Start your own Bitcoin exchange
Setting up and operating an exchange can be quite involved.
A few tiers to start thinking about: legal, banking, tech+security, and volume.
- The first question is whether you want to operate globally (e.g. Bitfinex or BitStamp) or focus on a national market (e.g. FlowBTC, meXBT). The next step is to seek legal counsel to help decide where you want to locate and how to incorporate/structure your business.
- You want to think about how you can limit your liability and exposure to litigation, as well as what regulatory/compliance requirements are in your jurisdiction, and what they are likely to be in ther near term.
- Merkle Tree offers a useful high-level global map of the regulatory landscape.
- What sorts of banking relationships do I need and how can I secure them?
- Note that banks can be heistant to provide services to digital currency exchanges.
Tech + Security
You or a partner need to build and maintain complex architecture that pairs orders, executes transactions, and manages deposits and withdrawals. Major componets are:
- Matching engine
- Risk management system
- Accounting/audit system
- Wallet management
- Payment gateways
Security is understandably paramount. Some things to consider:
- Sound internal security procedures among your team - see, e.g. CryptoCurrency Security Standard (CCSS) (incredibly important, and often overlooked)
- Network and hardware security (secure data center, etc.)
- KYC (Know Your Customer) + AML (Anti-Money Laundering) solutions
- Two-Factor Authentication for users
Without lots of live volume, all the above is for naught. It is well worth your time to actively consider all of the below:
- Channeling liquidity from large exchanges like Bitfinex to your exchange
- Messaging, media presence, brand creation and maintenance, ads and retargeting
- User definition (is this a retail exchange, for advanced users?, etc.), and using this to inform UI design and to prioritize features for product differentiation
Hope this is helpful for getting started!
Disclosure - I work at a firm called AlphaPoint - we provide white label tech to many of the largest Bitcoin exchanges in the marketplace, including full stack tech and hosting, as well as order routing for day-one liquidity.