An In-Depth Guide to Understanding Hybrid Crypto Exchange Model

Posted by : Mudit Kumar | 04-Nov-2020

  • Hybrid Crypto Exchange

    The cryptocurrency boom kicked off with the introduction of Bitcoin in 2009. This new digital currency was not linked with any centralized power and enabled both anonymous and secure transaction execution by users. It was not long until the advent of other cryptocurrencies happened. Each targeted a niche industry or presented an advanced algorithm of consensus. However, cryptocurrencies, due to being digital resources, faced challenges in their exchange on existing physical networks. Therefore, it highlighted the prerequisite for advanced cryptocurrency exchange platform development.

    Cryptocurrency Exchange Platform 

    Cryptocurrency trades perform business in much the same manner as forex trading works. For instance, they enable trading of one currency for another, but mostly digital currencies. One can exchange Ether for Ripple, for example. It is similar to how the US Dollar is tradable for the Indian Rupee and conversely. Through levying a small fee on each sale, these sites maintain themselves. Later, based on the fundamental architecture they adopted, those cryptocurrency exchange innovations fell into two categories. The descriptions of those two are Centralized Exchanges (CEX) and Decentralized Exchanges (DEX).

    Also, Read | Cryptocurrency Exchange Development | Crucial Aspects to Consider

    CEX and DEX (Centralized Exchanges and Decentralized Exchanges)

    As the name suggests, third-party providers that organize trades between buyers and sellers operate Centralized Exchanges. Decentralized exchanges, on the contrary, hold faithful to the ideals laid down by Satoshi Nakamoto and are thus not run by third parties.

    While CEX exchanges enable fast transactions and provide options for high liquidity, DEX platforms are known for maintaining anonymity and being hack-proof. These two separate exchanges, meanwhile, met with their particular collection of challenges.

    Not only did centralized markets charge transaction costs, but they also maintain full control over the assets of their clients. Also, CEXs hold the funds of their consumers on hot wallets that are reasonably simple to access. And it came as little surprise when CEXs were the most popular in all of the hack attacks in cryptocurrency history with Mt. Gox, BitFloor, and Poloniex, for instance.

    Decentralized markets, on the other hand, face challenges due to handling trades at the speed of a snail. It proves unfavorable for consumers planning to exploit the market volatility of the cryptocurrency. Also, they do not enforce laws such as AML and KYC. It makes it a hotspot for malicious activities.

    Also, Read | What’s So Astonishing About Decentralized Crypto Exchange

    Hybrid Cryptocurrency Exchange Platform

    The limitations of both exchanges, though, contributed to the creation of an upgraded, more specialized network known as the Hybrid Crypto Exchange Platform. The positive features of Centralized and Decentralized markets come in combination with this form of exchange.

    Hybrid crypto exchanges (HEX = Hybrid Exchange) address the issues of centralized and decentralized exchanges. They mainly focus on the usability and liquidity of CEX platforms, as well as the anonymity and protection of DEX platforms.

    Hybrid Crypto Exchange | Benefits

    • Provided real-time service access
    • Incorporates solutions based on blockchain technology
    • Users can trade on centralized as well as the decentralized crypto platform
    • Addresses challenges of centralized and decentralized crypto exchanges.
    • Even if third parties may regulate the exchanges of cryptocurrencies on a hybrid platform, users still have custody of their funds here.
    • Not only do hybrid crypto exchanges secure customer privacy, but they are also still compliant with different laws for digital currencies.
    • User assets are not held in hot wallets here. It suggests that funds are placed in cold storage altogether. That makes cyber-attacks on hybrid crypto exchanges challenging.
    • There are fast and transparent crypto transaction rates. That makes hybrid crypto exchanges for global crypto traders an enticing choice.

    In hybrid crypto trading, the technology used is scalable. It helps in positioning it as a prospective digital currency exchange hub.

    By introducing a hybrid platform using the finest cryptocurrency exchange creation services, one will receive more income.

    Fraudulent practices and hacking become obsolete by incorporating top-notch security technologies. In the hybrid crypto exchange, users can conduct smooth and safe crypto trading.

    Also, read | Security Token Exchange Development – A Comprehensive Guide

    How a Hybrid Crypto Exchange Works

    • An individual X wants to sell his Cryptocurrencies. And a person Y wishes to purchase Cryptocurrencies from the exchange.
    • Initially, incoming orders will process through encryption at the Hybrid Exchanges. A log will be available on the Blockchain for the order book.
    • The trader can transfer their private keys to the order pool to decode the instructions and send them to the corresponding engine.
    • The Blockchain will monitor all paired trades.
    • Finally, depending on the trades conducted, the cash and crypto balances will change.

    Hybrid Crypto Exchange Platform | Features 

    Liquidation management

    To improve the flow of crypto trading on your platform, it will set up complete information about the order book from a third-party exchange.

    Escrow method

    The escrow mechanism seeks to control the stability of Crypto funds to satisfy the needs of buyers and sellers.

    Flawless transaction execution

    Incorporates top-grade authentication that ensures seamless routing of each transaction in a highly secure environment.

    Creation of Atomic Swap Exchange

    Blockchain-based atomic swaps allow traders to exchange digital currencies directly without third parties using a private wallet.

    Elevated efficiency

    Without contributing much to growth and infrastructure, it provides a network with numerous coins, fiat gateways, and high security.

    Also, read | Cryptocurrency Exchange Development | Assessing Liquidity Factors 

    Hybrid Crypto Exchange | Development Process

    Project identification

    Our specialists determine and acknowledge your requirements and do analysis to understand the current state of the organization and product in the marketplace.

    Scheduling

    Our experts finalize an overview of the project. It depends on your specifications and a complete review of the project.

    Evolution

    Our team of developers will create the best hybrid exchange platform based on the plan via blockchain technology and smart contract, with both the new centralized exchange platform and decentralized exchange platform functionalities.

    Testing

    We have a trained testing team that will guarantee that your software is bug-free, given the value of testing the built product before deployment.

    Launch

    Once rigorous testing, the platform will go live on the production network of the client. Also, after project deployment, we have continuous support to ensure that there are no operational mistakes.

    Also, visit  | Fintech Blockchain Development Services

    Hybrid Crypto Exchange Development with Oodles 

    For entrepreneurs and specialists, Oodles offers its services around the clock. We provide features such as advanced analytics, fast transaction throughput, low latency, and equal execution with transparent price creation.

    After DEX, because of its incentives, a Hybrid exchange platform has a broader spectrum to offer. Oodles is a development service provider of crypto exchanges.

    We offer you advanced hybrid exchange development services with additional customized functionality that will further extend your hybrid exchange platform. To know our experience, get a free consultation along with the project plan from our blockchain and cryptocurrency development experts.


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Mudit Kumar (Writer)

Mudit has been working with Oodles since 2017. He writes about technologies that not only disrupt the digital space but also influence the physical world. Initially, he explored revolutionary technologies like ERP (Enterprise Resource Planning) and AI (Artificial Intelligence). Now, he focuses on unfolding the elements of blockchain technology, given its potential and edge over others.

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