Crypto Matching Engine Solutions — A Simple Guide

All you want to know about one of the impeccable features of cryptocurrency exchange that binds the user with the trading platform.

It is common to find the usage of matching engines in the cryptocurrency field. Several white label cryptocurrency exchange solutions providers would be adding them as one of the essential features for their clients. This is because, without this matching engine, no trader or investor cannot find an exact trade that matches his or her requirements.

In that case, have you ever wondered how it matches up trade pairs and conducts simultaneous trades in the cryptocurrency exchange platform? Do you know about their architecture, the languages they use, and how to build a matching engine?

No worries!! This blog will help you to explore the matching engine and its multidimensional usage in the crypto exchange field.

What is a Crypto Matching Engine?

Also known by the name “Trading engine”, the Crypto matching engine is a well-knitted software like blockchain technology. The main function of the crypto trading engine is to match trades based on the traders’ requests and conduct new trades if the two orders are consecutively fulfilled by each other trade.

For example, if you visit a cryptocurrency exchange platform, they will showcase the trading pairs of various cryptocurrencies to fiat or crypto to crypto, etc. That is what the trading engine does. It matches the cryptocurrency with the matching pairs and helps the traders to analyze and help them to conduct the trade without any hassles.

It is not a complex task for a matching engine to do the trade as they operate under two major functions — New order and Cancel order.

New orders are the one in which the trading engine search for any new orders and match those orders for the traders. Cancel order is the function in which the trade is canceled once the trader finds it not suitable.

Certain events can be generated through these two order functions: They are generation trades and canceled trades. Generated trades is the event in which the trade is generated through the trading pair that got listed. And the canceled trades is the one which gets canceled.

Types of Orders in the Trading

In terms of orders, there are various concepts related to trading generation. Some of the most prominent functions include Order books and orders that include limit orders, stop orders, and market orders based on the requirement of the trade, etc.

A limit order is one of the most used orders in the cryptocurrency exchange platforms where the user fixes a certain limit for his trade in which the matching engine will match the orders which are fulfilling the limit of that order.

For example, if a user is trading at a limit of 100 USD, then the matching engine will try and match a perfect trade whose limit will be less than or equal to 100USD.

Market orders are based on the execution of a trade based on market demands. Market orders bring the best bet out of the orders raised by the traders but not on the limits. So, the best trade leads the way rather than the limited order. For example, if market orders for 4 Ethererum can be traded at 380 USD, or 450 USD, or even 460 USD. Then the trade would close based on the open market demands of the trade.

Stop order is nothing but an order which converts itself into a market or limit order only after a particular level of trading limit is reached. This functions as a basic order book only when the fixed limit of the capital or targeted trade reaches.

In order to conduct a huge chunk of trades simultaneously, the matching engine will need an excellent infrastructure. They should have a perfect architecture and a framework and technologies for proper conduction of the trades and projects.

Infrastructure of Crypto Trading Engine

The trading engine infrastructure is a simple yet complex architecture. There are multiple components of the engine which will receive the trade requests from the end-user and send it for validation. After validation of the available funds, it sends the trade for further processing. It runs on variable platforms while the trade is conducted.

The main function is conducted at the Apache Kalfa. This is the area where different currency pairs and their trades are operated and send to processing. The communication from the servers helps the apache Kalfa to process the trade based on the chosen currency pair. From the user perspective, the user chooses the trade which in turn is sent to the load balancer. The load balancer balances the number of trades that are flowing to the server and splits them according to the type of order requests. After the load balancer sends the information to the server, the server will analyze the type of order and sends them to the apache Kalfa where the currency pair is chosen and the trade is generated.

In some cases, where the user cancels the trade, the trade would be stopped at the server stage itself. Even if the process reaches the Kalfa stage, the cancelation event would be generated which will stop the trade from being processed.

The main work of the matching engine is to listen to the Kalfa command and process accordingly. Each and every project is stored in the server which in turn the user can recreate the order anytime if he wants the same process to repeat. It is best to have some monitoring mechanism to look over the process orders and the time taken for those orders.

Choice of programming language

It is not like that the matching engine runs only on the specific language. The matching engine runs on any programming language. It is based upon the processing power. The programming language should be well enough to match the processing power and match the trades effectively which will improve the efficiency of the matching engine. Even low-level languages including c/c++ to high-end languages like Java and Kotlin can be adopted for running the processing orders in the matching engine.

Building a matching engine for your cryptocurrency exchange platform

It is not an easy task but not a difficult one either. There are certain steps that you should follow if you are building a cryptocurrency exchange Platform for you business,

1. Basic type or essentialities
2. Order book
3. Production and analysis
4. Monitoring

Features of using Cryptocurrency matching engine

There are extensive features in using the crypto matching engine as it provides advanced solutions to your white label cryptocurrency exchange platform. Some of the unique features include

1. Complete coverage as it covers all types of asset preferences and classes.
2. Very low door to door latency and high performance matching to make your trade close very faster and efficient. It can manage a huge amount of trades simultaneously without any hassles.
3. Interoperability and management — This matching engine effectively manages all kinds of trading operations by perfectly registering and managing through the order book and implement the trade using the interoperability principle.
4. Algorithm — Through robust infrastructure and algorithm, the matching engine performs the order requests in an effective manner and performs the trade based upon the user’s request.

To conclude as…

Crypto Matching Engine is the nerve center of any trade to happen in a proper way in the cryptocurrency exchange. Right from the user’s request to the processing of the trade, the matching engine is one of the necessities in every cryptocurrency exchange platform. During fluctuating market conditions, it is the crypto matching engine that will come as a savior.