What is a Cryptocurrency Exchange?

As a professional white-label exchange provider, we aim to expand upon every characteristic of cryptocurrency exchanges; main types of exchanges, their strengths and weaknesses. We initially embarked on a more technical approach on exchanges, diving into specific attributes such as custody, security, latency and fees [1]. We also looked into their functionalities – lending/borrowing, liquidity providing, derivatives offerings, and more [2]. 

After reviewing some feedback and carefully analyzing the available knowledge on digital asset exchanges, we feel it is time to re-discover exchanges with a more holistic mindset. We want to display a solid overview both for those just entering the digital asset space, as well as for those that want to enhance their understanding of cryptocurrency exchanges. It is therefore imperative to first introduce what exchanges are. 

Defining exchanges

At its core, an exchange  (noun) is the act of giving one thing and receiving another in return. In today’s evolved world we can think of a classic and daily example for this: buying a good (thing one) with money (thing two). Historically, and before the existence of money, those cases involved barter transactions [3], where two goods were transacted with no -cash- intermediary. Nowadays, exchanges are the digital or physical places where things are traded. Simplistically, they are marketplaces that enable the transfer of goods.

We interact with a number of exchanges throughout our daily lives. From Amazon and eBay to the London Stock Exchange, to buying electronic goods and selling stocks. 

What do exchanges look like in the blockchain space? 

Cryptocurrencies were born from an ethos of decentralization, and as such, weren’t initially accepted by institutions that live within the traditional financial centralized ecosystem. If a user that holds a checking account researches the financial product available by the bank, they will not see cryptocurrencies as possible offerings. Therefore, new venues such as cryptocurrency exchanges were created to access this new digital asset class. 

Overview of exchange types: CEXs and DEXs

Within the financial industry -more specifically the digital asset space-, exchanges can be categorized into centralized and decentralized exchanges. Brokers, cryptocurrency funds and traditional centralized cryptocurrency exchanges (CEXs) form part of the first category. Alternatively, decentralized exchanges (DEXs) form part of the second one. Both provide a trading venue that allows for buying and selling of digital assets, while taking commission from the service. However, the conceptual role that each represents could not be further apart from each other. 

Centralized exchanges are run by organizations that oversee their day-to-day operations such as (technical) maintenance, security, and growth. They provide the infrastructure and take full custody of users’ funds. Conversely, decentralized exchanges provide the infrastructure but allow for peer-to-peer transactions, which means that funds never touch the third-party (exchange) wallet.

How are tokens transacted within cryptocurrency exchanges?

The way transactions are carried out vary depending on the type of exchange used. 

CEXs take hold of users’ funds in a similar manner as banks. While the funds belong to a user, they don’t have possession, but access to them. Therefore, transactions in CEXs are settled internally through centralized order books, while balances are UI settled and displayed to users. It is only after a user withdraws the funds from the exchange that they regain possession of them.

Alternatively, DEXs are a series of linked smart contracts that enable users to trade digital assets without having to grant the custody and security of their funds to a third party. Smart contracts act as the ungoverned intermediaries that match orders to liquidity pools instead of trading against other people [4]. For a wider overview of the differences between CEX’s and DEX’s, you can read our article here

Scalable Digital Asset Exchanges

Scalable Solutions is a power-hub based in Switzerland that offers white-label exchange technology solutions. Besides centralized exchange software, Scalable is developing a decentralized exchange for the users that require these specific venues. As we continue to explore the main aspects of exchanges, it will become clear that we have an unmatched product equipped with the most sophisticated tools in the industry. 

We have a track record of proven excellence through SLAs and trillions of dollars processed through flagship split-of-a-second transactions. 

Schedule a demo with us to access leading digital asset exchange infrastructure.






[1] “Exchanges: Centralized v Decentralized .” Resources, Scalable Solutions, 26 Oct. 2020, https://scalablesolutions.io/news/centralized-vs-decentralized-exchanges/

[2] “Digital Asset Exchange: Main Functionalities .” Resources, Scalable Solutions, 7 Dec. 2020, scalablesolutions.io/news/digital-asset-exchange-main-functionalities/

[3] “A barter transaction involves two parties and is one where one basket of goods and services is exchanged for another basket of different goods and services without any accompanying monetary payment.” OECD. Glossary of statistical terms. https://stats.oecd.org/glossary/detail.asp?ID=181 

[4] “Smart Contracts and Their Characteristics.” Resources, Scalable Solutions, 7 Apr. 2021, scalablesolutions.io/news/smart-contracts-and-their-characteristics/

Blockchain Agnostic Technology: Support for 70+ Blockchains

The Scalable blog covers a broad range of topics about blockchain, DeFi, exchange technology and more. We try to accommodate readers with various levels of knowledge and technical acuity on the subject; this occasion is no different. A lot of information is written to explain basic concepts within blockchain technology on wallets, transactions, protocols, and more.  While security, decentralization and scalability are the most discussed concepts, we would like to go a step further and present a more detailed description of how any relevant service (wallet/exchange/etc.) supports a wide range of cryptocurrencies, and consider the benefits of being blockchain agnostic. 

Coins and tokens

Firstly, it’s important to understand that distributed ledger technologies (DLT’s) are a world unto themselves. A broad amount of consensus algorithms, as well as smart contract languages and virtual machines make each blockchain unique, and subsequently, create unique coins. The main types of cryptocurrencies are coins and tokens. Basically, coins run on their own blockchain, whilst tokens run on blockchains that are not natively theirs. ERC-20 tokens are the go-to example of this; Ethereum allows the creation of tokens on its own network, avoiding the need to establish a new one each time. 

Why do we mention all of this? In order to show that there is an exponential relationship between the number of cryptocurrencies out there and the infrastructure that must be deployed for them to exist. For example, in the cases where exchanges or wallets actively run nodes, an immense amount of computational power as well as storage are required to catch up to every blockchain and be able to update them. 

Adapting to different blockchains

As a Software-as-a-Service (SaaS) company, we consider that the benefits of being blockchain agnostic outweigh the costs. Simply imagine a car workshop that only has spare parts for a unique car model; this would be similar to only having the technology to adapt to one blockchain. However, having the ability to provide for whichever needs a prospective client may have would characterize the business as embracing.

Similarly, having the flexibility to swiftly and seamlessly switch between blockchains is essential in today’s world. This is a prerequisite for providing the highest levels of service for clients. It means users don’t need to search for different exchange platforms to handle transactions for various holdings, as well as businesses not having to worry about changing technology [1]. Whether it means creating a token of a real-world asset on a specific chain, setting a coin-inclusive exchange, or simply storing hard-earned life-long savings, Scalable is blockchain agnostic and can accommodate for virtually any need.

Scalable Offerings

Whether we are offering our white-label exchange, our white-label wallet, tokenization services, or other products, we deliver professional and technologically advanced services to our clients.  Given the industry we operate in, security and user experience are two of the pillars of our model. 

Regarding security, we combine a long list of outstanding industry professionals with deep theoretical knowledge and practical experience in order to provide technology that has not lost any of our users’ funds. Our wallets, for example, permit enabling at least 3-out-of-5 multi signature withdrawals and emergency as well. In our white-label exchanges, we operate separate teams that don’t know each other with detailed controls among them. These include the cross-checking of out-going transactions, as well as emergency teams for specific cases. We mitigate risk by having different fund buckets. For instance, hot wallets can contain roughly 1-2% of overall funds and use machine learning to calculate needs. Cold, offline and semi online wallets can store the rest. 

For user interface, we consider it paramount to offer every useful tool to avoid hacks on users’ accounts. In the case of custodial wallets like FreeWallet, trying to avoid physical robbery through withdrawal wallet white-listings, 24 hour locks, mails for external logins, 2FA, and IP ranges detection provides a series of layers to maintain funds as secure as possible. For users that put security at the top of their priority list, Lumi Wallet provides a non-custodial multi-currency option with a built-in exchange, and we add on top of that recommendations for the storing of private keys in a hardware environment [2]. We also have key ceremony protocols for generating enough randomness in the creation process of private keys, so no one can get their hands on generated keys.

Strong technology backbone

Another topic is the developer team, whose skills and expertise often create the backbone for any successful digital asset venture. Good programmers can easily understand Solidity (Ethereum’s smart contracts language) and other languages that are necessary for the job. This is especially important in an industry that requires swift responses and constant adaptation. At Scalable we have over 200 engineers that come from respected universities and have years of experience in programming.

We believe that everyone should have the opportunity to leverage blockchain technology and its benefits. Hence, we want to do our best to help that vision come to fruition. By supporting over 70 blockchains and thus being blockchain agnostic, with state-of-the-art technology, strategic partnerships, and an exceedingly capable team backing our beliefs, we know we are on the right track.




[1] “Powered by Blockchain Agnosticism.” Medium, The Startup, 9 Apr. 2019, medium.com/swlh/powered-by-blockchain-agnosticism-3c60db3b3bad. 

[2]  Please do not confuse this with hardware wallets. In this case, we mean storing private keys in several pieces of paper, for example.

What is Cryptocurrency Mining and How Does It Work?

Actors in the blockchain space are constantly buying, selling and sending billions of dollars worth of cryptocurrencies. Accordingly, the millions of transactions that are happening need record keepers to account for issues such as double-spending complications [1]. For those who send digital assets with Proof-of-Work (PoW) consensus mechanisms, they need certain participants, also known as miners, to confirm these transactions and add them into the blocks of a ledger (blockchain) in a decentralized way. This process is widely known as cryptocurrency mining [2]. 

In layman terms, once a block (bundle of transactions) is created, it undergoes a verification process. Miners take the information within the block, namely the actual block data, previous block data, current time and nonce, and apply a mathematical formula to it. This results in the seemingly random sequence of characters (letters and numbers) commonly known as a hash.

Hashes are functions that encrypt data into a sequence of characters. They have the necessary cryptographic characteristic that makes it easy to produce its desired output, while simultaneously making it virtually impossible to reverse engineer the data (you can’t find out the encrypted original data with only the hash information). Each hash is unique to the input it takes, so even the slightest change in the input will result in a completely different hash. For example, the input “Bitcoin” will have a different hash output to the input “bitcoin,” despite the small distinction between the two words. 

The importance of hashes in mining

Why are hashes important? In blockchain, each hash takes as input the hash of the previous block (think of them as pointers to the previous/next block), so if anyone tries to change the information (hash) of any given block in the chain, every following block will also deterministically change its hash, and will therefore be rejected by the rest of the nodes in the chain. This bestows the core principle of immutability to a blockchain, and is one of the most revolutionary advances in cryptography.

Anyone with access to the blockchain hash function can check the authenticity of each block, and find out if the hash is different from the one stored. Therefore, they are able to instantly spot invalid blocks as fake.

Cracking the puzzle of cryptocurrency mining

The difficulty of the Proof of Work mathematical puzzle is adjusted every two weeks, which results in an average block creation rate of six times per hour (1 every 10 minutes, which is the average block time). Furthermore, its complexity depends directly on the amount of nodes (computers that run the blockchain software) in a network. That is also the reason why a higher number of nodes makes a blockchain more secure.

bitcoin mining

Source: DGS101 [3]

Once a cryptocurrency miner solves the puzzle and publishes to the network, the other nodes automatically check its validity; this happens almost instantaneously once they have the resulting nonce. If actually valid, the miner receives a network reward, and the cycle starts all over again. Because the rest of the miners receive nothing, making their efforts momentarily ‘futile,’ it is common for small, starting miners to pool together in order to improve their odds of success, thus creating ‘mining pools’. 


At Scalable Solutions, we offer white-label exchange software for digital assets, making access to thousands of cryptocurrencies as simple and user friendly as it can be. Through our services, we also encourage blockchain adoption; we will continue to develop different tier articles, from introductory pieces to in-depth analysis, helping our readers get familiar with this asset class that has the potential to disrupt many aspects of our lives.




[1] Reiff, Nathan. “How Does a Block Chain Prevent Double-Spending of Bitcoins?” Investopedia, 9 Feb. 2021, www.investopedia.com/ask/answers/061915/how-does-block-chain-prevent-doublespending-bitcoins.asp

[2] “Staking – A Powerful Feature .” Resources, Scalable Solutions, 3 Nov. 2020, scalablesolutions.io/news/staking-a-powerful-feature/

[3] Jeyflex. “Why Do We Need Miners?” MINING, 6 Sept. 2018, dgs101.blogspot.com/2018/09/mining.html


Arora, Shivam. “Bitcoin Mining Explained – The 2021 Edition.” Simplilearn, 30 June 2021, www.simplilearn.com/bitcoin-mining-explained-article

Hong, Euny. “How Does Bitcoin Mining Work?” Investopedia, 21 June 2021, www.investopedia.com/tech/how-does-bitcoin-mining-work/

The Main Components of a Blockchain

Carrying out a faithful analysis of the exact components of a blockchain and knowing how to differentiate them from working parts can be daunting. Nodes, transactions, blocks, miners and cryptography are frequently categorized as blockchain components, though that assessment is not entirely accurate. We will take this opportunity to discuss the four main components of a blockchain, and will later develop on the other actors and participants [1].

Blockchain components

Nodes are the network of computers that run a blockchain. In blockchain, full nodes are constantly sharing information and updating separate ledgers. Alternatively, light nodes are connected to full nodes, but don’t keep a copy of the ledger. In the decentralized space, a blockchain improves its security as the network size increases. This is especially necessary at the infancy of the network, when it is most susceptible to 51% attacks (51% attacks are those carried out where hackers -or even colluding miners – take over half of the nodes in a network, therefore gaining the possibility to generate consensus on transactions). 

For example, a type of node you might have heard of are miners. Miners support the network by maintaining a copy of the blockchain, and are responsible for creating new blocks. Miners run the equipment that helps create consensus among all participants on the order of transactions. They propose different versions of the history of transactions and then use their computing power to vote on their version. 

Shared ledger. As we initially presented in our introductory article, blockchains’ distributed (shared) ledger is a data structure (database) that is managed inside the node application. Those running said application can view and even edit the respective ledger (blockchain) content [2]. Basically, running the software for the Ethereum application allows you to see and interact with its ledger according to pre-established rules. 

What’s inside the shared ledger? Essentially, the blocks that are linked together have what are called transactions inside. In their most basic form, transactions are records of cryptocurrency exchanging hands (wallets). Before being approved, they must satisfy a number of rules pre-determined by the underlying blockchain. Usually, they have to:

  1. Check that the wallet initiating the transaction has enough funds to send the required amount.
  2. Be authorized (signed) by the one who’s submitting the transaction.
  3. Check that the destination account is valid


Consensus algorithm. The next logical component of any blockchain ecosystem is its consensus algorithm. Similarly to shared ledgers, the way in which blocks will be added to the blockchain must be coded as part of the node application. The method for obtaining consensus can differ depending on each blockchain. Most common ones include Proof-of-Work (PoW), better known as mining, and Proof-of-Stake (PoS) [3]. 

Virtual machine. When understanding the already complex concepts and features of blockchain, we find that perhaps the most difficult ones are those of States and Virtual Machines [4]. Basically, virtual machines record a series of transactions and accounts [5] at definitive points in time. These logs create deterministic states, where with the right inputs, certain outputs are guaranteed. 


We hope this series of articles helps our readers better understand blockchain technology. Stay tuned, as the next pieces will involve a beginning to end process description. For more of what Scalable Solutions can help you do with blockchain technology, check out our Products and Services page. 





[1] Schwirz, Karl. “The Anatomy of Blockchain.” Medium, Slalom Technology, 16 Nov. 2017, medium.com/slalom-technology/the-anatomy-of-blockchain-1ac40cfdc92c

[2] In this context, editing refers to adding transactions and blocks to the chain, for it’s almost impossible to change previously accepted blocks.

[3] “Staking – A Powerful Feature .” Resources, Scalable Solutions, 3 Nov. 2020, scalablesolutions.io/news/staking-a-powerful-feature/

[4] An introduction to both states and virtual machines is available in a previous blog entry:  “How Are Smart Contracts Executed?” Resources, Scalable Solutions, 13 May 2021, scalablesolutions.io/news/how-are-smart-contracts-executed/

[5] There are two main types of “accounts” on Ethereum, Externally-owned accounts (or EOA), better known as user controlled accounts, and those deployed as smart contracts. In blockchain, we address “transactions” as cryptographically signed instructions from accounts. Moreover, transactions can be initiated only by EOA, but once initiated, it allows smart contracts to emit instructions to one another.


“The Logical Components of Blockchain.” Medium, Neocapita, 21 Feb. 2017, medium.com/@neocapita/the-logical-components-of-blockchain-870d781a4a3a

What Is Blockchain Technology?

Blockchain technology has been called a pillar of the Fourth Industrial Revolution; it has been placed side-by-side with technologies that ignited previous industrial revolutions, such as the steam engine and the internet. Blockchain has the power to disrupt existing economic and business models, and may prove particularly valuable in a number of heterogeneous industries [1][2]. 

With the advent of inconceivable returns surging from cryptocurrencies (and their impressive subsequent blowout), it seems unlikely that a number of consecutive conversations can be had without blockchain coming up. 

How did blockchain technology come to be the next big industrial revolution? Is there any attractiveness to it besides apparent astronomical gains? How come many social interactions are now marked by blockchain and the cryptocurrencies derived from this technology?

We want to take this opportunity to go back to the basics, and discuss the various views on what blockchain is and how to think about it.

Blockchain technology as a concept

With the boom of cryptocurrencies, more and more people began to take interest in their underlying technology: blockchain. If you choose practically any introductory article on blockchain, you’ll likely be bombarded with concepts on decentralization, the threat to institutions, low costs, immutability, and more. Formally, you can also find definitions like the following:

Blockchain is a software solution (protocol) for reaching agreement (consensus) within a leaderless (decentralized) group of peers (peer to peer), that events have occurred, as they occur (synchronised) and that of these each events is recorded in an indisputable (immutable) historical list (ledger) which each peer has a copy of (distributed)” [3].

At a first glance, blockchain technology appears to be a complex concept, filled with technical terms such as nodes, hash rates, miners, smart contracts, cryptography, Merkle trees, and more. Consequently, a myriad of ways were devised to explain the concept. Ultimately, they all try to convey a very simple idea, the concept of which is to allow digital information to be recorded and distributed, but not edited.

The first -and most common- way to think of blockchain is as a new type of currency; “a type of digital currency in which a record of transactions is maintained and new units of currency are generated by the computational solution of mathematical problems, and which operates independently of a central bank” [4]. Nevertheless, there are other ways of wrapping our heads around the concept of blockchain. 

The next way to explain the blockchain phenomenon is Decentralized Ledger Technology (DLT). This involves thinking of a blockchain as a ledger, much like the ones used by companies to keep track of their main financial activities. This way of thinking about blockchain technology is more mainstream and  technically correct, but still has some way to go. 

Another common way of describing blockchain, which we align to, involves the conventional analogy of a database

Blockchain as a database

At its core, a database is a collection of information originally stored on paper and later stored electronically on a computer system. Information is typically structured in table format to allow for a number of actions, such as easier searching and filtering for specific information. Therefore, blockchain is but another way to store information; a complex and innovative one, yes, but its essence as a database remains unscathed.

Blockchain as a specific type of database

  • Storage structure. While common databases structure their data into tables, a blockchain structures it into chunks (blocks) that are chained together. This results in all blockchains being databases, though not all databases are blockchains.
  • Decentralization. Unlike most databases that save information inside centralized storage units (think one computer, or a server for cloud storage), blockchain network computers (nodes) are not all under one roof. Instead, they are distributed geographically, and each node is operated by distinct individuals.  
  • Transparency. All transactions can be transparently viewed by either having a personal node or by using blockchain explorers that allow anyone to see transactions occurring live. Each node has its own copy of the chain that gets updated as fresh blocks are confirmed and added. This is not the case for common databases; given their way of storing information, they are private to a handful of users.
  • Security. After a block has been added to the end of the blockchain, it is very difficult to go back and alter the contents of the block unless the majority reaches a consensus to do so. That’s because each block contains its own hash (unique code), along with the hash of the block before it, as well as a timestamp. Imagine a case where a hacker wants to alter the blockchain and steal Bitcoin from everyone else. If they were to alter their own single copy, it would no longer align with everyone else’s copy. When everyone else cross-references their copies against each other, they would see this one copy stand out and that hacker’s version of the chain would be cast away as illegitimate. Succeeding with such a hack would require a simultaneous control of 51% of the copies of the blockchain so that their new copy becomes the majority copy and thus, the agreed-upon chain [5]. 


The concept of blockchain is not an easy one to grasp; high-level explanations can result in misunderstandings or misconceptions that can impact the eventual interactions with it. Stay tuned, as we will continue to expand on complex blockchain topics in an easy-to-understand framework. Anatomy, functioning, use cases and more all under one roof – that of Scalable Solutions.






[1] Kimani, D., Adams, K., Attah-Boakye, R., Ullah, S., Frecknall-Hughes, J., & Kim, J. (2020). Blockchain, business and the fourth industrial revolution: Whence, whither, wherefore and how?. Technological Forecasting and Social Change, 161, 120254.


[3] Jee, Martin. “The Best Blockchain Analogy Ever!” Martin Jee’s Blog, 11 Oct. 2017, martinjeeblog.com/2017/10/10/the-best-blockchain-analogy-ever/

[4] Mougayar, William. “Explaining the Blockchain via a Google Docs Analogy.” Medium, 6 Sept. 2016, medium.com/@wmougayar/explaining-the-blockchain-via-a-google-docs-analogy-56326b1bbe58

[5] Because of the game-theory incentives embedded in the creation of blockchain, we can easily understand that there’s a possibility that even if the attack is successful, the value of the underlying coin would drop to zero, given that it has no use anymore.


Conway, Luke. “Blockchain Explained.” Investopedia, 1 June 2021, www.investopedia.com/terms/b/blockchain.asp

“The Elements of a Blockchain.” Horizen Academy, academy.horizen.io/technology/beginner/the-elements-of-a-blockchain/

“Blockchain as a Data Structure.” Horizen Academy, academy.horizen.io/technology/beginner/blockchain-as-a-data-structure/

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