It seems that everyone nowadays is talking about cryptocurrency. No wonder blockchain technology has great potential.
You can buy cryptocurrency by using fiat money, and it could be an excellent investment if the coin skyrockets in price. You may also opt for mining a chosen crypto, but it requires mining equipment or a powerful GPU on a PC. But what about creating a new cryptocurrency?
Is it even possible to create a new cryptocurrency when there are so many other options to pick? Of course, it’s possible! But how do you do that?
This guide should be helpful if you are considering creating a cryptocurrency. You may also check out the article to better understand what a cryptocurrency is and how to make it.
What is Cryptocurrency?
Cryptocurrency is a phenomenon but no longer a new concept. First things first, crypto is, in fact, money. Unlike fiat money, crypto has no physical representation. Meaning, you can’t touch crypto like you can touch cash.
Crypto is a digital currency that is built on a decentralized blockchain system. Crypto uses cryptography to protect coins from any changes and approve transactions and regulate the generation of tokens within the blockchain.
Crypto money is decentralized. A central authority does not govern it, for instance, the central bank, government. It is built within a blockchain system that consists of thousands if not millions of computers worldwide. The system of computers governs the blockchain network to make sure all processes are decentralized.
A blockchain is a decentralized P2P (or peer-to-peer) system. It consists of blocks. To add a block, the system needs validation from components of the system. Adding a block to the chain is a process that requires computing power. The user or group of users first to add the block get a reward — that’s the mining process.
One of the reasons blockchain and its cryptocurrency are such a buzz is that when you add a block to the system, you can’t alter data. This peculiarity almost eliminates the probability of fraud and money laundering. Plus, this feature enables pseudo-anonymity, when everyone can see the transaction but can’t tell who the initiator is.
The most popular cryptocurrencies like Bitcoin and Ethereum are built on proof of work types of blockchain. It requires miners to compete with each other by using powerful computers to mine the currency. But some currencies are built on the proof of stake algorithm, which requires less ash power.
The success of companies responsible for creating blockchains and cryptocurrency makes us all believe that it’s quite a profitable venture. But before you dive into the world of cryptocurrency building, check the differences between tokens and coins. It seems to be worth it to create crypto.
The Differences Between Tokens and Coins
To make it easier to perceive information, here are three key facts:
- Coins may be used anywhere, but tokens are bound to particular industries or communities.
- A coin is a significant part of a blockchain, but a token is not. It only operates on the existing blockchain.
- One can buy tokens by using coins, but not vice versa.
A simple example will explain the difference between the two. You are a client in a store, and you participate in the loyalty program. Let’s say it’s an online bookstore.
When you buy books with real money, you earn loyalty points. You can exchange them for a book when you get enough loyalty points. Meaning, you buy these loyalty points with your real money.
But if you decide to cash out these loyalty points, it won’t be possible. You can’t exchange loyalty points for real money. That’s how it works in the crypto world. But you should also note that creating tokens is easier than building a new blockchain with a coin.
Creating Coins vs. Creating Tokens
Creating and launching a crypto coin requires building and maintaining a new blockchain. The process requires knowledge and financial support. But forking (creating a copy) an existing coin or using a blockchain system to create a token is a lot easier.
Here are the critical facts about creating crypto coins:
- It needs a separate blockchain. That may be both a benefit and a downside, depending on the quality of the blockchain.
- To create a coin, you need knowledge about coding and significant financial support.
- Creating a blockchain takes time and requires substantial expenses.
And here are a few essential facts about creating tokens on an existing blockchain:
- You get access to pre-existing tools and a blockchain with an open-source code. That’s why it’s easier to create a token. You do not need to write code.
- It’s easy to build a token on an existing blockchain and the process doesn’t require advanced skills, and won’t cost a fortune.
It does seem like creating a token is a better idea. In most cases, that’s a correct statement. But the potential for success is higher if you make a new blockchain. Nevertheless, it’s a complex process.
Reasons for Creating a New Cryptocurrency
Today, quite a lot of businesses and startup companies decide to create their tokens or even coins. Whether you opt for creating a coin or a token, the idea has benefits. If you are a business owner or a startup creator, then you have at least five reasons to create a cryptocurrency:
- Flexibility. If you use fiat money, it is controlled by a central authority. Financial operations, money transfers, etc., might be tracked and even blocked. But if you have a cryptocurrency of your own, you get more freedom and financial flexibility.
- Branding a business or startup. Did you know that Facebook, Mitsubishi, Microsoft, Google, and even Walmart have their cryptocurrencies? They do! The reason behind the creation of cryptocurrency is that it adds more value to the brand.
- Easy crowdfunding. It’s a lot easier to find funds for a new project or a startup by having cryptocurrency. It takes less paperwork and clearances to get funds. Plus, you can engage with investors from all over the world!
- Security and cost-effectiveness. Yes, blockchain technology does have issues, but it is still more secure in increasing cybercrimes. But one benefit you can’t take away from blockchain tech — cost-effectiveness. Transactions are easier to maintain when you use cryptocurrency. And it’s a godsend if you work with international companies — imagine how much you will save on exchange and transaction fees?
- Mainstream. You can research and find proof that most companies are more interested in cryptocurrency and blockchain technology. Most likely, creating cryptocurrencies and even new blockchains might become mainstream. So, if you don’t want to be left behind, you might need to consider making a cryptocurrency.
Depending on the method of creating cryptocurrency you choose, it could be difficult or easy to make new crypto money.
Methods of Creating a Cryptocurrency
Creating a new blockchain is not the only way to obtain new coins. You may opt for easier solutions. Check out three main methods of creating new crypto further in the article.
Building and Launching a New Blockchain
This is the most challenging method you may choose. It requires financial support to create and launch a new network and advertise it. You also need coding skills.
Luckily, you may benefit from online courses and lessons teaching users how to create a blockchain. But even if you spend time learning new skills, there is no guarantee that you will be able to create a new blockchain.
Use an Established Blockchain
You may have heard that a lot of blockchains and thus crypto tokens are based on Ethereum. Some of these coins are highly popular and successful, so there is hope! It’s one of the easiest methods.
Ethereum offers the ERC-20 standard to create new projects on top of the main blockchain. It’s the easiest solution since you can use helpful tools to create a blockchain and its digital token.
Create a Fork of an Existing Blockchain
By visiting GitHub and copying an open-source code of an existing blockchain, you can easily create a new blockchain. This process of copying the code is called forking.
Thus, your blockchain will be a fork of the main blockchain, for instance, of Bitcoin and Ethereum. However, you do need coding skills to understand how to modify the code.
Algorithm for Creating a New Cryptocurrency
If you like the idea of creating a new blockchain or launching a token within the existing one, this guide should be helpful.
Choose a Blockchain Platform
If you want to take a shortcut and create a token, choose a suitable blockchain. Bitcoin or Ethereum (and their forks) are the most usable options. If you wish to create a blockchain from scratch, you should either learn to code or hire a specialist.
Decide what Consensus Mechanism to Use
There are two main consensus mechanisms: Proof of Work or Proof of Stake. They determine how participants of the system validate and approve transactions. If you are creating a fork on a PoW chain, you can still opt for the PoS mechanism and vice versa.
Build a Blockchain Architecture
You can skip this step when creating a fork or using an existing blockchain. But if you are developing a coin, you have to choose the architecture. There are three main types of blockchain architecture:
Depending on your goals, you should choose the architecture. If you want more control, consider a private type. If you’re into better transparency, then consider a public one.
Begin the Blockchain Development Process
If you are creating a blockchain out of scratch, make use of development teams. The process is difficult and requires a lot of testing. Meaning it’s best to engage with a professional team.
Consider to Audit the Code and the Overall Blockchain
Audit your code by asking the help of such companies as Certik. A team will audit the code to find vulnerabilities so you can fix them before launch. Auditing will also help you in the future. You might publish the report to prove that your blockchain is safe. It’s a good bonus to seek investors.
Make Sure to Take Care of all Legal Aspects
You have to make sure you can launch your blockchain. To do so, you need legal advice. This is another step that requires the aid of experts.
Mint the Newly Created Cryptocurrency
Minting a cryptocurrency is almost like forging a real coin. You need to mint the cryptocurrency whether you are working on a token or a coin. Depending on the economics of your ecosystem, you may either mint all cryptos at once or opt for gradual minting.