specifics of Bitstamp:
The company Payward was established in California, USA in 2011. It launched an exchange named Kraken in 2013. Kraken periodically absorbs other exchanges and acquires services, such as the exchanges Coinsetter, Cavirtex, CleverCoin, and Crypto Facilities; and the services Glidera and Cryptowatch.
Specifics of Kraken:
KuCoin was launched in 2017, with its headquarters in the Seychelles. It offers 4 services for regular trading and 4 for derivative trading, plus 7 earning and investing services. In 2018, the company opened KuCoin Labs, an investment and research laboratory, and in 2021, it launched the KuCoin Community Chain testnet with a focus on inclusiveness and community outreach.
Specifics of KuCoin:
Cryptocurrency exchanges earn on commissions for trading and for withdrawing crypto/fiat from the account. Trades are taxed at a minimum if native exchange tokens are staked or settled for a commission, as well as if you trade in very large volumes monthly, therefore fees in the table start at 0%.
As a rule, no one charges a deposit fee. And the withdrawal fee almost completely goes to pay miners or the network via which the transaction is carried out. Considering that each network has its own tariffs, we used only the withdrawal of BTC and ETH for reference.
|Crypto exchange||Trading fee for makers, %||Trading fee for takers, %||Withdrawal fee||Trade volume per day, $|
|Binance||0.02–0.10||0.04–0.10||0.0002 BTC; 0.0012 ETH||11,849,682,536|
|Coinbase Pro||0.00–0.04||0.05–0.60||Crypto: according to miners/network rates.
Fiat: 25 USD for Wire; 0.15 EUR for SEPA; 1 GBP for Swift.
|Bitstamp||0.00–0.30||0.00–0.40||Crypto: 0.0005 BTC; 0.006 ETH.
Fiat: 25 USD for Wire; 3 EUR for SEPA; 2 GBP for Faster Payments
|Kraken||0.00–0.16||0.10–0.26||Crypto: 0.00001 BTC; 0.0035 ETH.
Fiat: 4–35 USD for Wire; 0.09–1 EUR for SEPA; 13–35 GBP for Swift.
|KuCoin||0.00–0.20||0.05–0.20||0.0005 BTC; 0.005 ETH||693,819,851|
The last column, with volumes as of August 2022, will help you calculate the approximate daily revenue from spot trading only. Take the average maker and taker fees and multiply by volume to get the average revenue of a popular exchange.
A crypto exchanger is a website without a trading engine and an order book. It itself acts as the second party in trading, that is, it sells and buys cryptocurrency directly. In this way, it more resembles an offline currency exchange point.
While on a crypto exchange, prices are dependent upon the balance of supply and demand, on a crypto exchanger, the owner sets the exchange rates themselves. On the one hand, this is an advantage of exchangers because they aren’t suitable for exchange schemes like ‘pump and dump.’ On the other, crypto exchanges are more democratic because prices are influenced by many participants and not just one person.
Creating a crypto exchanger is more profitable than an exchange: development will cost half as much and pricing depends on the owner, not traders. While administrators often look at market prices on exchanges, many buy and sell at significantly different exchange rates to capitalize on the difference. At the same time, their customers can’t choose an acceptable selling or buying price for themselves, or specify their own, unlike orders on exchanges.
When creating a crypto exchanger, keep in mind that users pay attention to such characteristics as:
A P2P platform is a service that allows users to sell and buy cryptocurrency directly. The buyer and seller interact with one another without the mediation of a third party. The P2P platform only helps to select ads, pre-checks and evaluates their creators, as well as provides escrow accounts for cryptocurrencies.
CEXs usually have strict rules and requirements for users, including passing identity verification. Unlike them, P2P platforms are more loyal to users. To find the best offer in just a few seconds, you need to fill in several fields of the search form.
P2P platforms resemble crypto exchanges in that they also match sellers with buyers, making the trading process easier and simpler for those who need to quickly sell or buy cryptocurrencies. Otherwise, they operate very differently from both CEXs and DEXs:
When creating a P2P platform, keep in mind that users pay attention to the following factors:
Users additionally pay attention to the availability and efficiency of customer support, available payment methods, the number of ads (liquidity), and the absence of scammers on the platform.
Do you need a P2P platform? Polygant develops them from scratch and also implements a P2P service on existing trading platforms. Submit a request, and after a detailed discussion, we’ll get started on your project!
A difficult but competent approach that allows you to get to know the crypto market better by coming through all stages of creating the future service: from concept design and ToR to final release. In a basic version, a crypto exchange consists of a trading engine, admin panel, database, user interface, account management centre, web wallets, and analytics.
Polyx.net is an example of an exchange that our team developed from scratch.
We were given the task of developing not just a cryptocurrency exchange, but an ‘all-in-one’ service. The main objective was to launch a convenient platform not only for professional traders and investors, but also for ordinary users to purchase cryptocurrency just like any other digital product. We therefore added several useful services to the basic version to expand audience reach. The platform currently consists of 10 components:
We didn’t implement them all at once, but gradually, in stages. For most customers, this is more convenient: you can control work progress, plan a budget, suggest new ideas during the development process, as well as order additional sections and functions gradually. Creating a turnkey crypto exchange took us 3 months (in 2019); the first 6 components were included. We added components 7, 8, and 9 in 2021, and this year included a P2P service.
It all starts with the development of the terms of reference. Without ToR, it’s impossible to estimate the time and cost for creating a turnkey cryptocurrency exchange. This mandatory stage takes about ~100 working hours and costs ~$5000.
Tailoring an already developed product to your brand. A crypto exchange powered by a ready-made engine may be a fill-in alternative or additional service for your audience. Typically, the main activity of someone who purchases a white label product is not related to cryptocurrencies, but is very close in subject matter. And a crypto exchange may be needed to meet demand or to follow a trend.
It may seem that the key thing when ordering a cryptocurrency exchange is to solve technological issues, but in practice this isn’t the case. According to our estimations, solving financial and legal matters captures over 50% of the time. Here is what you’ll have to deal with.
You need to choose a jurisdiction that is loyal to cryptocurrency services. It’s not so easy as cryptocurrencies are still not widely recognized and approved by the governments of most countries. And these states welcome cryptocurrencies:
In many countries, activities related to trading and storing cryptocurrencies require separate licencing. For instance, in Estonia, it is necessary to obtain two licences: one for cryptocurrency wallet functions (storage of cryptocurrency), the other for exchanging cryptocurrencies for fiat money.
As a participant in the financial system, you’ll have to comply with anti-money laundering laws (AML). The 5th AML Directive, in force in the European Union since 10 January 2020, imposes strict requirements on the procedures to verify customers and their transactions.
KYC — Know Your Customer. This requirement forces verification of the identity and address of residence of users. Of course, you can still collect documents from users, carry out verification, and check against various databases (PEP, sanction lists, etc.) yourself. But it is easier to turn to auxiliary services that simplify and make it fairly inexpensive to implement the necessary checks:
KYT — Know Your Transaction. A relatively new requirement by regulators says that all crypto exchanges are required to check the cryptocurrencies coming from users and block those received from ‘dirty’ sources. This is to prevent coins used in criminal activities, drug trafficking, and financing of terrorism from getting into circulation. Various services that allow you to check transactions via API will also be of help here.
AML compliance. According to the law, a certified AML officer must be on the staff of a crypto exchange. They are responsible for tracking suspicious transactions, filing SARs (Suspicious Activity Reports), and sending them to financial regulatory services. This employee must have a background in finance and a certificate from a recognized world community:
This is the most difficult task when creating a turnkey cryptocurrency exchange or exchanger. Banks consider cryptocurrency activities to be high-risk, so with a 99% probability they’ll likely refuse to open an account in Europe, even if your company has received the necessary licences and complies with AML laws.
The only way to get a current account is to open one in an electronic money institution. The essence of what they do is that when you transfer fiat money to them, it is automatically exchanged for electronic money. And when you withdraw fiat from the account, this electronic money is redeemed. It’s a bit confusing, but can be used. Strict requirements are also involved there, but they can actually be fulfilled.
Here are the current payment systems that open IBANs for cryptocurrency services (as of August 2022):
|Name||Website||Opening cost (€)||Monthly fee (€)|
Developers aren’t used to specifying the cost for an unknown amount of work. Without holding negotiations with the customer, it’s difficult to make calculations because different customers have different requirements. Nonetheless, everyone wants to know in advance how much it costs to create a cryptocurrency exchange.
For a preliminary estimate, companies conduct market research and provide a range of service costs so that customers can navigate when planning a budget. We did that too and found out that rates have come down somewhat this year (they just adjusted after the boom in 2021). In 2022, development markets in different macroregions provide services at the following rates:
Still have questions? Submit a request, and we’ll explain everything in detail and together work out a strategy for developing and promoting your cryptocurrency exchange!