I have read other answers related to how can I setup my own exchange

What is needed to make a bitcoin exchange?

but I still have few doubts.

  1. When an exchange is launched and there are no buyers or sellers initially how is the price of any cryptocurrency set.
  2. In my country there are few exchanges which don't provide any order book functionality, they just list their buy and sell price for each cryptocurrency and we can buy on that prices, so how does that work? To name a few of such exchanges. buyucoin, bitcoin-india. These exchanges don't have order book but still around 30 cryptolisted to buy/sell.

1 Answer 1

  1. It isn't. Exchanges don't set prices at all, they merely provide a place for people to trade with one another at whatever price they can agree on. If there are no customers, the order book is empty; if you like, you can think of the bid being zero and the ask being infinity. If the first customer is someone who wants to buy, they can enter a limit buy order at whatever price they want, and that will become the bid. When someone arrives who wants to sell, either their price matches the existing buy and a trade happens, or it doesn't and that price becomes the ask.

  2. These are not really exchanges, just dealers. You are not trading with the company's other customers, but with the company directly. Just like an ordinary retail store: they have a product, they offer to sell it at a particular price, and their customers either buy at that price or take their business elsewhere.

And as general advice:

How to setup my own exchange?

If you have to ask the question, then don't. This is not a do-it-yourself project; the security and legal and financial considerations are daunting and need to be handled by experts. At best you will waste a lot of time before realizing that it is impractical. At worst you will discover it is impractical after you have lost a lot of money belong to yourself and your customers.

  • If they are just dealers then do they have a large supply of coins with them, which I think is less likely. How do these exchanges set buy/sell price? I know that it is not a do-it-yourself project and involves alot of different things. It's just I want to understand how these things work, right now I have a team of around 5 so we are just exploring things Commented Jan 9, 2018 at 7:44
  • 1
    @nishantagrawal: That's right, they should have a large supply of coins when they first get started. Bear in mind that they also buy coins from customers to continually replenish this supply. Of course, they will adjust their buy and sell prices to keep their supply of coins from getting too small or large. But the point is that, on both ends, transactions take place at the dealer's quoted price or not at all, and so there is no need for an order book. Commented Jan 9, 2018 at 15:20
  • Thanks a lot for your explanation. I have one more question. I have read somewhere that there are few exchanges which provide API's to start your own exchange, means behind the scenes order will be getting placed on that exchange and the exchange(on which customer places order) profits by the difference in buying and selling price. Am I right? If yes then are you aware of any such exchanges? Commented Jan 9, 2018 at 15:44
  • @nishantagrawal: I don't know anything about that. You should post it as a new question. Commented Jan 9, 2018 at 15:45

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.