How to create a crypto exchange? Designing an online platform architecture from scratch
As cryptocurrencies are becoming more and more popular, there is a growing demand to create a cryptocurrency exchange. Investing is always risky, so it is important to choose a reputable market that provides technologically safe tools and high quality customer service. To develop a platform on which these virtual coins are traded, we used in-depth research and an interview with our client, and the entire project was built on the basis of patterns from traditional exchange offices and specific industry communication.
In 2018, a client who was developing a centralized currency exchange market turned to us and asked for help in creating a crypto exchange.
Few words about the client. The team received appropriate funding from the ICO, made a “deal” with future users to provide a decentralized exchange – a platform that will operate the new coin.
During conversations with the client it turned out that our task will be to deliver exactly the same stock exchanges, respectively for a centralized and decentralized stock exchange. We asked ourselves a question – how to distinguish them? To this end, we lengthened the research process and deepened the research among experienced players on both exchanges.
We divided the work process into 3 stages, in which 2 people from our team were involved. The first stages were dedicated to research, which allowed us to start working on the design of cryptocurrency exchange.
Phase 1: In-depth research prior to developing the crypto exchange
In the first stage we focused on setting the goal and direction of our efforts. We designed the research and in-depth research to clarify the product idea, both ours and the client’s team’s, about the product. The kick-off workshop we started working with outlined a specific vision and goals for the team.
We have been informed that their task is to set up their own blockchain (a technology that is used to store and transmit information about transactions made on the Internet. The essence of blockchain activities is to maintain a common and collective accounting book of transactions in a digital form, distributed over the network, in the same copies) from scratch. Although there were some doubts, the company finally decided on one direction of development – to create two complementary tools: a centralized and a decentralized stock exchange. The clearly stated client’s goal was also to enter Western Europe and the USA with the product.
We decided to deepen the study and did a research, after which we reached several conclusions in the area of the market within the area of experienced players.
The market is divided into two types of experienced players:
- Players who have moved from Forex money market games. They are the ones who are trying to adapt this “new world” to the realities they perfectly know. Moreover, they are trying to implement as many solutions from currency exchanges as possible. They use their experience to build up a real advantage over intermediate and first-time players.
- Another type of experienced players are those who came from the abyss of Reddit. It’s quite characteristic because they love stock exchanges such as Poloniex, with its poor 2010 design. Players base their game on data found on the Internet and on communication with each other.
We also conducted a survey of the most popular websites out there. These include Bitbay, Poloniex, Kraken or Binance. This area is occupied mainly by centralized entities, which dominate when it comes to speed and efficiency of data processing. We have analyzed the costs of individual operations and information architecture. All these things allowed us to draw one conclusion – expanding the target groups.
In this sprint we were working on the followings:
- clarifying purpose of our efforts,
- mapping groups of customers on the centralized and decentralized exchange,
- desk research,
- user path audit,
- preparing research hypotheses.
More about the research process regarding the market, culture and target group on the example of the cryptocurrency exchange you can learn from Project: People Podcast 5 “Fluctuations like cryptocurrencies – how does a persona affect a product?”. We will also show you how a product can transform from a functional currency exchange to an advanced exchange.
Phase 2: Sprint II: Defining and extending the recipient groups
A group of experienced customers for the product we develop is relatively small. Building a cost-effective product for advanced players is challenging as the main factor in switching to a given currency exchange platform is the volume of a given cryptocurrency. When the exchange starts, the volume is impossible to reach due to lack of traffic. We needed a group of early adopters, i.e. early users who would successively build this volume. For this reason, we decided to broaden the group to include intermediate players.
At this stage, we conducted research for a group of B2C customers. That way we found customers for the centralized exchange. During the research process, in which we used surveys, we managed to identify the factors determining selection of a given currency exchange platform. The factors that were important for these users were as follows:
- quick decision-making,
- one of several tools,
- construction similar to the existing currency exchanges,
- volume as one of the key elements,
- CSV, reports, historical data, TradingView (a platform with information from various exchanges in real time and market analyses).
Furthermore, this group is and will be interested in the following areas:
- margin trading (offered by the larger cryptocurrency exchanges),
- stop-loss orders,
- binary options.
Stage 3: Development of a decentralized exchange
After finding recipients for the centralized group, we faced an even more difficult question – how to develop a decentralized exchange with similar functionalities? The advantage of a centralized exchange is its speed, stability and smoothness, while this is a disadvantage for players on the decentralized market. It turned out that these factors imposed a target group on us.
In stage three, we focused on using the functionality of a centralized exchange and implementing key elements for the recipients of a decentralized exchange. We emphasized anonymity and integrated the decentralized exchange with the centralized exchange to increase the volume of the latter. This is what it looks like in practice:
Why do we create different solutions for one tool?
At Project: People we have already had experience in designing the crypto exchange. We had previously been contacted by a client from Venezuela who wanted to create a crypto exchange for their local recipient. In this case, the result of our work was a decentralized crypto exchange, based on a clear interface and possibly simplified communication with the final recipient in order to facilitate accessibility for intermediate players.
Technically, both clients came with the same product. Practically, it turned out that they expect something completely different. Clients often think of ready-made solutions, but they are limited to situations and solutions they are familiar with. That’s why it’s important to us to have an in-depth market analysis and research support tools before we start designing.
Imagine that for a recipient who knows nothing about the money market, we would create a chart like the one below:
They would probably never risk buying on a stock exchange like this. Focusing on a simple and clear interface with a limited number of features enables even the not-so-advanced person in the world of cryptocurrencies to handle it easily.
This is the result of our work on the design of the crypto exchange:
An overview of our efforts to create a cryptocurrency exchange
To sum up: during the research work on creating the cryptocurrency exchange we decided to broaden the target group with intermediate players, who increase the volume of currency on the exchange. We focused on the highest possible value for both experienced and intermediate players, so we developed a simple and clear design for a centralized and decentralized exchange, basing our design decisions on information acquired during the research process.
Tools used in the project
- Audit of user’s purchase path
- Research survey
- In-depth research
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