Creating their own cryptocurrency exchange has become a common phenomenon among entrepreneurs in the cryptosphere in recent years. Cryptocurrency exchanges are the main driving force behind the crypto market volume growth over the past decade, and they have provided lucrative opportunities for many entrepreneurs around the world. Many entrepreneurs have become millionaires by launching their own cryptocurrency exchange, which is why the demand and competition around crypto exchanges have drastically increased in the last few years.
Even though starting your own cryptocurrency exchange is lucrative, there are also many challenges involved in the cryptocurrency exchange development process. Especially in this intensely competitive scenario, every aspect of your cryptocurrency exchange development plays a crucial role in determining the success and visibility of your exchange over your competitors. To ensure long-term sustainability and success for your exchange, it is essential that you identify the pain points involved with crypto exchange development, and learn how to convert the odds into your favor. So, let’s go ahead and take a look at some of the significant challenges involved in developing an exchange from scratch, and solutions that will help to overcome them.
Factors that affect crypto exchange development
- Keeping up with the technology trends
We are living in a time of unprecedented technological advancements and constantly changing market trends. While developing an exchange from scratch, it is very important to analyze the market trends, and integrate the most advanced exchange modules. You need to be up-to-date with the latest trends and technological advancements to ensure success and traction among potential investors over your competitors. But, sometimes developing an exchange all the way from the ground might take months, or even years to complete. This makes it difficult to keep up with the trends as what might have been trending at that point, would have become outdated by the time you are done with the development of the exchange.
- Regulatory compliance
Like the changing market trends, the regulatory framework also keeps changing every now and then. And the legal requirements differ from one country to another. Several countries across the world are upgrading their regulatory norms regarding cryptocurrencies and crypto exchanges. What was legal a while back in a country might not be legal now. Therefore, deeply analyzing and adhering to the legal requirements according to your geographical location is very important to build a strong foundation for your business.
- Implementing top-of-the-line security
Even though exchanges have mostly turned out to be lucrative for entrepreneurs, they have been prone to hack threats and other scam issues in the past. Therefore, to avoid such hurdles for your exchange, as well as your users, it is mandatory to implement the best security measures when you commence your cryptocurrency exchange software development, such as proper KYC/AML verification, multi-factor authentication, escrow system and other multi-layered security protocols to ensure utmost safety for the exchange platform and user funds.
- Upgradation of Multi-currency trading
It is clearly evident that users prefer multi-currency trading platforms with multi-currency wallet support. And, the cryptocurrency numbers are vastly growing with each day. Therefore, you need to be constantly looking out for new cryptocurrencies entering the market, analyze their potential, and accordingly integrate the one that’s beneficial for your exchange as well as your users. By doing so, you can enable your users an efficient, effective trading process with their preferred cryptocurrencies, thereby boosting your potential over your competitors.
The major and the most common challenge faced by traders is the lack of liquidity. Insufficient liquidity makes the whole process burdensome and complicated. Liquidity is the key factor that decides how quickly a cryptocurrency or digital currency can be transferred or converted into cash when the market conditions are favorable. Lack of liquidity will further cause price fluctuations. Therefore, you need to ensure your platform is integrated with sufficient liquidity for smooth operations.
- AML( Anti-Money Laundering)
If you are an agile crypto enthusiast, you would have definitely known that cryptocurrencies have been prone to fraudulent activities in the past. Cryptocurrencies are in fact quite easy for criminals to transfer in a way that it cannot be detected by authorities. This is why the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act was passed to protect digital currency exchanges. You will have to adhere to the anti-money laundering policies as well to safeguard your exchange from fraudulent activities.
Taxation concerns are quite common with cryptocurrency exchanges. Exchange won’t be able to provide accurate taxation documentation for users because of reasons such as,
- Users are constantly making transfers in cryptocurrency exchange platforms with different cryptocurrencies, therefore it is difficult for the exchange to know when, where and at what cost the particular cryptocurrency was originally acquired.
- When the assets are being transferred in and out of cryptocurrency exchanges, the exchange loses the ability to compute the accurate tax report or the market value of the cryptocurrency.
What is the best way to overcome these challenges?
The above mentioned are all some of the most common challenges involved with cryptocurrency exchange development especially, with an exchange that is developed from scratch. If you are really intrigued by creating your own exchange, you need to take all these factors into consideration prior to commencing your exchange development.
Rather than creating your own crypto exchange all the way from scratch, the best alternative that will help to avoid such challenges is to acquire readymade crypto exchange software solutions from an existing company. Such companies will have an extensive and experienced team of developers, market experts, analysts, strategists, etc who will be well versed in the field, and offer advanced, futuristic solutions that will help overcome such challenges and get a headstart over your competitors. You can also achieve quick, efficient solutions, but at cost-effective prices.
At Infinite Block Tech, we have employed a broad range of industry experts who will take care of everything for your exchange from development, design, marketing, and launch allowing you to focus only on the customization part to launch the exchange in your desired brand. Our solutions guarantee high lucrative returns for your business at the best price in the industry. To create and launch your exchange in the most efficient and effective way possible, get in touch with our team of experts.