“The trade volume of cryptocurrencies worldwide was $49.6 billion, on average over 24 hours as of February 2023. Before this, in November 2021, the total trading volume of all cryptocurrencies worldwide at 24 hours was $130 billion. (Source: CoinMarketCap).”

Cryptocurrencies are bought, sold, and traded via Crypto Exchanges across the globe. Crypto Exchanges play a vital role in secure transactions, thus the platform has a huge business potential as it drives more users over time. Before investing in this business model, investors and entrepreneurs should be aware of this emerging trend in cryptocurrency exchange development and have the necessary knowledge. Investing in crypto-related business might look profitable, but investors should know the benefits as well as the downsides to it. 

What is a Cryptocurrency Exchange Development?

We guess you must know what is cryptocurrency & how it works on blockchain technology. Cryptocurrency Exchange Development is a process of developing an online platform in which users can start buying and selling cryptocurrencies and other digital assets. The Cryptocurrency Exchange is a privately owned software application that enables the trade of digital assets, fiat currencies, and NFTs.

Types of Cryptocurrency Exchanges

There are three types of Cryptocurrency Exchanges in the industry, Centralized Exchanges (CEX), Decentralized Exchanges (DEX), and Hybrid Exchanges (HEX). As of now, most trading takes place through either CEX or DEX because of the reliability. Hybrid Exchanges is in its development stage which is aimed to overcome the limitations in CEX and DEX.

Centralized Crypto Exchange

The centralized crypto exchange is the most commonly used trading platform by users. All the transactions and processes in CEXs are governed by a central entity, mostly the owner of the exchange. In this type of exchange, users can exchange crypto-to-crypto or bank accounts to trade cryptos. Exchange platforms like Binance, WazirX, and Coinbase are examples of CEX. The main advantage of CEX is the secure funds, the whole process is governed by an entity that keeps the cryptos safe and secure.

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Decentralized Crypto Exchange

As the name implies, the exchange is truly decentralized which means no central entity, company or organization is under oversight. The trading in DEX is fully automatic and works on smart contracts. The transaction is completely anonymous and it doesn’t require any KYC this exchange is less secure when compared to CEX. Most decentralized crypto exchanges operate on the Ethereum blockchain keeping all security criteria as a concern.

Hybrid Crypto Exchange

HEX's primary goal is to develop an exchange that pinnacles the advantages of both CEX and DEX and also eliminates all the downsides of both platforms. HEX eliminates the taker or the gas fees, thus helping reduce high trading fees in DEX. Hybrid Crypto Exchange also provides a private key to the user for better scalability, thus enabling options like both wallet trade or trade via smart contacts to perform seamlessly unlike DEX. As HEX is in its infancy we cannot predict its benefits.

Benefits of Centralized Crypto Exchange

Reliability

When it comes to a centralized exchange, there is an enhanced layer of reliability and security offered by the central entity.

User Friendly

Most transactions taking place through a crypto wallet or a P2P exchange might be complex, whereas, in CEX, users can simply trade through websites or apps.

Convenience

Users can easily keep track of their fund transfers, check their balance, payment status, and other processes at an ease.

Downsides of Centralized Crypto Exchanges

Prone to Hacking

The central entity is responsible for the security of the users which makes the centralized exchange more vulnerable to hacking.

High Transactional Fee

Centralized Exchange platforms usually charge hefty transaction charges, which can become extremely high when transacting in substantial volumes.

Top 5 Centralized Exchanges 

1. Binance

2. Kraken

3. Coinbase

4. Bitstamp

5. Bitfinex

Source: CoinMarketCap

Benefits of Decentralized Crypto Exchanges

Stay Anonymous

The DEX doesn’t ask for KYC, thus personal details are not required. This makes your transaction completely anonymous.

Anti-Manipulation Measures

Decentralized exchanges reduce market manipulation by enabling peer-to-peer cryptocurrency trading, buffering customers from fake trading.

Guardianship

In a decentralized exchange, there is no third party involved in managing user assets. The users are assured of increased safety against fraud, hacking, failure, or theft.

Downsides of Decentralized Crypto Exchanges

Complexity

The user must remember their keys or passwords for their digital assets or crypto wallet, once lost, it cannot be recovered and gone forever.

Less Liquidity

Almost 88% of all crypto transactions take place in a centralized exchange, so it is difficult to find buyers and sellers in DEX.

Top 5 Decentralized Exchanges 

1. Uniswap V3

2. dYdX

3. Kine Protocol

4. Curve Finance

5. Balancer V2

Source: CoinMarketCap

How Investing in Cryptocurrency Exchange Development Will Be Profitable in 2024?

Ever since the rise of cryptocurrencies, the concept of crypto exchanges, NFTs, and digital assets has been the subject of debate. Initially, people were skeptical about the technology and the legality of digital currencies. But now cryptocurrencies are ruling the world and evolved as the most profitable business model. 

With the increased number of digital currencies these days, there is a lack of crypto exchanges to handle all the trading. This makes Cryptocurrency exchange development a lucrative business idea in 2024. Most businesses and governments have started to accept cryptocurrencies ensuring the crypto exchange development is a profitable business in 2024.

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How Crypto Exchanges Make Money?

1. The crypto exchange receives a transaction fee when a user buys, or sells a cryptocurrency through a cryptocurrency exchange platform.

2. The exchange platforms can also charge a deposit fee for migrating cryptos from other platforms.

3. The exchange can make money by staking. It works on interest basics, a user can hold crypto for a specific period, making money for the exchange.

4. A large group of investors can stake their cryptos or smart contracts and the exchange can make money through a liquidity pool.

5. A cryptocurrency project must pay to have its tokens listed on an exchange for traders. This generates a listing cost for the exchange.

Take Away

Cryptocurrency Exchanges has been a proven revenue-generating business stream over the years. Almost every crypto investor is ready to start their exchange these days. Before jumping on the bandwagon, one should know the crucial factors and complexity involved in the Cryptocurrency exchange development process. Maticz a leading Cryptocurrency Exchange Development Company helps entrepreneurs to develop their exchange that suits their requirements and needs. 

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