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For anyone who has done the math on opening their own bitcoin exchange, how much capital do you need to start an exchange, of course excluding the obvious variables like marketing budget, setup and legal fees? and where the money would go? for example, buy reserve bitcoins (if needed), infrastructure..etc Thanks.

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I thought about this a while ago.

What you need is:

  • A website with
    • Good security
    • A Order matching engine backend
    • A BitCoin send and receive engine
    • A way of processing normal money funds
      • A merchent or escroe account @ a bank
      • Batch file processing code
    • A scalable infrastructure (hosting)
  • Customers (people have to know your exist)
  • Some form of support (moderated forum, someone to answer where is my money emails)
  • Legal advice
  • Legal liability limited company

You don't actually need any money in reserve to operate the exchange. In fact you trading account (the one holding your customers money) should only every hold your customers money. You should have a separate account which you move fees into (and pay you bills from) Same goes for your BTC (LTC etc) wallets*.

To do other wise it would look like you are gaming the system (not a good look). If you wanted you could create a separate entity to act as a Market Maker to increase the liquidity of your exchange. But that should be run by a different person/board.

So basically the money you need is the amount to setup and run the site (including legal fees insurance, office space etc etc.) But you should not need any money/coins to run the site (over that which you are not holding on behalf of your customers)

*Once you have a reasonable amount of funds under management, you should have several operating accounts/ wallets. One for putting fees into/paying bills, one for day to day churn (the amount coming in will balance the money/coins going out most of the time) and one for cold storage, i.e, an off line wallet that can be accesses if need be, but a hacker can't drain from the live site.

**This is just my thoughts not legal advice, etc, etc, blar, blar.

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