Cryptocurrency Trading Platform Development Is An Extensive Process

The type of platform you want to build will influence how the platform will be developed. This will determine how the business model works, the security, how it will store the assets, liquidity, compliance and what the overall architecture looks like.

The decisions you make at this stage will impact how much the platform will cost and how complicated it will become. Understanding what you want your platform to do will help your startup or business understand what you want to build and for whom.

What Type of Platform Will You Be Building?

This will be the first thing you have to decide. There are various types of platforms you can build.

Centralised Exchanges (CEX)

These are the most common, allowing users to create accounts and provide order books, matching engines and custodial arrangements. These can be familiar to users but will require strict controls to ensure customers know who is responsible for their assets.

Decentralised Exchanges (DEX)

These use smart contracts and blockchain networks to match trades. Depending on how they are set up, users can trade directly from their wallets. However, there are risks with the smart contracts and the blockchain network. Costs, finality and liquidity will need to be considered.

Hybrid Platforms

This combines some aspects of centralised and decentralised. For example, order matching can be done off chain but settlement on chain.

Brokers

Some platforms are brokers which connect users to liquidity providers.

Which type of platform you choose will depend on the audience you are targeting, the custodial requirements, your resources and what markets you want to target. Getting this decided early will stop you spending money on features that won’t help you.

Know Your Business Model

You will want to ensure the technology you implement will support your business model.

Will your platform be for retail traders, professionals, businesses or institutional clients? What products will you offer? Spot trading only or more advanced products in the future? Will you be offering crypto to crypto pairings, fiat to crypto pairings or both?

You will also need to think how you will make money. Will you be charging fees for trading, withdrawal fees, subscriptions or premium services?

Usually trying to build a minimum viable product (MVP) with achievable features will be the best option. This will allow you to test the demand, check critical functionality and understand any potential issues.

Security

As you will be dealing with sensitive account details and potentially assets that aren’t easily recovered, you will want to ensure security impacts your architecture.

Consider the following:

Authentication: Ensure secure authentication processes are in place, using multi-factor authentication, session management and role based.

Wallet & Keys: Decide how you want to protect your private keys and who can authorise transactions. If you want to manage the custodial requirements or if you want to use a custody specialist. Withdrawals: Consider whether you want to allow withdrawals only to approved addresses, have limits on how much can be withdrawn, extra verification processes, detecting anomalies and manual checks.

APIs: Limiting API usage, ensuring secure authentication, validation and correct permissions.

Infrastructure: Isolate your infrastructure, ensure secrets are secured, detect any anomalies and ensure you have back-up and recovery processes in place.

Hot & Cold Wallets, multi-signature and Multi Party Computation (MPC) may be required depending on how you are managing the custodial requirements.

Smart contracts will require their own security checks. Where possible, have them audited by a third party. No single control will fully mitigate any risks so ensure you have multiple layers.

Liquidity & Trading Engine

Having a nice looking platform will not always mean you will have a good marketplace. You will need to ensure users can execute orders reliably and there is enough liquidity.

If you are building an order book exchange, you will need to ensure your matching engine works correctly. This will include prioritising orders, accurate execution, handling multiple requests, cancelling orders and mitigation against failures.

Liquidity will be key. If you don’t have much depth, you could find prices fluctuate a lot between orders. Businesses will need to decide what liquidity they want. Will they get it from market makers, external exchanges, liquidity providers or something else?

You will also need to ensure your records are accurate. This should include having a reliable ledger, reconciling and idempotent processes to ensure you don’t double post.

These processes should be thought through carefully to avoid issues.

Choose The Right Blockchain

Ensure you are choosing a blockchain that suits your product.

Different blockchains will have varying costs, confirmation times, ecosystems, smart contract capabilities and infrastructure requirements. If you are supporting multiple blockchains, make sure you have the correct deposit addresses, token standards, confirmation rules, monitoring and withdrawal processes.

Consider if you want to run your own blockchain nodes or use a managed service. Running your own nodes can give greater control but can be more resource intensive.

Third party services will also need consideration. Using payment gateways, ID verification, custody providers, market data and liquidity will help speed up development. However, make sure they are reliable, what the costs are, how secure they are and what alternatives you have.

Ensure your integration will support your current requirements but not make it too difficult to scale in the future.

Compliance

Depending on where you are based, what type of platform you are running, where your customers are and what services you provide, you will have differing compliance requirements. Centralised exchange, non-custodial application or broker may all have different requirements.

Depending on how you’re operating and what country you’re in, you may have requirements around verifying customer identity, anti money laundering, sanctions, monitoring transactions, keeping records, reporting and data protection. You may also need a license or registration.

Make sure you speak to a qualified legal and compliance professional to understand what requirements you need to meet.

This can impact your software. You may need processes in place for verifying ID, transaction limits, detecting suspicious activity, audit logs and admin checks.

If you leave this until after launch, it could cost you a lot of money to re-design. It can also cause delays and limit what markets you can operate in.

Choose The Right Architecture

Ensure you have an architecture that will support the performance, security and uptime requirements of your platform.

Typically your architecture will include:

Web/mobile application for trading and accounts. Backend services for users, orders, balances and transactions. Matching engine for order book. Database and ledger to keep accurate financial records. Blockchain nodes or external blockchain APIs. Wallet and custody. Monitoring, reporting and admin.

Using cloud, containers, caching, messaging and automation can help support scaling.

However, using microservices or complicated infrastructure just because they are popular can add extra costs. An easier architecture may be better for a new product, ensuring security boundaries are clear and to help with future development.

Set out what performance you expect from your product. How much trading volume do you expect, how quickly your API will respond, how available your system will be and what your recovery objectives are. Run load tests to see if your architecture can meet these requirements.

Build Or Buy?

Most businesses will have three general options. Build your own platform, use a white label or use existing services and build some functionality.

Building your own platform will give you greater control but will require more work from the engineering team. More testing, maintenance and investment into security.

White labels can speed up development but you need to think about what limitations they will have. How flexible they are to integrate, what the licensing terms are, how secure they are and what alternatives you have.

Using a mix of existing services and building your own can be a good middle ground. For example, using existing ID verification and custody providers but building your own trading application, customer processes or business specific logic.

Think about the total cost of the platform. What costs will you have for infrastructure, auditing, third parties, regulatory, monitoring, customer support and maintenance?

Testing A good development process will include testing.

You will want to test the full trading process from verifying the account, placing an order, executing, updating balances, settling and withdrawing.

Make sure to test under normal and failure conditions. What happens if the blockchain gets busy? What if a liquidity provider goes offline? Can you recover from a database failure without double posting?

Performing security checks, penetration testing, performance testing, reconciliation and disaster recovery will help prepare you for launch.

Rolling out your product in phases will allow you to see how the system is behaving. Fix any issues and slowly increase your access. Ensure you are ready to deal with any incidents, have monitoring alerts, support processes and clear roles for customers.

Final Thoughts

There are many decisions to make when building a cryptocurrency trading platform. The type of exchange will determine how you will store and settle assets. Security and compliance will impact the architecture. Liquidity will impact the trading experience and infrastructure and operations will determine how well it can scale.

The best way to build your platform is to know what you want it to do, what requirements you need and create a realistic development plan.

To learn more about the technical side, blockchain integration and development, take a look at our guide on cryptocurrency trading platform development.

Making these key decisions will give your business a solid foundation to build a secure, scalable and sustainable digital asset trading platform.