Is It Worth To Develop A New Crypto Exchange In 2021?

05 Mar 2021

#Blockchain Development



#Startup Library

Not long ago, we have talked about the bitcoin price surge (and how it affects the blockchain development industry) — it actually reached a significant milestone of a $1 trillion market cap and is gaining momentum among individuals and corporates. With crypto exchanges getting more and more attention from new and existing users, we decided to talk about whether it’s reasonable to develop a new crypto exchange in 2021.

Crypto emergence

Cryptocurrencies were created with a view to providing people around the globe with a safe and convenient way to manage their finances and conduct transactions. They aimed to cut out middlemen and bankers to create a new level of economic freedom. The idea didn’t really catch on at first, but as time passed, the concept finally got decent attention and consideration from both individual and corporate players.

In 2017-2018, the crypto market experienced its first real boom — the price of the most popular cryptocurrency bitcoin soared from about $1,000 to almost $20,000. However, the boom soon ended, and until recently, cryptocurrencies weren’t such a hot topic. Last year, however, things changed. The first months of the pandemic triggered a robust growth of crypto, and individuals, as well as a growing chorus of prominent institutional investors, were beginning to flock to the crypto haven. Crypto exchange development became on-trend — and today there are over 500 crypto exchanges.

Crypto market today

There are three types of crypto exchanges:

  • centralized cryptocurrency exchange (CEX): the most traditional one. It is governed by a company of central organization that offers crypto trades from either crypto-to-crypto or fiat-to-crypto.
  • decentralized cryptocurrency exchange (DEX): an alternative to a traditional centralized crypto exchange. Such a platform doesn’t depend on a service or a company to control the customer’s assets — instead, transactions are peer-to-peer and are not controlled by an automated process.
  • hybrid cryptocurrency exchange: the mixture of features of both. A hybrid crypto exchange operates as a centralized one and provides space for decentralized trading.

Today, while there are hundreds of crypto exchanges on the market, only a few of them have become go-to incumbents that ensure safety and security for their users whether they intend to trade frequently or purchase and hold crypto long term.

The most popular one is Coinbase, which was founded in 2012, almost a decade ago, when the idea of the alternative to traditional money was in its infancy, and the overall crypto market capitalization was no more than $500 million.

Binance is another popular crypto exchange that was founded in 2017 with a focus on altcoin trading. It offers over a hundred different trading pairs as well as relatively low fees.

Other prominent crypto exchanges are Venus, Kraken, Dex, and UniswapV2 among others.

Crypto VS… Delivery?

Crypto and delivery? What is it that those markets may have in common?

Although not really evident, the commonality is quite simple — both the crypto market and the delivery one are quite crowded and full of established players. Delivery giants such as Grubhub, Doordash, Deliveroo, Postmates, Glovo, and Ubereats have taken up an advantageous position and are planning to steadily yet rapidly develop in the future. The room for growth is enormous — the market size of the global online food delivery sector stands at about $110 billion today, and it is expected to grow at a CAGR (compound annual growth rate) of 11.5% to reach over $150 billion in 2023. The coronavirus pandemic has forced many businesses and individuals to switch to delivery solutions, which materially accelerated the growth.

A similar situation may be observed in the crypto market. There are a few major players that have significant market share and popularity — Binance, Coinbase, Kraken, Huobi Global, and Bitfinex among the largest ones — and they keep enjoying the growing interest in crypto from the public. If someone thinks of creating a crypto wallet and wants to either actively trade or simply invest in crypto and hold it, there is a very high probability that he or she will turn to one of the aforementioned incumbents. Surely, there may be cases when your friend refers to some small new crypto exchange and highly recommends using it, so you decide to try it out, but in most cases, newcomers turn to incumbents who are time-tested and reliable.

However, even in such a crowded market as the food delivery one, there is a sweet profitable spot where there is an unserved or underserved niche demand. Take Slice, a discovery platform for local pizzerias, as an example — it may seem that no pizzeria owner would prefer to use a small niche solution when there are solutions like Doordash or Grubhub that have a huge userbase and cater to many needs. Yet, quite a few owners of small local pizzerias don’t want to spend their time on creating promotions and ads or conduct review management — they just want to do their job and simply cook and sell tasty pizza instead of worrying about getting a better rating than some Chinese restaurant nearby. For those owners, a niche solution like Slice is the best option — it’s simple, focused, and convenient.

The same situation may be observed in the crypto market. Sure, incumbents like Coinbase or Binance are easy and usual to use, plus they are efficient and reliable. Still, when there is a big market (and the crypto one seems to grow almost exponentially), there are always quite a few niches where there is unsatisfied demand.

Our take

A large market means a great number of opportunities, and with the crypto market, the opportunities are indeed in creating niche solutions. While alluring, the decision about creating such a niche solution should be well-considered and weighed against several factors. First of all, you need to conduct thorough market research and be sure that you’ve identified the unsatisfied demand. This will help to find the exact niche you want to enter and think over the ways of differentiating from the powerful incumbents. Secondly, bear in mind that creating a niche solution entails high expenses.

No doubt, at Idealogic, we are always eager to work with new clients who have ambitious innovative ideas, but at the same time, we have always been proponents of a rational and well-considered approach to the reasoning of creating a particular product. So, if you wish to embark on crypto exchange development — together with us or with some other development company — carefully think the idea over and consider all the pros and cons.

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Mel Duy

Sales Executive

Irene Avrutova

Sales Executive

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