Must-Know Guide Before You Start Creating Your Own Cryptocurrency
With the advancement of blockchain technology, more and more people have begun to wonder if it’s possible to create your own cryptocurrency. In short, the answer is yes. But there are quite a few different options to consider — and caveats to keep in mind — before you dive in.
After reading this article you will know exactly what a cryptocurrency is, how a coin is different from a token, business aspects of cryptocurrency creation, how to make your own cryptocurrency, and which solutions can be used to make your own cryptocurrency.
What is Cryptocurrency?
Before diving into more complex concepts and which solutions can be used to make your own cryptocurrency, you should first know, “what is a cryptocurrency?”
A cryptocurrency is a new form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments, central authorities, or banks. Cryptocurrency uses encryption techniques to regulate the generation of currency units and to verify the transfer of funds. Anonymity, decentralization, and security are among its main features.
Crypto holders can transfer cryptocurrency assets between wallets and blockchain addresses, exchange it for fiat money, or participate in cryptocurrency trading. Everyone on the network can view transactions, while the identities of the people behind these public addresses remain anonymous, as they are encrypted by unique keys.
Blockchain, which is a growing list of records called blocks, is an integral part of cryptocurrency. These blocks chronologically store information about transactions and adhere to a protocol for inter-node communication and validating new blocks. The data recorded in blocks cannot be altered without the alteration of all subsequent blocks. The benefits of blockchain make companies and individuals think about how to create their own cryptocurrency.
Advantages and Disadvantages of Cryptocurrencies
If you are thinking about how to create a cryptocurrency, you first need to know their pros and cons. The following advantages explain why cryptocurrencies are popular and why you should use cryptocurrency in your business operations.
Here is a list of the most significant advantages:
- Eliminating fraud risks: Cryptocurrency is impossible to counterfeit and no party can reverse past transactions.
- Providing transaction anonymity: Customers decide what exactly they want sellers to know about them.
- Cutting down operating costs: Cryptocurrency is free from the exchange or interest rates, as well as the transaction charges.
- Offering immediate transactions: Holidays, business hours or geographic location of the parties don’t affect cryptocurrency.
- Ensuring an immediate pool of potential customers: You can even do business with those who do not have access to traditional exchange resources. No more trade restrictions in any market.
- Providing security for funds: Since cryptocurrency is a decentralized system, banks or government institutions can not seize or freeze your assets.
Apart from the advantages, there are certain drawbacks that need to be considered before you start creating your own cryptocurrency. Here is a list of the most significant disadvantages:
- Highly volatile in nature: The cryptocurrency market is not stable, with frequent ups and downs even for famous cryptocurrencies like Bitcoin.
- Not accepted everywhere: In everyday life, there are still limited possibilities for those who want to make purchases with cryptocurrency. Very few countries have legalized the use of cryptocurrencies.
- Transactions are non-reversible: Mistakenly entering an incorrect cryptocurrency address may cost you money. There is no way to reverse a transaction. You may send a request for a refund, but if it is declined, be ready to say goodbye to your money.
- Cryptocurrency storage: You’ve probably read horror stories about cryptocurrency owners who lost their devices, forgot the private key, and could not access their cryptocurrency fortunes.
These benefits and drawbacks should be taken into account when considering the creation of a cryptocurrency that will facilitate your business goals. You need to decide what the purpose of cryptocurrency creation is for your company.
Difference Between Coins and Tokens
Cryptocurrencies can be broadly divided into two large subcategories — coins and tokens. While they are both cryptocurrencies, there is a difference between a coin and a token. Understanding their main concepts will help you figure out how to make your own cryptocurrency for specific business needs.
Coins are standalone cryptocurrencies based on their own blockchain whereas tokens are built and hosted on existing blockchains. Examples of coins include Bitcoin, Ethereum, NEO, and Emercoin, all of which operate on a different blockchain. If you want to make your own coins, you need to first create your own blockchain.
A token works on the top of an existing blockchain infrastructure (like NEO or Ethereum) which is used to verify transactions and make them secure. Coins are just a method of payment while tokens may present a company’s share, give access to products or services, and perform many other functions. Coins are currencies that can be used for buying and selling things. You can buy a token with a coin, but not vice versa. Coin operates independently, while token has a specific use in the project’s ecosystem.
A blockchain, at its simplest, is a record of transactions made on and secured by a network. So while coins have their own independent transaction ledgers, tokens rely on the underlying network’s technology to verify and secure transactions and ownership. In general, coins are used to transfer wealth, while tokens can represent a “contract” for almost anything, from physical objects to event tickets to loyalty points.
Key Business Processes Involved
Before jumping right into the development of your own cryptocurrency, there are some key business-related decisions you’ll want to consider. I will explain these business processes by following six main steps:
Define a purpose for your cryptocurrency
If you’re going to create a cryptocurrency, there should probably be a reason for its existence. Creating a cryptocurrency may be fun, but in real-life business, you have to develop a strategic plan. Define what problem you want to solve with your dApp and what audience it will target. Maybe you want to remove a bank or other middleman during transactions or create a life-changing healthcare solution. To make customers interested in your token during ICO/STO, create a value proposition.
Hire a strong development team
Unless you’re developing your crypto yourself, you’re going to need strong developers to help bring your idea to life. Consider hiring experienced professionals who know their way around the blockchain and cryptocurrency world.
Create rules for smart contracts and hire external auditors
A smart contract will have a significant impact on your project. Smart contracts are like traditional contracts, except for the fact that they are digital, operate on the blockchain, have pre-established rules, cannot be changed, and are executed automatically. You can create your own rules representing the main idea behind ICO/STO.
Found the right developers to create your cryptocurrency? Again, since it’s peoples’ money on the line, you’ll want to double and triple-check that your security is top-notch. This is where external security audits come in.
Craft a white paper
Once you have defined a purpose for your cryptocurrency, be sure to explain it in a white paper, along with other aspects of your project. Investors often get their first impression of your cryptocurrency from white papers. A well-written white paper helps you cross the invisible bridge from failure to a successful ICO/STO.
Your white paper should answer the following questions:
- What is the problem and why is a new solution needed?
- How is your company planning to spend ICO/STO funds?
- When will tokens be released, how many, and on which exchanges?
- What roadmap will the project follow?
- Who is on your team, what experience do they have, and how can they bring value to the project?
Promote your project
After accomplishing all the steps mentioned above, it is time to move on to ICO/STO marketing. Email marketing, press releases, social media, blogs, and channels popular among the crypto community like Twitter, Telegram, Reddit, and Discord are a good place to start.
Create a strong community and grow it
Do you know what successful cryptocurrencies like Bitcoin, Ethereum, Ripple, and NEO have in common? All of these blockchains have active and strong communities. Choose the right channels to communicate with the community members, try to answer all their questions, and provide timely updates regarding project development. Many projects have community management teams for the sole purpose of growing a loyal user base.
What to Create First: Coin or Token?
It has been already mentioned above that there are two subcategories of cryptocurrencies - coins and tokens. Hence, creating a coin is different from creating a token. The very idea behind cryptocurrency is that the underlying code is accessible to everyone — but that doesn’t mean it’s easy to understand. Here are the paths to creating your very own coins and tokens.
Creating a coin
Creating a coin is much harder than creating a token because coins have their own blockchains, you’ll have to build a new blockchain. This option is not suitable if you want to create your cryptocurrency easily and free of charge. This is a task best left to the professionals experienced in decentralized technologies and the good news is the field of developers with cryptocurrency experience is growing rapidly.
Don’t worry, there is an alternative too. This process can take a few minutes if you just copy or fork the code of an existing cryptocurrency like Bitcoin and add or change a variable - that’s it, you have your blockchain and coin. You will learn more about forking later. However, you need to understand the code and how to change it, which requires extensive coding skills.
Creating a token
Creating a token is a more feasible way to become a cryptocurrency creator. Many projects prefer to start with a platform like Ethereum, before migrating to their own blockchain, an example of such crypto is Tron (TRX). This saves a lot of time and money in development costs and also lets a team gauge a project’s potential before investing more in the development of its own blockchain.
You can create tokens on various networks like Ethereum, NEO, and EOS. Ethereum became the first blockchain to offer token creation service. It provides an exceptional level of trust due to its maturity and strong position on the cryptocurrency market. All tokens built on Ethereum use the ERC-20 standard. A token on Ethereum can only be written in Solidity (its own programming language).
NEO blockchain is aimed at the smart economy and utilizes the NEP-5 standard. Unlike Ethereum, you can use almost any high-level programming language, including C#, Java, Python, and Kotlin to create your own token on top of it. EOS tokens use the EOSIO.Token standard. The blockchain offers great scalability, a vast number of transactions per second, and cost efficiency due to the lack of a truncation fee.
Forking an Existing Blockchain
It takes a lot of time, resources, and particular skills to build a blockchain. So what can you do if you don’t possess all of the above but still want to build your own cryptocurrency? Then it’s time to talk about forking an existing blockchain, let’s say Bitcoin.
You can fork an existing cryptocurrency like Bitcoin by taking the open-source code found on Github and making a few changes, and launching a new cryptocurrency with a new name (like Newcoin). You can fork any open-source cryptocurrency according to your convenience and by utilizing the trust, popularity, and consensus mechanism of the underlying technology. Again, this requires you to understand the code so you know what to modify and why.
Follow these steps to get started:
- Go to Github, download, and compile the Bitcoin code on your computer.
- Make the required changes and implement your customization.
- Publish the code back to Github.
- Provide a website and the documentation (normally a white paper).
Some examples of successful Bitcoin forks include Litecoin, Bitcoin Cash, Bitcoin Gold, etc. Litecoin is an example of a cryptocurrency fork based on Bitcoin that has grown to become one of the most popular cryptocurrencies.
Using a Cryptocurrency Creation Platform
This option will save a lot of your time, but it will require you to spend some amount of money. A creation service will do the technical work and deliver your finished coin or token back to you. For example, CryptoLife will actually build a custom coin, and all you have to do is enter the parameters, from the logo to the number of coins awarded for signing a block. The base price for this service is 0.25 BTC and you’ll receive your coin’s source code in a few days. WalletBuilders has a similar service starting at 0.01 BTC as well as a free test version.
If you want to go a step further to create a coin with real value for a broader audience to mine, buy, and sell, and you don’t have coding experience, you’ll probably want the help of one or more developers. Even if you use a service to build your currency, you’ll need to maintain it. The Coindev and sites like CodementorX will connect you with crypto developers for your project.
Is it Worth it to Create Your Own Cryptocurrency?
The technical creation of a cryptocurrency isn’t actually the hardest part of launching a successful crypto project. The real work is in giving your coin or token value, building the infrastructure, maintaining it, and convincing others to buy. Plenty of cryptocurrencies are unsuccessful, even questionable from a legal standpoint because the ICO wasn’t created in good faith or the coin failed to generate lasting interest.
While the benefits are numerous, the amount of work that goes into creating your own blockchain is significant and requires a wide range of knowledge and tools to execute all steps of the process. Now, you have a fairly clear picture of what it takes to create a new cryptocurrency. Before starting any new complex project it’s always a good idea to take a deep breath and evaluate once again if this is something you should be investing your time and money in.
Remember, every technology has always been beneficial for its early and serious adopters. The good news about blockchain technology is that it has not arrived yet so it’s not too late to join the ranks of pioneers.
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