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Crypto Exchange Hosting: Cloud vs On-Premise

Cryptocurrency exchanges are attracting ever-greater interest from investors. These exchanges, however, must be hosted in a secure and reliable format.

Posted: 11th March 2021 by
Jake Madders
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Jake Madders, Co-director of Hyve Managed Hosting, weighs the pros and cons of the two distinct types of crypto exchange hosting.

Cryptocurrency has boomed in recent years, helped by people like Elon Musk joining the conversation and increasing the trust in its value, helping it to reach the mainstream. As the number of investors placing their money in cryptocurrency continues to grow, finding a reliable trading platform has never been more important. Hence, the need for crypto exchanges.

The ongoing growth of interest in cryptocurrency and the demand for technological development and maintenance has generated the need for different exchanges. According to a recent study conducted by crypto market data provider cryptocompare.com, cryptocurrency exchanges have increased their market share by 13% since October 2020. Bitcoin gained 13% of the market share from October 2020 to January 2021, going from 61% (USD$347 billion) to 74% (USD$ 1.41 trillion). The study pointed to crypto exchanges increasing their transparency by providing data as well as improved security as reasons for this growth.

Whilst the world of digital currencies continues to bloom, the issue around crypto exchange hosting becomes a challenge. Choosing between cloud vs on-premise hosting might not be an easy decision to make as it depends on the investors' needs. Nevertheless, with exchanges sites having to be active 24/7 in order to offer optimal performance, the cloud could be the ideal option.

Cloud vs on-premise benefits

When it comes to crypto exchanges, performance has always been a key factor. However, there’s a bigger picture that individuals need to look at. With the industry always evolving and technology developing constantly, flexibility is crucial in order for crypto exchanges to adapt. Moving an exchange to another location can be a long and costly process but on the cloud, this process can be done in a matter of hours and at a much lower cost. Speed on the cloud is clearly a valuable benefit, allowing crypto exchanges to set up the infrastructure on a cloud system much faster than on-site hosting.

When it comes to crypto exchanges, performance has always been a key factor.

Customisation is essential in order to meet the requirements of the ever-changing marketplace. The cloud offers the option to scale and implement storage, security and developer tools when required to meet the demands of the market and investors quickly and efficiently. Another benefit that is important to keep in mind when choosing the right hosting is latency. Users using a cloud hosting provider can opt for a data centre near their end-users which will reduce the latency, allowing an exchange to provide instant information directly from the market or from a transaction.

There’s also the environmental aspect of the cloud, which is a benefit that is often overlooked. As the adoption of cryptocurrencies continues to expand, a sustainable and eco-friendly hosting choice feels like something important to consider.

Choosing on-premise hosting 

Whilst the cloud seems to tick all the boxes as the perfect space for crypto exchanges, many of these platforms still use on-premise hosting. A key aspect offered by on-premise is the option to have full control and responsibility. For some, this might sound like a great advantage and the reason why on-premise can be the right choice. Still, there are other points to consider. Having full responsibility means being accountable for managing and maintaining the software which can require a fair amount of knowledge and also time. Some users might not have the right level of expertise to manage their cryptocurrencies and might require a specialist to do it for them resulting in an extra cost. On-premise hosting also means that servers could be more vulnerable, whereas data centres are secure environments with 24/7 security and cooling and fire protection measures.

Security, the deciding factor

It is not surprising that, over the last few years, cybercriminals have developed an interest in cryptocurrency. With hundreds of billions of dollars being traded daily on crypto exchange platforms, they are the perfect target for hackers. Cryptocurrencies are not easy to hack, but crypto exchanges are. This is one of the reasons why cryptocurrency owners have worried about choosing the cloud over on-premise hosting. Nonetheless, the cloud has become a safer environment for crypto exchanges. Risks have been minimised thanks to security being increased and improved on the cloud, helping mitigate issues concerning the protection of cryptocurrencies.

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When deciding between cloud and on-premise hosting, there are numerous factors to examine. On top of that, individuals need to keep in mind their investment plan and take into consideration what the future of the market could look like. With technology evolving and cryptocurrencies gaining popularity, finding the right crypto exchange hosting option will continue to be a challenging yet very important decision.

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