Trading Cryptocurrencies has now become a lighter and less complicated task than before. Over the past few years, cryptocurrencies have been rapidly gaining a great hype of re-exploring the financial industry. According to Coinmarketcap, around 214 cryptocurrency exchanges are in operation to support trading for the user base. The crypto exchanges have seen an uprise and will burgeon in the future days as well!
What is a Cryptocurrency Exchange?
A Cryptocurrency Exchange is the platform which allows the investors to trade the cryptocurrencies in exchange for other cryptocurrencies or assets. These exchanges play a great role in the drastic growth of cryptocurrencies. Cryptocurrency Exchanges connect the buyers and sellers and make a piece of a fee from each transaction.
Crypto Exchange platforms are responsible for:
- Cryptocurrency users can easily carry out with the operations between fiat and crypto.
- Easy swapping of coins
- Dealing with Order Book
A Crypto Exchange has the following set of components in its dashboard:
- Trade Engine
Trade Engine is the software which enables the investors and traders to place the order and monitor their transactions.
- User Wallet
User Wallets are responsible for holding the cryptocurrencies which are being traded. Whenever a user wants to initiate the transaction, the user has to enter the private keys stored in the wallet.
- Liquidity & API
Crypto Exchanges usually offer higher liquidity. When the orders are being placed, they are securely transferred through restful API.
- Escrow Security
In the case of Peer to Peer trading, to eliminate the security risks, Escrow software is being installed. This enables a smooth transaction between a buyer and a seller.
- Admin Panel
The backend of the trading platform involves Admin Panel. With this section, one can manage the crucial elements such as User order, Withdraw, Escrow, etc.
Types of Cryptocurrency Exchanges
When it comes to Crypto Exchanges, there are two primary exchange platforms. Centralized and Decentralized Exchanges.
- Centralized Exchanges
In Centralized Exchanges, there remains a middleman in between to perform the trading activities. Most of the crypto traders end up with using centralized exchanges due to the benefits they offer. The key benefit of Centralized Exchanges is regulations and legality.
Moreover, most of the centralized exchange platforms are being well-regulated by the government. In centralized exchanges, there is greater transparency where exchanges come forward and specify their location and address. Most of the crypto traders using the centralized exchange platform enjoy the benefits of higher liquidity, higher trading volume, ability to convert from fiat to crypto, etc.
- Decentralized Exchanges
While on the other hand, Decentralized Exchange platforms have been accredited as the future of crypto exchanges. The reason is, Decentralized trading platforms don’t involve any third-party for trading. Therefore, customers can have complete control of their funds. Decentralized Exchanges will contribute more to the security for the trading platform!
In Decentralized Exchanges, matches the people behind the orders rather the orders directly. Moreover, the absence of third-party cut downs the trading fee. These exchanges are more private and don’t require to disclose their identity.
- Hybrid Exchanges
As the name suggests, Hybrid Exchanges are the one which combines the features of both Centralized and Decentralized Exchanges (HEX= CEX+ DEX). Either the centralized nor decentralized exchanges can completely provide the entire functionality to trade efficiently in the market. Thus, came the hybrid exchanges which compose liquidity feature from Centralized Exchanges and security features from Decentralized Exchanges.
- Launching an Ideal Exchange
An Ideal Crypto Exchange is the one which combines both the benefits of Centralized and Decentralized Exchanges. Additionally, the trading platform should remain user-friendly when it comes to trading.
Future of Crypto Exchanges:
- Social Trading
The famous crypto exchanges have not collaborated with social channels to help new customers. This can help save traders from potential losses and learn trading tactics.
- Several charts in a single window
Professional Traders are looking for a platform where they can view multiple charts in a single window. In recent days, crypto exchanges support to view a single chart in a tab while other charts can be viewed only by opening other tabs. To avoid these issues, exchange platforms will come up with this feature.
- Resolve the current issues
The cryptocurrency exchanges are here to stay. In the upcoming years, exchanges work to resolve the current issues with the platform. In the case of Centralized Exchanges, security is a bit lower compared to Decentralized Exchanges. While liquidity is lower in Decentralized Exchanges. In future exchanges, all these issues will get solved.
- Wide Acceptance
Right from enterprises to the government would start accepting cryptocurrencies and thus the crypto exchanges. This can, in turn, encourage international trade and would become more effective.
- Alternative to Bitcoin
At the time of writing this article, the Bitcoin price is $8,690.86. I’m not sure, what would be the price when you are reading this. Despite the fluctuations in Bitcoin price, the usage of Bitcoin will upscale. Other currencies such as Litecoin, Ripple, Ethereum will also soar up. Thus, investors would approach trading platforms for the exchange of other currencies.
- Tokenization of economy
More number of projects will start emerging for legal tokenization With this there are greater benefits for users such as high liquidity, ease of trading, etc. Therefore, new users are being expected to reach Crypto Exchanges.
- Instant Trading
The time required to trade the cryptocurrencies will indeed become faster in the upcoming years. If you consider the popular crypto exchange platform Binance, the transaction speed is 15 transactions per second. Moreover, the exchange platforms will start raising the number of transactions in the future.
To end up, users are looking for more tools and features in a crypto exchange platform. Moreover, the basic instinct of all the traders is to make great revenues with the exchange platforms. Therefore, create a cryptocurrency exchange platform which encompasses all the above can help you with upscaling your business!
A very well explained article about cryptocurrency exchange development. Thanks for sharing. Keep up your work.