Gap Analysis: Crypto Exchange Software
This gap analysis was done to discover existing capabilities of available products that offer white-label cryptocurrency exchange software. Exchange software is required within the new strategy testing environment that is being developed at GDA’s R&D lab.
Existing strategy testing methods are predominantly backtesting and paper trading. Both of these methods do not fully capture the effectiveness of a trading strategy (except for market orders) because they fail to simulate the effect of the order book on individual trade events and vice versa. To properly measure the effectiveness of a strategy, a new testing environment that can accurately simulate trading on an exchange is required.
This solution includes crypto exchange infrastructure. This paper will introduce a few of the solutions that currently exist that can be deployed with minimal cost and effort. Importantly, this exchange infrastructure requires L3/granular data capabilities and API connectivity. Additionally, the exchange requires super admin functionality so that users can be created and virtual equity can be easily allocated and distributed. For reporting requirements, the exchange needs to log every activity, such as user events and trading events. Because of the nature of the project, the user interface, user experience and exchange security are not important features.
Operating an Exchange
In 2021, there are many white-label solutions on the internet and many of them will probably do the job, but only from a software technology side. There are many other considerations that are important to operate a quality, successful exchange. One of the most important factors is liquidity. An exchange needs an order book and trading activity. This can be overcome by connecting your exchange with other exchanges.
Another important issue that is not completely solved by out of the white-label software is exchange security. While not a primary focus of this paper, it is for operational exchanges. User’s funds, information and other sensitive things need to be properly managed. This may require hiring professional consultants and engineers.
Lastly, legal regulations may be an obstacle in some jurisdictions. It is important that all business decisions are mindful of this issue. Breaching regulations can easily undo an exchange.
OpenDAX is one of the largest open-source projects for a cryptocurrency exchange. However, the term open-source should be used with caution in this case because it isn’t entirely open-source. The OpenDAX stack is divided into its services, some are open-source like Peatio, and some are proprietary, like Tower.
Peatio is described as the core component of an OpenDAX exchange. It is responsible for accounting, balances, deposits, withdrawals and all exchange trading activities. It also manages blockchain nodes. With respect to the testing environment that is under development, the functionality offered by the Peatio component would go largely unused. All trading is virtual and requires no blockchain connectivity.
Barong is responsible for security and authentication services. It has its own KYC functionality but external third party KYC providers can be connected. This functionality also is not required by the R&D lab’s testing environment.
Tower is the admin interface for the exchange. It is responsible for the exchange’s operational needs. This includes user activity, deposits, withdrawals, and other admin responsibilities. While you can use an image of Tower for free, if you want to customise any functionality, you must reach out to the Openware team.
Rango is a general purpose websocket server which dispatches public and private messages from RabbitMQ.
BaseApp is a react based user interface. It is completely customisable and a great starting point for open source projects.
The OpenDAX platform is a great resource for those wanting to start a cryptocurrency exchange. However, for the GDA R&D lab, its shortcoming is that it seemingly only offers spot trading functionality. Its API connectivity is robust to what extent it is unsure. The key takeaway is that the out of the box product that is offered by OpenDAX is not exactly what is required and further customisation is needed. This is offered by Openware or it can be done in the R&D lab.
- API endpoints and technologies?
- Does it support L3 data? Example implementations only show L2 data.
- What admin functionality is offered by Tower? How much do we need to customise it to fit requirements?
Exchange clone software is available from multiple sources. Putting aside the question of intellectual property of code and the rights of the named exchange, it can offer a quick and dirty solution to get a mirrored exchange up and running.
Coinsclone offer A Bybit clone. Which claims to offers a vast range of functionality and features:
- Referral Program
- Margin Trading
- Insurance Funds
- Affiliate Bonus
- Margin Bonus
- Multiple Trading Pairs
- Matching Engine
- 24*7 Customer Support
- Multi-Language Support
- Dual Price Strategy
- Funding Price
- Perpetual Contracts
- Auto Margin Replenishment (AMR)
- Market Orders
- Time in Force Method
This particular company and clone is based out of India. Their site features little technical information on their solution. Without this information it is difficult to determine its viability.
We are continually researching this topic and will release more articles when we find new information to share. Please stay tuned and consider following us to never miss an update.