Cryptocurrencies are decentralised digital currencies; unlike other fiat currencies like the U.S. dollar or euro, crypto has no physical representation.
Cryptocurrencies offer various benefits, such as security, anonymity, transparency, and no downtime. Therefore, starting a cryptocurrency exchange generates significant interest, as people believe they can make good profit from the exchange if their services become popular.
Three main types of exchanges exist: centralised exchange (CEX), decentralised exchange (DEX), and hybrid exchange.
CEXs are managed by businesses or individuals involved in the custody of funds. They offer minimal costs, liquidity, and safety. Such exchanges are very user-friendly and easy to understand for customers unfamiliar with the crypto market.
However, CEX has some drawbacks: for example, high fees and lack of anonymity. Also, such exchanges might have some security issues and oversight from outside parties.
DEXs are not subject to government regulations and have no major parties involved in transactions. Trades are executed directly between users via smart contracts, adding to a higher security level. However, DEXs might be less attractive for beginner traders since, in these exchanges, it can be difficult to process transactions.
An exchange that combines the best elements of both CEX and DEX is called a hybrid exchange. Its biggest advantage is that people get more control over their money. These exchanges may not be operational for some years as they are currently in the early stages of development.
Choosing the right kind of exchange for your business is the first step if you want to launch your own cryptocurrency exchange.
A perfect type of exchange doesn’t exist. Your skills and preferences will determine what you need. You have to be aware of the benefits and drawbacks of each trade before you begin.