How Crypto Exchange helps to generate revenue in 2024?
“According to Grand viewer research, from 2022 to 2030, the market for cryptocurrency exchange platforms is expected to grow at a CAGR of 27.8%”
The rising acceptability of digital assets like cryptocurrencies and NFTs is anticipated to drive demand for crypto exchange platforms. Because of its versatility and convenience in transactions, consumers in industrialized nations like the U.S. and Canada are embracing digital currency swiftly. And the growing popularity of trading methods based on mobile devices is another factor that the company is expected to capitalize on.
So far, the market for cryptocurrencies is incredibly profitable. Cryptocurrency make money in a variety of methods, including active trading, investment, and staking. Particularly, cryptocurrency exchanges are organizations that have survived even during times of stagnation and fall of the crypto market, unlike institutional investors and individuals.
This is because cryptocurrency exchanges actively influence the market, encourage the participation of traders and institutions, and charge for their services.
In this article, we’ll talk about…
The main ways of generating profits by creating crypto exchanges
How much do popular crypto exchanges make money?
The development method you can approach to create crypto exchange
How do Crypto Exchanges generate revenue?
Exchanges for cryptocurrencies have popped up all over the place in the last ten years, generating trade volumes worth billions of dollars. Although the blockchain and cryptocurrency sectors are still in their infancy, business owners all over the world have been quick to seize the financial opportunities afforded by cryptocurrency exchanges, and for good reason, given how lucrative they can be.
Commissions
The practice of charging commissions on trades is perhaps the most well-known way for exchanges (both cryptocurrency and conventional stock exchanges) to generate revenue. In actuality, this commission is a fee for assistance in arranging trade between the buyer and seller.
Having said that, the major exchanges in the cryptocurrency sector report daily trading volumes in the hundreds of billions of dollars, resulting in commissions of eight figures and more for profitable exchanges. By getting commission from both buyers and sellers, you can generate through that.
Listing fees
To generate initial money, digital asset exchanges can provide a token and coin listing service. Exchange operators may get a portion of the money earned by organizing Initial Exchange Offerings (IEOs), Security Token Offerings (STOs), and Initial Coin Offerings (ICOs), which, depending on the project, could amount to hundreds of thousands of US dollars.
Listing rates for these fees can range from 1 to 10 BTC, and they are often paid in cryptocurrencies or the native tokens of the project. It should be emphasized that competition for token and coin listing has been fierce, even if there have been exchanges with incredibly low volumes that have yet to generate billions of dollars in listing fees for their founders.
Transaction Fees
There are transaction fees associated with each transaction a trader makes on the exchange that belongs to the exchange owner. The exchange owner may choose the transaction fee that will be charged.
The average transaction cost on a cryptocurrency exchange platform is between 1% and 3%. You can select your transaction fees and make money off of them based on your business demands. Binance charges 0.1%, whereas Coinbase charges 2.99%.
Market Making
Market-making, or creating liquidity, is another excellent source of income for cryptocurrency exchanges. Market-making is the act of buying and selling digital assets at somewhat less favorable prices on your exchange than on another exchange.
Immediately after the trade is made on your exchange, you make another trade on a separate exchange to make up for the first one, and you keep the difference. This method performs best when automated and used on markets with wide spreads. A similar tactic is creating new trading pairs out of already existing instruments. This option would undoubtedly increase the exchange’s acceptance and trading volume.
Fund Collection for IEOs
Another way to increase exchange revenue is to give the platform an IEO module so that other businesses may manage token sales. Similar to how Kickstarter functions in this situation, your exchange acts as a repository for users to purchase tokens before they go to an exchange. However, in this instance, contributors are given tokens in return for other digital assets like BTC or ETH.
So, how does this process generate revenue for the exchange? When the exchange raises money on behalf of the fundraising organization, it levies a fee based on a portion of the overall revenue. Such a percentage can result in a significant dividend for the hosting exchange, depending on the total amount raised.
So far, we have seen the major ways how crypto exchange generate revenue. Like this, anyone can start their own crypto exchange business and make money through that. Because we have so many live examples in the crypto industry. Many exchange platforms gain a lucrative amount of revenue per annum.
How to create Crypto Exchange platform?
As I said earlier, startups have enormous opportunities by starting a crypto exchange platform. They can earn a good amount of profit like the popular crypto exchange platform gains. So launching a cryptocurrency exchange on your own is a profitable business for budding entrepreneurs. Those who are new to the crypto industry may have a query on how to create a crypto exchange platform. Here are the steps to follow before starting the development process.
Choose the Type of a Cryptocurrency Exchange
Selecting the type of cryptocurrency exchange is the first and most crucial step you should make before building your platform for bitcoin exchange. Centralized cryptocurrency exchanges (CEX), decentralized cryptocurrency exchanges (DEX), and hybrid exchanges are the three different categories of cryptocurrency trading platforms. You can choose any one of these according to your business needs.
Select a Jurisdiction
You must thoroughly research all the legal factors related to the licensing of a crypto exchange before choosing a regulation. In addition, to run exchanges, you require a license to work with banks and payment systems. Even though cryptocurrencies are becoming more and more popular, several nations forbid their use. Of course, you should avoid these nations and think about locations with favorable cryptocurrency regulations.
Decide the structure of the Software
You need to design your crypto trading platform as per your user’s requirements. The basic components that your platform should have are the trade engine, cutting-edge UI & UX, and wallet integration. In addition, you need an admin panel to verify users, change and remove content, ban and remove traders’ accounts, change commissions, manage marketing activities, and so on.
Choose the Method of Developing a Crypto Exchange
There are two approaches to creating a cryptocurrency exchange from scratch or using a white label. If you choose the first option, you should be carefully prepared for the development process and have a well–experienced team. Your project will also require an audit for safety and legal compliance.
On the other hand, you can choose the white label solution. It is a pre-build software to get a product that will have no technical problems and meet all your demands. With the help of the white label crypto exchange solution, you can save your time and money. For professional guidance, you can hire a development company that provides you with the top-notch white label crypto exchange software development service.
Make security provisions
Also, fraudsters are drawn to cryptocurrencies as they offer new opportunities to hack cryptocurrency wallets and earn quick cash. Even the biggest exchanges, like Binance, are occasionally vulnerable to hacker assaults. Your company must invest as much time and money as possible in taking the necessary precautions to maintain the required degree of security. Two-factor authentication, the use of both cold and hot wallets, database encryption, anti-phishing features, and other cutting-edge technology are a few examples.
Examine Your Crypto Exchange
Another crucial phase in the creation of your bitcoin exchange is testing, which under no circumstances should be disregarded. Check to see if the platform is functioning properly.
To safeguard the assets and private information of your customers and enable risk-free bitcoin transactions for them, you must find weaknesses and errors in the cryptocurrency exchange’s logic. To guarantee flawless functionality and improve the user experience, never forget to gather user input and make the required adjustments.
Deploy Your Cryptocurrency Exchange platform
If the testing process is complete and everything is in order, your exchange service is ready to enter the market and welcome traders. You’ll keep up with the platform’s upkeep, updates, and promotion. To quickly introduce new features and give your consumers top-notch tools, keep up with current trends. To ensure that the exchange complies with the cryptocurrency legislation, keep track of legislative amendments. Keep an eye out for emerging hacking methods so you can defend your digital assets from cyberattacks.
These are the major factors that you need to consider before entering into the crypto exchange development process. Other than these, you need to focus on the features you need to integrate which make you unique from the competitors. And you need to do marketing and promotions for your platform.
Concluding thoughts
Overall, we have seen the revenue-generating model of creating a crypto exchange platform. From this analysis, you came to know that starting a crypto exchange is a revenue-generating business for even startups. As a budding businessman, you can follow the above-given steps to create your own platform.
If you feel the given steps are tedious to follow, you can go by hiring a prominent Cryptocurrency Exchange Development company in the marketplace. They have a graphic flowchart that shows how their software operates and the extra services they offer. So choose a prominent development firm and start your own crypto exchange business to make a good profit.
