How to create your own White Label for cryptocurrency exchanges?

White Label Crypto Exchange is a software solution that allows you to launch your own trading platform easily, quickly and with a relatively small budget. All you have to do is buy or subscribe to white label, customize it and launch it. There is little or no programming required. The white label provider provides support and development of the software. Thanks to all this, the customer can concentrate all his efforts on marketing and sales.

In this article we will describe in details how to create your own white label for cryptocurrency exchanges, what you need for this and how much such development costs.

Niche and target audience

When launching your white label project, you will be working with at least two target audiences: those who want to launch their cryptocurrency exchange using white label, and its end users (traders). Consequently, you need to understand their tasks, needs, pains and consumer habits.
As far as entrepreneurs who want to launch their own trading platform are concerned, their goal is to make money with minimum investment. In doing so, they will also be targeting their end users, which can vary depending on the niche, country and preferences of the entrepreneurs. And your white label solution needs to be flexible enough to adjust to the needs of a particular entrepreneur. This applies to appearance, trading pairs, commissions, payment methods, available languages, marketing, etc.

If we analyze the needs of end users of crypto exchanges (traders, investors), it is a bit more complicated because their tasks, needs and habits can be very different. For example, experienced US and EU traders focus on safety, legality, liquidity, volume and availability of trading indicators and signals. While new traders from the same countries pay more attention to the decentralized nature of the system, its external ethics and simplicity of design. Security is also important for them, but not to the same extent as for experienced traders. You can also say that experienced players in the world of crypto conventionally come from Forex, and newcomers from Reddit.

If your focus is on the EU and the United States, this means two things to you. First, you have to create a white label cryptocurrency exchange with quite a lot of customization of design, functionality and administration. Secondly, you have to create a solution for either beginners or experienced traders. In the first case, everything is easier and more economical, but this way you will significantly limit the audience coverage. The second option is the opposite: you do not limit the audience coverage, but the development will be much more complicated and costly.

In other countries, the target audience may have different preferences.

The white label monetization model
Once you've decided on your niche and target audience, you'll also need to decide how to monetize your white label solution.
Here are the basic options:
One-time payment. Means selling the software in exchange for a one-time payment, similar to selling Windows OS, Adobe Photoshop, video games, or a product in an online store.
Fees and commissions. Implies providing a white label for free, but the vendor will take its own commission on each sales transaction.
Freemium. Means free access to the basic functionality of the platform, which is enough for its normal operation, but the client can get access to advanced functionality for a fee.
Subscription. It implies granting access to the white label of a crypto exchange in exchange for a subscription. This model is used by products such as Netflix, Spotify, and Creative Cloud (graphics services).

View of your cryptocurrency exchange
In the next step of creating your white label to launch crypto exchanges, you must decide on the type of your trading platform. This decision will affect the crypto-asset exchange mechanism and storage methods, fiat trading availability, liquidity, transaction speed, and platform capacity.

Centralized Exchanges (CEX). Currently, about 99% of cryptocurrency transactions are processed on centralized cryptocurrency exchanges, as they provide higher liquidity and more trading volume than decentralized exchanges. CEXs operate similarly to traditional stock exchanges: there is a single operator who manages everything, and all traders must deposit funds into the exchange to buy and sell assets on it.

Decentralized Exchanges (DEX). Such sites may be owned by a single company or individual, but their management is distributed among several independent nodes and / or given to automated algorithms. And unlike CEX, the validation and processing of transactions in DEX is handled by smart contracts, rather than a centralized operator. In this case traders do not need to deposit their funds to the exchange to be able to trade.

Peer-to-peer exchanges (P2P). These services act as an online bulletin board, where users can notify other people about their desire to buy or sell cryptocurrency. The transaction can be done both online and in person. Cryptocurrency assets can also be bought and sold with physical money and goods, as agreed upon by the parties.

Instant exchangers. This type includes all sites and applications where you can easily and as quickly as possible buy, sell or exchange a cryptocurrency asset. In fact, such platforms act as a broker, giving the client access to the liquidity of other exchanges, which allows for almost instant transactions. The fee for high speed is a higher trading commission.

Platform liquidity management
Even when launching a white label crypto exchange, you should think about how you will provide liquidity on the trading exchange: the possibility and speed of executing orders to buy or sell crypto with the least losses. And the higher it is, the faster traders will be able to execute their orders.

Providing liquidity on an exchange can be done with the help of:

A third-party market maker. Assumes cooperation with external liquidity providers who can link one trading platform with other exchanges in such a way that if one platform lacks its own liquidity, the order will essentially be executed on another exchange.
Creation of an inter-exchange market. Assumes cooperation directly with another exchange rather than a liquidity provider. In this case the pool of external liquidity will be lower, there is no need to pay a commission to the market-maker.
Liquidity Mining. Assumes the creation of a mechanism that will encourage users to keep their money in the accounts of a marketplace in exchange for some benefits, such as interest from a deposit, dividends or a reward in the form of platform tokens (this is how PoS-cryptocurrencies work).

White Label Crypto Exchange functionality
The functionality of your white label cryptocurrency exchange startup solution should be divided into two separate groups. The first is the functionality needed to launch, configure and manage a cryptocurrency trading platform. The second is functionality for end users (traders) that will allow them to buy and sell assets on the launched cryptocurrency exchange.

Here's what you need to start an exchange with a white label:

1.Trading Engine. This module is the basis of any exchange, because it is responsible for checking balances on wallets, matching orders to buy and sell assets (matching), balance calculation, integration with liquidity pools and payment gateways, processing rates and commissions.
2.User Interface. This is the part of the white label that allows users to launch exchanges, customize and manage them. This interface must be functional, but simple enough for users to understand it quickly and not make mistakes.
3.Settings and personalization. This is the part of the white label, which is responsible for the ability to brand the launched exchanger, its personalization and customization for the specific owner. And this should be not only a choice of name and logo, but setting the design, functionality and other features.
4.The security system. In this section, the exchange owner can configure options related to authorization and login, verification, additional checks of traders, privacy and protection from hackers.
5.Payment system. Responsible for monetization of the white label solution for licensees (enabling and disabling commissions, the amount of commissions), billing and choice of deposit/withdrawal methods.
6.External integrations. Your licensees may need to integrate with social networks, affiliate programs, banks, marketing tools, fiscal authorities, liquidity pools, etc.
7.Support. Also, when developing a white label for a cryptocurrency exchange startup, you should think about how they will communicate with traders if they have any problems or questions.

Here is the functionality for traders:
1.Registration, Login. Your platform should provide end users with several ways to create an account. The most popular options are via email, phone number and accounts in social networks. You can also add the ability to log in with biometric data.
2.Identity verification. All modern trading platforms must comply with KYC, KYT and AML. To do this, you must add features to the white label to accept user identity and verify it.
3.A user page. With its help end users will be able to manage registration data, deposits, bank cards and privacy, as well as contact the administration of the exchange.
4.The interface of the trading engine. All user functions that are responsible for buying and selling cryptocurrencies are concentrated here: asset search, order creation/cancellation, charts, indicators, tips, etc.
5.Deposit, payments. This module is responsible for the ability to deposit and withdraw funds, transaction tracking, viewing transaction history, etc.
6.News feed. It allows the trader to monitor actual events on his account, orders, site updates, important news in the world, etc.
7.Notifications. Will notify about trade completion, new messages, important/favorite signals and other important things for trader.
8.Reports, analytics. Traders should have the ability to track and analyze their trading results.

Security and compliance with KYC, KYT and AML

Security. According to CipherTrace, users lost more than $1.9 billion to various cryptocurrency scams and hacks in 2020 alone. Hacks account for about $500 million, of which $129 million is in the decentralized finance (DeFi) sector. The victim of the biggest hack in 2020 was the KuCoin exchange, with $281 million stolen from its accounts (84% were recovered). In previous years, user losses were no less.
When launching your white label for crypto exchanges, you need to do everything you can to secure money and user data of both your licensees and end users. This is especially important if you are developing a platform to launch decentralized exchanges.

This is exactly what you need to implement:

  • Denial of Service (DoS) protection.
  • Protection of HTTP parameters from contamination.
  • Distributed denial of service (DDoS) protection.
  • Server-side request forgery protection (SSRF).
  • Crossite request forgery protection (CSRF).
  • Two-factor and HTTPS authentication.
  • Biometric authentication.
  • Data encryption.
  • SQL injection.

KYC, KYT and AML. If you are targeting the U.S., European and East Asian markets, your platform must not only be secure, but also comply with various practices for combating terrorist financing and money laundering. To do this, you need to add compliance:

KYC (Know Your Client). Every trader on a cryptocurrency exchange must be verified to confirm that he is of legal age and has the right to invest in cryptocurrency. In some countries it is forbidden, in others you need to be an accredited investor. KYC also helps keep track of fraudsters and hackers. This can be implemented with services such as Sumsub, Trulioo or Veriff.
KYT (Know Your Transaction). It obligates trading platforms to check users' sources and withdrawal points and block funds and/or transactions if these sources are marked by regulators as suspicious or are under sanctions. This can be implemented through the Traceer service.
AML (Anti-Money Laundering). In most countries, these are general rules that exchanges must comply with on their own, but in the U.S. the exchange must have a special anti-money laundering officer on staff. The officer is responsible for checking suspicious transactions and sending suspicious activity reports (SARs) to the financial monitoring authorities. The officer must be specially certified by the ICA or ACAMS and have a degree in finance.
Architecture, technology stack and APIs

Exchange Architecture. This is the structure of the trading platform, which helps to define logically and visually the connection and the way of interaction between all the key components of the software. Here's an example:

Technology Stack. These are software tools with which developers will create a white label solution for launching cryptocurrency exchanges. This includes programming languages, compilers, frameworks, database management system, libraries, APIs, etc. Here is a variant of the technology stack for cryptocurrency exchange development:

The process of developing White Label Crypto Exchange
White Label Crypto Exchange is a very complex software that cannot be developed using a script or builder. It is possible only through custom development, which is best entrusted to a development company with experience in creating products in this area. Where to find such a technical partner and what to look for when choosing one is described in the article "How to Choose a Blockchain Development Company".

When you choose a development company, your cooperation will follow the following algorithm:

1.Signing a contract. At the first stage, the customer and the technical partner negotiate the concept of a white label, decide how it should work, what functions it should contain and what it should look like. Next, the technical description of the project is drafted and the details of cooperation are specified (time and cost of development). At the end, an agreement is composed and signed.
2.Prototyping the platform. Next, the customer, a business analyst and/or designers develop the framework for the platform. Also, user flows are worked out at this stage.
3.Interface design creation. Next, based on the wireframes, designers create layouts and prototypes of the platform's interfaces, which show how it will be presented to users (licensees and traders).
4.Direct coding. At this stage, frontend, backend, and blockchain developers implement the design and functionality in the code.
5.Product testing. After the programmers write part of the product code, QA engineers come in and use special tools and manual testing to find bugs and errors.
6.Deployment and support. When the white label is ready to go live, the platform is listed on business lists and social networks. Sales begin.

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