How to create your own cryptocurrency – a step-by-step guide
Today, cryptocurrency is booming, and this trend seems to continue. Every day we observe the birth of new coins and most of them will die soon. And one of the reasons for this abundance is that nearly any person with some knowledge of blockchain can launch their own altcoin. It is not as difficult as it may seem. Let’s talk about what you need to do to create your cryptocurrency and to become a founder of a new project.
Will your startup be successful and your efforts be rewarded? Who knows, one day you may become a king of the crypto community. Now let’s get deeper into this topic to see how cryptocurrency is created and identify some pitfalls that might stop you at the very beginning.
Basics on cryptocurrencies
Let’s have another look at what crypto is. I believe you know this but it never hurts to refresh your knowledge. From very early childhood, we deal with money, so it is not necessary to explain to us what it is used for and why it is important. We deal with it every day and we know perfectly well how it is earned, stored, and spent.
In simple terms, cryptocurrencies are a digital alternative to traditional financial tools and payment means. They are based on encryption and are decentralized to some extent. They exist in the form of tokens and coins, and these two names are often confused.
Token and coin: is there any difference?
What are you going to launch? A token or a coin? Does the difference between these two terms matter? They are often used interchangeably as synonyms for the same phenomenon in many articles (I confess: I do it, too.) But these concepts are not one and the same in fact though they are very much alike on a fundamental level.
They both represent value but it is realized in a different way. A coin is any cryptocurrency that has a separate independent blockchain (like BTC or ETH). All coins that are not BTC are called altcoins (alternative coins). They are a digital version of fiat money and some blockchain enthusiasts believe that coins will replace fiats in the not-too-distant future.
On the contrary, tokens don’t have their own blockchains and they benefit from the technologies of other ones (e.g., ERC-20 standard). They can be compared with assets and deeds rather than with money. Tokens are issued by a definite project and limited to it and its ecosystem. They provide access to the project’s functionality and may give its owner a right to take part in making decisions on the network development and future.
So keep in mind that if you decide on a crypto coin, you’ll have to build a blockchain.
The advantages of having your own crypto
In some cases, you might not have another solution and your business actually needs its own coin: if your project needs its own blockchain you’ll create a new cryptocurrency to stimulate node owners to contribute more power and time. Lots of business people understand that blockchain technologies are a source of development, so it’s the right time to enter this hot segment and take all the credit. If you plan to stay on the online market for more than a couple of years it is quite reasonable to ingrate your own digital money. So what are the advantages of having your own crypto?
The list of the most significant pros is rather long:
- Avoiding the fraud risks. It is impossible to imitate or falsify digital money. Nobody can deny any transaction, every transaction is recorded and the records are immune to changes.
- Transaction anonymity. It is no necessity to disclose your personality for committing transactions. You can provide your counterpart with as much information as you want to give to them.
- Decreased operational costs. No interlayers and thirty parties’ involvement result in lower costs.
- Transaction speed. You don’t have to wait for money as you have when dealing with fiat money. Blockchain transactions are completed nearly immediately and you can create an unlimited number of transactions.
- Availability for a wider array of clients. Your services become available for anyone who has a crypto wallet, no matter where and in which country they are. Their locations and hour zones don’t matter.
- Security of assets. Blockchain is a decentralized system and this means that it is almost impossible for someone to discover the addresses from and to which the assets were sent.
These are the main advantages that your business can get from using online currencies.
Create your own cryptocurrency token
Now that you are convinced of the necessity of having your own crypto, let’s see in detail how to make it in the most simple and efficient way.
In short, you should take 8 basic steps to start:
- Decide on the purposes you are going to achieve
- Select a consensus algorithm
- Choose a robust blockchain platform
- Set up the nodes
- Provide your blockchain’s internal structure
- Take care of APIs
- Develop the interface
- Ensure the legality of your cryptocurrency
Decide on the purposes you are going to achieve. Define your precise goals and what you need. There are three big groups of tokens:
Decide on what type you really require.
Select a consensus algorithm. Consensus mechanisms are multiple programming used by blockchain network participants (validator nodes) to come to an agreement. There are lots of them to choose from for the best results.
Choose a robust blockchain platform. For a token, you’ll need to choose the blockchain to make your crypto on. Ethereum is the most popular tool and is relatively easy to use but sidechains can also be a good idea.
Mind that creating your own coin will require designing or hiring someone to create a custom blockchain. Creating a new blockchain from scratch takes substantial coding skills and is, undoubtedly, the most difficult way.
Set up the nodes. Nodes are the backbone of any blockchain. As the owner, you should determine how your nodes will function providing efficiency, support, and security to the entire network.
Provide your blockchain’s internal structure. If you still plan to launch a coin, remember that there’s no way back and it is impossible to change many parameters once the mainnet is already running. A testnet is a great solution that will help you to avoid numerous problems and fix the errors before the mainnet launch.
Take care of APIs. Some platforms don’t provide application programming interfaces (APIs). If your platform doesn’t have this function, that’s no reason for being concerned. This problem can be easily solved by means of third-party blockchain API providers.
Develop the interface. To ensure smooth interaction between the end-users and your blockchain, you need every network element to be meticulously planned. Your project will die away if people find it too difficult and complicated to use. Keep in mind that some elements should be updated as you go along to meet your and your users’ demands.
Ensure the legality of your cryptocurrency. The days when crypto was far beyond the national legislations are long gone. Today, things are changing, and governments worldwide to some extent make steps towards the recognition of crypto assets. I believe you are a law-abiding citizen so you wouldn’t break the laws. Do you know how cryptocurrency is treated in your country? Is it legit? Or is it prohibited? Should you pay taxes? All these questions are very important. Try to find the answers to them before starting to mint your crypto. This will help you to avoid numerous troubles.
Here are 8 main steps you should take to achieve your goals. But don’t think that the most difficult job is already done. You’ve done only the first steps and it is not the time to kick back. Now you are ready to meet a new challenge: you need to promote your creature attracting new network participants and keeping it up-to-date.
To sum it up
Cryptocurrency is a phenomenon that cannot be ignored. Its benefits are obvious and it leads to rapid growth in blockchain projects that offer various tokens and coins. You can join this trend and offer your own project to the crypto community. But don’t think that you’ll manage to do this for free. Be ready to pay and use the resources of professionals as many aspects of this business cannot be done without the certain experience. Don’t economize on specialists and their services and it is quite possible you will make a hit.