Currently, one of the most profitable industries in the cryptocurrency sector is the exchange.
According to The Block data, in 2018, the annual profit of Firecoin, Coin and OKEx was around US$400 million. This level exceeds 90% of A-share listed companies in the same period.
High profits have attracted a large number of latecomers. The number of exchanges included in CoinMarketCap alone has reached more than 270.
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However, the exchange pattern has begun to solidify, and the days of the latecomers are not as good as imagined: the flow is bleak, the funds are not prepared enough, and the exchange is at risk of closing down at any time.
We talked to several start-up exchanges, how much money and traffic we need to open an exchange.
After lifting the side control, I chose to go to the sea again.
“The exchange is the most profitable, although it seems to be very vulgar to the money.” Carter, a startup exchange CEO, explains why he was on the exchange, “but I don’t want to advertise how tall I am.”
In 2014, Carter began investing in Bitcoin and participated in several ICO (Initial Token Release) projects in 2017, including EOS and QTUM.
Through the speculation, Carter completed the original accumulation of capital, and the value once exceeded 200 million yuan. However, in 2018, cryptocurrency entered the bear market, and Carter also lost tens of millions of assets.
“At that time, I felt that the speculative coin is not a long-term solution. It is better to have a consistent and stable source of income.” Carter explained that he is used to the way of making quick money, and it is difficult to adapt to the traditional industry. Continue to stay in this industry.
In May 2019, Carter invested 10 million yuan to open an exchange.
In Carter's own words, in the current blockchain project, the exchange is one of the most profitable ways, and the speculative currency has no exchange to stabilize the money.
“The simplest logic is that gamblers are always better than casinos to make money.”
Carter's words are not unreasonable. Even in a bear market, the trading volume is bleak, but the exchange is still very lively. In 2018, the annual profits of the three major exchanges were around $400 million (2.8 billion yuan).
In the same period, A-share listed companies, only 400 companies with annual profits exceeding 1 billion yuan, accounting for only about 10%.
In addition to the investment exchange, Carter's other layout is to invest in the mine.
"It’s still the same thing, what to do with money. It’s just a choice to be an exchange. It’s really no feelings.” Carter explained quite casually.
A little different from Carter, Yuan Yun, the founder of another start-up exchange, sees the exchange as a “shortcut” to overtaking his own curve.
In the past few years, Yuan Yun has struggled in the field of Internet finance (referred to as “mutual gold”) and accumulated tens of millions of worth. However, Yuan Yun still found that he was still behind the entrepreneurial friends of the same period.
"The people around you are very good, you will find that the gap between yourself and them is getting bigger and bigger." Yuan Yun said, "Opening the exchange is to catch up with them, of course, to make money."
However, the driving factor that prompted Yuan Yun to make this decision was Facebook's issue of money – the introduction of the blockchain project Libra.
"Facebook's project is surrounded by Zuckerberg, and there are 2.7 billion users behind it. Central banks have to face cryptocurrencies. The future cryptocurrency market will grow bigger and bigger, and exchanges will have a place." Cloud explanation.
(Yuan Yun friends circle screenshot)
In early September, Yuan Yun’s exchange was online. Just a few days ago, Yuan Yun just lifted the border control and went to the other side.
"I want to go to the sea again." Yuan Yun showed his determination.
Prepared 4 million dollars, try water
Year after year, the rise of the IEO boom, the cryptocurrency market became active, and emerging exchanges have sprung up.
However, under the seemingly prosperous appearance, the crisis is raging. At the beginning of the establishment of many exchanges, they did not make cost calculations, which eventually led to operational difficulties. The exchange had already aborted before it went online.
How much money is needed to open an exchange, the Odaily Planet Daily has given you an account.
At present, there are two options for the technical solutions of the exchange. One is to develop independently and the other is to directly purchase a complete solution provided by a third party.
Alex, the head of an exchange, told us that if you choose to develop independently, you need to configure a technical team of 30 to 40 people, which takes about half a year. Based on an average salary of 20,000 per technician, the R&D cost needs to be between 3.6 million and 4.8 million yuan.
“Own development, the pits that the seniors walked through have to go again, time and trial and error costs are very high. With external systems, you can save millions of development costs and more than half a year's time,” Alex said.
For this reason, start-up exchanges, including Alex and Yuan Yun, chose to buy third-party trading solutions directly. The Odaily Planet Daily survey found that the current third-party trading solutions on the market offer different prices. For example, the SaaS system software of Hong Kong Sheng Technology is quoted at 600,000 in the first year, and the operating and maintenance costs are charged at a certain percentage of the handling fee.
2. Labor costs
Today, start-up emerging exchanges, although difficult in scale, are comparable to the three. However, the sparrows are small and complete, and there are still some staffings, usually ranging from 20 to 30 people.
Based on a per capita salary of 15,000, the annual manpower expenditure is between 3.6 million and 5.4 million yuan.
3. Operating costs
The operating costs here mainly refer to media announcements and rankings of ranking websites (not trumpet, CoinMarketCap, etc.). An anonymous person told Odaily Planet Daily that the cost of a ranking website is 3 BTCs (about 210,000 yuan) a year.
"Do not buy rankings, sometimes there is no exposure, there is no traffic." The anonymous person said.
In addition, in terms of media announcements, some head media users are charged 12 BTCs (840,000), up to 3 million. Start-up exchanges generally choose between 2 or 3 head media for collaboration.
On average, the cost of a start-up exchange is only $2 million to $3 million a year.
4. Hardware costs
The hardware cost here is mainly office facilities, equipment, Alibaba Cloud server and other office facilities. Roughly calculated, the annual cost is about 1 million yuan.
In summary, if a start-up exchange wants to really work, its annual cost will be at least 7.2 million to 10 million yuan, with an average of 600,000 to 800,000 yuan per month.
According to the handling fee of 0.2%, the daily trading volume of the exchange should be more than 10 million yuan in order to maintain a livelihood. Several startups interviewed by Odaily Planet Daily did not reach this level.
Although not shown on the trumpet, there are more than 120 exchanges that can reach this level. But how much real trading volume there is, no one knows except the exchange.
Poor trading volume and insufficient stocks on the exchange are important reasons for the bankruptcy of the exchange.
"I have prepared ammunition for two years, $2 million a year." Yuan Yun said.
Yilihua, the founder of Capital, told the Odaily Planet Daily that the number of people on an exchange is generally between 30 and 100.
“At least 20 people are needed, and the input cost is at least 10 million per year.”
Cottage exchange, lower cost
The above exchange cost calculation can only summarize the general situation.
There are also insiders telling the Odaily Planet Daily that some cottage exchanges have fewer people and lower costs.
What is the cottage exchange, Hopex said, the cottage exchange, also known as the pheasant exchange, the exchange has several characteristics in recognition:
- The platform is directly involved in betting. This is the platform as the user's counterpart, the user's loss is the largest source of income for such platforms, the biggest risk of this exchange is the user to win.
- Often inserted, the pheasant exchange is not independent of the independent market, so the index will be used to maintain the platform's own interests from time to time, that is, the platform we often say is evil.
- Leverage is unusually high, product inductive, and even hundreds of times the leverage is allowed for users to trade, and even the offline team to use electricity sales to induce incentives for traders.
These are the most common performances and the ability of users to identify the pheasant platform at first glance.
Linkvc founder Lin Jiapeng said that some small pure cottage exchanges only need to buy a system, and then hire 5 to 10 people to form a team. And because of the lack of funds at hand, these exchanges will not go to large-scale declarations, and the drainage will rely on the project side's own traffic. "Looking for a bunch of business pull projects."
“In general, the cost of pheasant exchanges is uneven, but the investment in technology and product development must be the weakest. Because their energy must not be on product investment, but use human resources, technical means. The value of the user is squeezed out as quickly as possible," Hopex said.
Open exchanges can use third-party services to reduce their own development investment, but the lack of independent research and development capabilities at a certain stage of development will certainly become the biggest drawback of these exchanges. The cost of investment and manpower costs are mainly based on whether the company wants to make quick money on the market or whether it wants to take root in the industry.
After opening the exchange, I didn’t sleep at night.
There is always a big gap between ideals and reality.
The high profits of the head exchange are certainly eye-popping. However, the current pattern of exchanges has gradually formed, and it is difficult for latecomers to have the opportunity to squeeze into them.
“The head exchange has divided the stock users, the winning rate of the new exchange is very low, 99% are all killed.” Li Xi exchange Wang Xijian said, “In 2019, only two have signs of success: BIKI, Matcha.”
How do start-up exchanges improve their trading volume through operation and maintenance?
Gtaex Wu Yidong said bluntly that the new exchanges currently want to obtain stock users, they can only do their own marketing, hot spots, such as some popular currencies.
However, this method does not last long. The first is the unity of the transaction, that is, the user only trades a certain currency in the exchange; in addition, when the user's enthusiasm for the new currency subsides, the retention of the new exchange is very low due to safety and other factors. .
Therefore, for emerging exchanges, stock users are not the main force, how to expand incremental users is the way to win.
Hu Jianlei of BTC100 believes that more attention should be paid to the three-line and four-line small white users to educate them. Once the user's trading habits are formed, it will be difficult to be taken away by the three major exchanges.
However, this approach seems to be difficult to achieve. At present, the platforms including the three major exchanges are actively training small white users. Large exchanges have strong financial strength, and it is difficult for start-up exchanges to take advantage of it.
“It’s been a lot of money to do a few months of trading. I’m thinking about various problems every day: I’m not enough money, I’m not keeping up with it, why is there no traffic…” Mr. Zeng Guang, the head of the startup, complained "I haven’t made any money yet, and the current funds are only enough for half a year."
In addition to the pressure of funds and operation and maintenance, the greater pressure is policy.
In 2017, the central bank, the China Banking Regulatory Commission, the China Securities Regulatory Commission, the China Insurance Regulatory Commission and other seven ministries jointly issued a notice to stop ICO financing, which is known as the “June 4 Notice”. Later, various departments launched actions to clear the domestic cryptocurrency exchanges. It can be said that policy is the sword that affects the survival of the exchange.
In July of this year, Sun Yuchen, the founder of the wave field, was passed by and stopped the lunch with Buffett. This also gave Zeng Guang an alarm, and he also canceled the publicity activities during that time.
"In those few days, I went to sleep several times to dream, dreaming that I was being controlled by the side, and I was arrested." Zeng Guang said with a bitter smile, "The money is not earned, and the head is almost bald."
Will there be spring in the start-up exchange?
"As long as you survive, there is hope for success. There is always a small cake that belongs to you. For the enterprise, it is already very good." For the future, Wang Xijian is still optimistic.
(Note: Some of the respondents in the article are pseudonyms)
Text | Qin Xiaofeng
Produced | Odaily Planet Daily (ID: o-daily)