With every passing day, the trend of cryptocurrency exchange is booming across industries. Individuals and several companies are shifting from conventional financial models to these decentralized bodies. As blockchain technology is getting more mature and performance-driven, the demand for more sophisticated cryptocurrency exchanges is also growing.
As the competition surges, it has become competitive to run the cryptocurrency exchange with higher profitability and good customer retention rate. As there are so many options available for crypto owners, switching from one platform to another is only a few clicks away.
So, it is inevitable to run the cryptocurrency exchange efficiently for maximum benefits without cutting down the profits. If you plan to build your own exchange or you are already into it, you should know about the best practices to run an exchange. To have an edge in the market, you must understand where the market is going to grow your profitability.
Before we dive into the best ways to run a cryptocurrency exchange, it's essential to know its different types. Majorly, there are four types of cryptocurrency exchanges, that are:
Retail exchanges are among the most popular platforms that both beginners and seasoned investors leverage to enter the cryptocurrency market. This exchange holds the users' private keys, and it makes trading, buying, selling, and staking much easier for the users. For retail exchanges to work seamlessly, it's essential to have higher transaction speed, asset security, and ease of use to thrive in the market.
With an unprecedented surge in data privacy and identity protection, decentralized exchanges are getting more popular among traders and crypto lenders. These are non-custodial platforms that have a minimum involvement of the exchange operator for protecting privacy and flexibility. For ensuring security and facilitating lending and trades, these platforms use smart contracts to automate various complex things.
A peer-to-peer exchange is a popular format where two or more traders can connect one-to-one and perform trade with or without any custodian or a broker. Here individuals create a listing for their requirements, and others can buy or sell from them directly. P2P exchanges come with complex auto-matching engines that connect traders for completing the transaction. P2P exchanges are popular because they are fast, secure, and easy to use.
Derivative exchanges' popularity is growing rapidly among experienced traders as it offers several advanced features that are not available on other platforms. It allows traders to have multiple investment options. Be it spot trading or leveraged trading; these platforms offer omni-channel options. As these exchanges have high earning potential for investors, companies can have good profit-making opportunities by launching their own derivatives exchange platform.
On this note, let's explore those best practices that will help you run the exchange with higher profitability and allow you to grow your customer base.
With ongoing digital disruption, more platforms are coming into the market that offer services at competitive prices. For making a cryptocurrency exchange successful, having an attractive trading fee is very important. Before you define your deposit, transaction, and withdrawal fees, it's critical to perform a competitive analysis to sustain and thrive in the competitive market.
Cryptocurrency exchanges offer multiple payment modes that support both fiat and cryptocurrency. For making the exchange more accessible, it should have payment options through credit card, debit card, and Paypal. When you enable credit card payment options, ensure you verify each user to avoid any kind of credit card fraud.
You need to keep in mind that fiat-to-crypto exchanges need to undergo regulatory scrutiny. However, this is not the case with crypto-to-crypto exchanges. To gain an edge in the market, an exchange owner should offer both options to their customers.
While scaling the exchange, how you verify your user base plays a winning role. As many individuals prefer to stay anonymous and skip the KYC process, it sometimes becomes challenging for companies to keep a record. To get ahead of the competition, exchanges must have multiple ways to verify their customer base other than KYC.
Get started with Seven Bits
If you are looking to develop your cryptocurrency exchange to serve your customers better, we have you covered. Our Blockchain Center of Excellence (CoE) team brings in years of experience and expertise in multiple technologies to drive innovations and groundbreaking results. With the support of more than seven blockchain frameworks, we ensure cutting-edge product development to take the lead in the market. Get in touch with us at firstname.lastname@example.org to know about our cryptocurrency exchange development services.