Written by: Dmytro Volkov, CTO of the international cryptocurrency exchange CEX.IO.
A crypto exchanges technical infrastructure has much in common with traditional exchanges and trading firms. Trading stocks, commodity contracts, cryptocurrencies or any other financial instrument requires basically the same technical solutions and faces very similar problems. However, there are some notable differences.
Hardware and Software Maintenance
Traditional exchanges allow trading 6-8 hours a day, 5 days a week. This schedule provides a 16-hour window each day to do any maintenance of technical infrastructure, and full weekends. Crypto exchanges usually operate 24/7, and it’s much more difficult to maintain such a system. It requires a special design of all technical components to operate non-stop.
Sometimes crypto exchanges face outages because of long non-stop operations, but traditional exchanges usually do not face such issues simply because they do not operate on a non-stop 24/7 basis. Crypto exchanges do most of the technical maintenance non-visible to the end user and without outages. However, some other complex work requires short outages that become visible for the end user.
Traffic Load and Burdens on Exchange Infrastructure
Traditional exchanges usually allow access only to professional players like brokers and big firms. Traditional exchanges have a much wider audience than any crypto exchange does, but usually its spread between brokers, prime brokers, managed funds, and other players, which decreases direct traffic for the exchange.
A regular individual has no chance to interact with a traditional exchange directly and has to rely on his broker.
On the other hand, crypto exchanges are more accessible and allow direct access to almost any individual, even with a $100 account.
This leads to very high traffic being concentrated at the crypto exchange. Ironically, in terms of traffic, crypto exchanges are more centralized than traditional exchanges, because crypto exchanges allow direct access to individuals and small traders. Such high traffic leads to more frequent outages, especially during hype periods.
Correlation Between the Number of Users and the Protection Requirements
Both traditional and crypto exchanges have very high-security requirements. However, crypto exchanges face fraud and hacking incidents much more frequently, especially when taking into account that a crypto exchange is accessible almost to everyone. This leads to the exchange either getting hacked, or becoming more secure and implementing more features to protect itself. Sometimes, attacks are simple denial-of-service attacks, which could lead to outages. Hostile environments like this force crypto exchanges to become more secure, usually much more so than traditional exchanges.
Storing Client Assets
Traditional exchanges usually provide only trading services and other related…