Draglet Gmbh helps you to find the best way to exchange your bitcoin . Draglet intends to clarify what you need to consider before you want to launch your own bitcoin/cryptocurrency exchange, how the internal architecture of exchange software should be structured and most importantly, where to get your exchange software. At Draglet, all our Blockchain applications integrate multiple patented encryption layers to guarantee a safe back end operation. Clients are protected by several Two Factor Authentications assuring maximum security.

1. How To Start Your Bitcoin Exchange – A Beginner’s Guide
Bitcoin has become increasingly popular in the last few years. Bitcoiners call it ‘The New Gold Standard’.
Experts from the financial industry expect its price to continue its steep journey in the future.
Therefore, it is no surprise that more and more people want to jump on the bitcoin train before it is too
late. How do they usually involve themselves in the bitcoin business? The three most common options
are bitcoin mining, bitcoin trading/investing and accepting bitcoins as payment for services provided
or goods sold.
Bitcoin mining was a lot easier in the earlier years. However, with the ever-increasing limitations of CPU
power (you need a lot of money to achieve the appropriate amount!), it is nearly impossible to
profitably mine bitcoins as an individual today unless you have the facilities and budget.
Bitcoin Mining Hardware
The more common options are the latter ones. Most people either sign up for an exchange such as
or , and buy or actively trade bitcoins there, or implement bitcoins as a payment byCoinbase Kraken
integrating QR code snippets into their website or print these out on a piece of paper.
The increasing demand for trading bitcoin and implementing bitcoin payment services has motivated
many to start their own exchanges since it portrays a splendid opportunity to earn a significant amount
of income through transaction fees (every trade and every payment via bitcoin includes a small fee
which essentially sums up how an exchange makes money).
You want to start your own bitcoin exchange, but don’t know where to start? Well, you have come to
the right place. This article intends to clarify what you need to consider before you want to launch your
own bitcoin/cryptocurrency exchange, how the internal architecture of exchange software should be
structured and most importantly, where to get your exchange software.
What do I need to take into account at the beginning?

2. 1. First, you need to decide the operational scope of your exchange, whether you want to operate
globally or confine yourself to a specific region or country. You will be required to get necessary
licensing and approvals for you company to open a bitcoin exchange according to your operational
scope. Laws vary from place to place; hence, consult with a legal expert regarding the licensing and
compliance with local laws and regulations.
2. Almost all governments require entities which are involved in the currency exchange business to
adhere to the Know Your Customer (KYC) norms. KYC is the process whereby a business verifies the
identity of its customers through government issued ID cards or passports. The main purpose here it to
discourage money laundering. Make sure you adhere to your country’s KYC norms and integrate a
suitable customer verification procedure into your exchange. Otherwise, you might be wondering
someday why the police is suddenly standing in front of your door.
3. You will need to partner with a bank or payment provider to process payments via fiat currency.
Choosing a trustworthy bank with a host of online facilities is a good choice. This is more relevant in
developing and under-developed economies where most banks do not have a facility to initiate an
instant bank transaction online. Transactions may take up to two days for settlement. Partnering with a
bank which has fast clearance and settlements of funds will provide convenience to your customer.
Adding and withdrawing of fiat funds can be automated via payment gateway or even can be done by
manual remittance.
4. Any exchange needs liquidity to operate successfully. Customers are hesitant to place orders or even
deposit funds unless they see a full order book and trading activity. New exchanges naturally encounter
liquidity issues. There are three established ways of kick-starting your liquidity:
 You can simulate trading activity within your exchange by buying and selling between two
artificial accounts within your own exchange.
 You can implement an API interface which connects your bitcoin exchange to another existing
exchange.

3.  You can join a whole network of cryptocurrency exchanges such as Trust-Deposit which will tie
together the liquidity of all exchanges within its network. The bigger the network, the better the
liquidity.
5. Any exchange needs top-notch security to ensure that both the exchange operator’s and his traders’
funds remain secure. This should also apply to your customers’ private data which include their KYC
details and bank account information. There have been incidents of security breach at various
exchanges like the infamous Mt. Gox breach where the security breach went un-noticed for years
resulting to almost 1% of total bitcoins in circulation at that time being stolen. According to a Reuters
report, a third of all bitcoin exchanges operational during the period of 2009 till 2015 were hacked. The
main take-away: Security must be the top priority within your exchange.
6. Finally, customer support is another vital component of a successful exchange. Staff is needed for
approving KYC requests, answering customer complaints, processing the deposit and withdrawal of fiat
currency, etc. A swift customer support mechanism ensures you’re your customers start trading and
generate revenues for you exchange from the very moment he has signed-up.
The Architecture of a Bitcoin Exchange Software
Any exchange software should have these 4 different components working together:
1. The first component is the trade engine. The trade engine should be the core of any exchange. It
accesses the order book, matches buy/sell orders, executes transactions and calculates balances.

4. Without a trade engine, your exchange cannot function. So make sure you have a working trade engine
before setting up anything else, or otherwise you will merely have an empty shell.
2. The second component is the user interface (UI) or front end of the exchange website. The user
interface is how your traders see your exchange (e.g. trading platform and the design of your website).
Any user interface must be user friendly and intuitive. This may sound cheesy, but make it your goal to
offer your customers a wonderful trading experience (Tipp: less is more). The UI needs to be mobile
friendly too, as the use of smartphones is constantly increasing. A dedicated app for mobile devices
would make the exchange more easily accessible which in turn may enhance trading engagements.
Ideally, the UI should enable the user to
 Register and access an account
 Deposit, maintain and withdraw Crypto and Fiat currencies
 View current order book, past transactions, balances, statistics etc.
 View charts
 Place buy and sell orders
 Access the support mechanism
3. The third component is the wallet. The wallet is the bitcoin daemon running on the exchange server.
This is where the bitcoins (of the exchange operator and his traders) are stored, hence it needs
maximum security. Any exchange should implement a so-called hot/cold wallet system to diversify risk.
The hot wallet is the bitcoin gateway of the exchange and allows the customer to instantly withdraw
bitcoins to their external wallet without the need of approval from an exchange operator. A hot wallet
needs to have a positive balance for instant withdrawals which can be set according to the turnover of
the exchange.
A cold storage wallet is where rest of your bitcoins is stored. This wallet is completely offline which
guarantees that nobody can access your leftover bitcoin even if your hot wallet is hacked (Therefore, it
is advisable to always put aside a certain amount of bitcoins and leave them in your cold storage
wallet.). A simple cold storage wallet could be a piece of paper or an USB stick where your private keys
are located.
4. The fourth component any exchange should possess is an admin panel. The admin panel of an
exchange is the equivalent of business intelligence and management software. It helps the exchange
operator control and manages his exchange. Functions should include:
 Altering liquidityAdmin Panel Bitcoin Exchange Software
 Editing the spread and trading fees
 Approving user accounts for trading, after verifying KYC or other compliance requirements.
 Managing currencies like BTC, USD, ETH, etc. and markets like USD/BTC, BTC/ETH, etc.
 Crediting fiat deposits, or debiting fiat withdrawals requested by users.
 Addressing the support requests raised by users.

5. Available Options: Where Do I Get My Exchange Software?
Building the exchange software in-house: Gather a dedicated team of developers (friends, freelancers)
to build (and maintain) your exchange software. Make sure that they understand how an exchange
operates in general, how cryptocurrency and blockchain technology works, and that they implement the
above-mentioned components.
From a programming language point of view, the choice of the proper language might also vary
depending on which cryptocurrency you want to implement for your exchange (check out this post).
Furthermore, make sure that your software is compatible with various payment processing platforms or
banks to safeguard payment transactions within your exchange.
Most importantly (this is a no-brainer, but some people seem to have unrealistic expectations), you
need to estimate the costs and time associated with developing, maintaining, and constantly upgrading
the software in-house. Due to its inherent complex nature, developing an exchange software from
scratch will be quite costly and might take up 1-2 years (depending on your developers’ experiences)
until it works properly. Contingent upon the salary of your developers, their experience, and what
functionalities you want to incorporate into your exchange (multiples languages, currencies, mobile
application, etc.), development costs range between 300.000 – 400.000 Euros. Bear in mind though,
that these numbers are just a rough estimation based on our experience since so many different factors
need to be considered.
Using free/open source scripts: If you check out GitHub or other forums, you will discover quite a few
open-source bitcoin exchange scripts. The big benefit obviously is that the source code is free.
Nevertheless, there are also a few risks that must be considered:
 You still need someone with technical knowledge to understand and implement the lines of
code within the open-source script. Becoming acquainted with how the script works, will take
time and modifications to enable customization, will also require additional time and money.
 There is no guarantee that the script is secure and reliable. It might be buggy, susceptible to
hack attempts or in the worst case, includes malicious lines of code, which slowly but
unnoticeably extract your funds or bitcoins. (Does the Darknet ring a bell?).
 The amount of development support on an open source system is rather sparse. Most of the
time, your team of developers will be left on their own to figure out how to fix bugs or improve
performance. Worst case, if the project is abandoned, you will be left with absolutely no support
or whatsoever.
White label exchange software: White label exchange software is software that has already been
thoroughly tested and proven to work (particularly the trade engine!), while at the same time allowing
you to customize and alter the software to match your individual requirements (e.g. design, brand
placement, languages, currencies, charting etc.).

6. A big advantage of using white label software is that you save yourself the hassle of dealing with
technical requirements, implementation and ongoing maintenance. Since the core components (trade
engine, wallet, UI and admin panel) have already been developed and tested, the “only” thing left is to
customize the software to your liking. You save yourself time because the customization time is much
shorter (usually a few months) and you save yourself a lot of money because you pay significantly less
for a white label software license compared to developing it on your own (for the ones who insist on a
number: the basic license fee for our draglet white label exchange software starts at 4.250 Euro).