1. Requirement Analysis
1.1 Centralized vs. Decentralized Exchange Platforms
Centralized (CEX) and decentralized (DEX) cryptocurrency exchanges differ in operational models, security, and governance:
- Control & Management: CEXs are operated by a single entity acting as an intermediary, while DEXs rely on blockchain-based smart contracts for peer-to-peer trades.
- Fund Custody: CEXs manage user assets, requiring trust in the platform; DEXs allow users to retain control via private wallets.
- Security: CEXs are vulnerable to hacks due to centralized storage, whereas DEXs minimize risks through distributed ledger technology.
- Regulatory Compliance: CEXs adhere to KYC/AML laws; DEXs often operate with greater anonymity, posing regulatory challenges.
1.2 Functional Requirements
- User Authentication: Secure registration/login with multi-factor authentication (MFA).
- Asset Management: Deposit, withdrawal, and balance tracking for cryptocurrencies (e.g., BTC, ETH) and fiat currencies (USD, HKD).
Trading Features:
- Order types: Market, limit, stop-loss.
- Real-time matching engine for buy/sell orders.
- Conversion between cryptocurrencies.
- Order History: Transparent records of past transactions.
Non-functional Requirements:
- Performance: Low-latency order execution (<100ms).
- Security: Encryption, cold/hot wallet segregation, Tatum Key Management System (KMS).
- Compliance: SFC licensing (e.g., Virtual Asset Trading Platform Operators License).
2. System Design and Implementation
2.1 Core Modules
2.1.1 User Authentication
- Frontend: Login page with input validation (email/username, password).
- Backend: JWT-based session management, password hashing (bcrypt), and rate-limiting to prevent brute-force attacks.
2.1.2 Trading Engine
- Order Matching: Price-time priority algorithm for buy/sell queues.
- APIs: Integration with cryptocurrency exchanges for real-time price feeds.
- Transactions: Atomicity ensured via database rollbacks on failures.
2.1.3 Asset Management
Wallets:
- Hot Wallets (5% assets): For liquidity (PayPal, platform fiat wallet).
- Cold Storage (95% assets): Offline hardware wallets.
- Withdrawals: 4-eye approval via Tatum KMS for secure signing.
2.1.4 Security
- Tatum KMS: Local private key generation/signing; mnemonics replaced with signature IDs.
- Compliance: Client risk profiling, exposure limits based on financial status.
2.2 Optimization Strategies
Future Enhancements:
- Scalability: Parallel matching engines using memory-based state machines.
- High Availability: Multi-server redundancy with load balancers.
- UI/UX: Responsive design, real-time market data visualization.
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3. FAQs
Q1: How does a centralized exchange ensure fund security?
A: CEXs use cold storage (offline wallets) for most assets, employ MFA, and leverage KMS solutions like Tatum for private key management.
Q2: What order types are supported?
A: Market, limit, and stop-loss orders, executed via a price-time priority algorithm.
Q3: How are withdrawals processed securely?
A: Withdrawals require 4-eye approval and are signed offline using Tatum KMS before blockchain broadcast.
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