Anyone could theoretically launch a cryptocurrency, but not everyone has the knowledge or means to do so.
Even if a person succeeds in creating a new cryptocurrency, there is usually work to be done in terms of promotion, exchange listing, and continuing maintenance and updates. Still curious about the requirements? Continue reading:
Coins vs Tokens: What is the Difference
It’s crucial to understand the difference between a token and a coin before getting started. While both are classified as “cryptocurrency,” a coin like as Bitcoin or Litecoin operates on its own blockchain, a token such as Basic Attention Token runs on top of an established blockchain technology infrastructure such as Ethereum. Outside of a single community or organization, tokens have no utility or value.
Cryptocurrencies work in the same way as conventional currencies, but without the need for a central bank. Users usually want to store, build, or transfer wealth using their coins.
Tokens, on the other hand, typically reflect a contract or have a specific use value for a blockchain application. For example, the Basic Attention Token pays content creators via the Brave browser. Tokens can also be used as a contract for something, such as event tickets or loyalty points, or as a digital replica of something. Non-fungible tokens (NFTs) are digital assets that are one-of-a-kind, similar to artwork. And DeFi tokens can be used for a variety of things in that space.
How to Create Your Own Cryptocurrency
There are three main methods for creating a cryptocurrency, none of them are quick or simple. Here’s how they each work:
Make a brand new blockchain
Creating a new blockchain from the ground up necessitates advanced coding skills and is by far the most difficult method of creating a cryptocurrency. There are online courses that will guide you through the procedure, but they will assume that you have some prior knowledge. Even yet, you may not leave with everything you need to start your own blockchain.
Create a fork of an existing blockchain
It can be easier and faster to fork an existing blockchain than it is to create one from scratch. This would entail modifying the open source code available on GitHub before creating a new coin with a different name. For example, the inventors of Litecoin built it by forking Bitcoin. Several forks of Litecoin have since been created, including Garlicoin and Litecoin Cash. This method still necessitates the creator’s knowledge of how to modify existing code.
Use a Pre-existing Platform
Making a new cryptocurrency or token on an existing platform like Ethereum is the third and easiest option for folks who aren’t experienced with coding. Many new initiatives, for example, use the ERC-20 standard to produce tokens on the Ethereum network.
If you’re not comfortable writing code, try hiring a creation service to handle the technical aspects and then deliver a final project.
7 Easy Steps to Creating Your Own Cryptocurrency
After you’ve considered everything above, you can begin the process of creating a cryptocurrency. When paying a third-party to generate a new coin, some of these stages will be less important. Even so, anyone taking on the work should be aware with these facets of bitcoin creation.
Step One: Choose a Consensus Mechanism.
A consensus mechanism is the protocol that determines whether or not a transaction will be accepted by the network. A transaction must be confirmed by all nodes in order to be completed. This is sometimes referred to as “reaching a consensus.” You’ll need a system in place to figure out how the nodes will go about doing this.
Bitcoin’s proof-of-work was the first consensus method. Another prominent consensus approach is Proof-of-Stake. There are plenty others.
Step 2: Decide on a Blockchain.
This relates to the three ways stated previously. A coin or token requires a home, and determining which blockchain environment the coin will live in is an important first step. The option you choose will be determined by your level of technical expertise, comfort level, and project objectives.
Step 3: Put the Nodes Together
Any distributed ledger technology (DLT), including blockchains, is built on nodes. You must decide how your nodes will work as a coin creator. Do they want a permissioned blockchain or a permissionless blockchain? What would the hardware specifications be? What is the procedure for hosting?
Step 4: Construct the Blockchain Architecture
Before launching the coin, engineers should be completely confident in the blockchain’s functionality and the design of its nodes. There’s no going back once the mainnet is live, and many things can’t be modified. That’s why it’s standard practice to try things out first on a testnet. Simple items like the cryptocurrency’s address format, as well as more complicated ones like implementing the inter-blockchain communication (IBC) protocol to allow the blockchain to communicate with other blockchains, fall under this category.
Step 5: Connect APIs
Application programming interfaces (APIs) aren’t available on all systems. Making sure a freshly launched cryptocurrency has APIs can help it stand out and gain traction. Some third-party blockchain API providers can also assist with this stage.
Step 6: Create the User Interface
It’s pointless to develop a cryptocurrency if users find it too difficult to utilize. Web servers and file transfer protocol (FTP) servers should be current, and front-end and back-end code should be done with future developer updates in mind.
Step 7: Legalize the Cryptocurrency
Many people who started or promoted ICOs in 2017 and 2018 got into difficulty because they didn’t think about this last stage. They may not have recognized that producing or advertising new coinage might result in penalties or criminal charges depending on the circumstances at the time. It’s a good idea to research the rules and regulations of securities offerings and related subjects before launching a new coin. Given the complexities of the issues and their frequent revisions, you might want to hire a lawyer who specializes in this field to assist you with this stage.
Conclusion
This is merely the tip of the iceberg when it comes to learning how to make a cryptocurrency. Aside from the technical concerns, producers of a new coin or token must consider how their cryptocurrency may bring value to others, how to encourage them to invest, and how to keep the network running. Hiring a development team, a marketing team, and additional individuals to assist in keeping things running and making needed improvements are all common costs.
It takes a lot of time and money to create a cryptocurrency, and there’s a good chance it won’t flourish.
