The past five years or so have seen the rise of Bitcoin as a viable currency option that can be utilized virtually. Bitcoin is a truly decentralized virtual currency that uses blockchain technology to make payments.
The valuation of Bitcoin as a currency has been increasing by the year and reached its highest ever levels in 2020.
know about Bitcoin Exchange Valuation
With the valuation of Bitcoin skyrocketing, there has been a renewed interest in building Bitcoins exchanges that make it possible to buy and sell the cryptocurrency online – be it through a mobile app, a web app, or a website.
Several new Bitcoin exchanges have come up in the past year, offering different features and capabilities to attract users. If you, too, want to build a Bitcoin exchange, here are some things you must consider.
Bitcoin is not as prevalent everywhere as it is in some countries. The popular cryptocurrency has not made its way into the popular financial culture everywhere in the world.
So even before you assemble an app development team, it is essential that you decide what the operational scope of your Bitcoin exchange is going to be.
The first step toward assessing the financial viability of Bitcoin is to conduct some research on its market penetration in different countries.
In countries where this penetration is less, try to understand whether the population is underbanked or there are problems in accessing the internet.
You will have the greatest opportunity in markets where people have decent internet connectivity but online banking has not made headway yet.
Once you have determined the geographical region where you will be operating, it is important that you survey legal considerations regarding Bitcoin in this region.
This is because of the varying nature of regulations with respect to Bitcoin in different countries. Additionally, in some countries, investing in Bitcoin is even banned! Thus, if you are not a legal expert, hire a lawyer specializing in financial matters to do this task for you.
Legal compliance might even require setting up certain independent institutions with your company to keep a check on its dealings or coordinating with a government agency on a regular basis.
Alongside app development and financial factors, do keep a firm grasp on the legal side of things as well.
There are two aspects to the payment aspect – the banking partner and the payment gateway.
Your banking partner is primarily the bank that processes all your payments and acts as a sort of mediator between you and the customer.
Every exchange has a banking partner, and the main requirements from such a partner are that a variety of options for payment settlement are available, and this settlement is made in the shortest period of time possible.
Especially if you are operating in a country where several different banking options are available to consumers, having these features becomes doubly important.
An important part of learning how to create a wallet for bitcoin is to understand the integration between your app or portal and the payment gateway you will be using.
This gateway must provide premium security options while not being inconvenient for your customers. Additionally, it must also not have significant downtime, since this is likely to drive away any prospective customers.
All new exchanges, whether based on real currency or cryptocurrency, are bound to have liquidity issues. It is hard to get prospective customers to be interested in investing through you if they do not see trading activity or actual customers.
Luckily, you can establish bare minimum liquidity in your Bitcoin exchange in a few ways. An easy way to stimulate liquidity in your system is to connect your Bitcoin exchange to an existing, active Bitcoin exchange by using an API interface.
Another option is to first start using the Bitcoin exchange yourself, for small transactions among people you know, since this will also help with testing and finding out if there are any errors in the code.
Lastly, you can also choose to join a network of Bitcoin currency exchanges that create a common pool of liquidity for all its member exchanges to benefit from.
As Bitcoin cryptocurrency has been getting more and more popular, so has the interest of hackers in compromising Bitcoin exchanges and stealing cryptocurrency.
Over the past years, Bitcoin exchanges have been among the most-hacked institutions in the world. Some of these hacking incidences have also led to a significant proportion of Bitcoins being stolen and used for nefarious purposes.
While security is built into blockchain technology, it is important that you also invest significantly in making your new Bitcoin exchange more robust and immune to compromise.
Having multiple layers of security and user authentication has become an important feature of any currency exchange. In addition, make sure that all third-party services you are dealing with, such as banks and payment gateways, also have the highest security rating.
The final and most essential part of your new Bitcoin exchange is how it is developed. Not all development frameworks are compatible with the creation of financial apps, especially when it comes to new technologies such as blockchain.
Make sure that that your development team chooses its frameworks and tools wisely since this can lead to issues down the road.
There are certain features that are important for any Bitcoin exchange to have, such as a virtual wallet and a dashboard where you can organize and browse through all your investments.
Additionally, you will also need a channel for providing customer support services and an admin channel through which you can provide users access to features or remove them from your platform.
The number and valuations of Bitcoin exchanges have been growing at lightning-fast speeds over the past years. And this trend is likely to continue skyrocketing in the coming years as well.
To take advantage of this trend, you must build an exchange that can truly stand out from the crowd, and the above factors will help you do so!