Cryptocurrency: In principle, anybody may launch a cryptocurrency, but not everyone has the requisite skills or resources.
Even after creating a new cryptocurrency, there is usually work to be done in terms of advertising, listing on exchanges, and continuing maintenance and updates. Still curious about what it takes?
Tokens vs. Coins: What’s the Difference?
However, before you begin, you need to understand the distinction between a token and a coin. Both are classified as “cryptocurrency,” however whereas a coin like Bitcoin or Litecoin lives on its own blockchain, a token such as Basic Attention Token operates on top of an existing blockchain technology infrastructure such as Ethereum. Tokens also have no uses or value outside of a particular group or organization.
Cryptocurrencies work similarly to fiat currency in the absence of a centralized bank. The majority of users expect to utilize their coins to save, develop, or transfer wealth.
Tokens, on the other hand, often reflect some form of contract or have a particular use-value for a blockchain application. For example, the Basic Attention Token pays content producers through the Brave browser. Tokens may also function as a contract or digital form of anything, such as event tickets or loyalty points. Non-fungible tokens (NFTs) are one-of-a-kind pieces of digital property, similar to artwork. And Defi tokens perform a variety of functions in that sector.
Methods for Creating a Cryptocurrency
Here’s how they each work:
Make a New Blockchain.
Creating a new blockchain from scratch requires extensive technical knowledge and is by far the most challenging approach to establishing a coin. There are online classes that will lead you through the procedure, but they will presume you have some prior knowledge. Even so, you may not leave with all you need to start a new blockchain.
Attempt to Fork an Existing Blockchain
Shelling an existing blockchain may be faster and easier than developing one from start. This would include modifying the open-source code available on GitHub and issuing a new currency under a different name. For example, the inventors of Litecoin built it by forking from Bitcoin. Since then, developers have forked various Litecoin currencies, including Garlicoin and Litecoin Cash. This procedure still requires that the developer knows how to alter the current code.
Make Use of an Existing Platform
The third and simplest alternative for individuals who are not experienced with coding is to create a new cryptocurrency or token on an existing platform such as Ethereum. Many new projects, for example, establish tokens on the Ethereum network using the ERC-20 standard.
If you are unfamiliar with programming code, you may want to explore using a creation service that conducts the technical work and then delivers a final result to you.
How to Create a Cryptocurrency in Seven Simple Steps
After you have considered everything said above, you may begin the process of creating the coin. When hiring a third party to generate the new currency, some of these stages will be less important. Even so, anybody attempting the operation should be aware of these fundamentals of bitcoin creation.
Step 1: Select a Consensus Mechanism
A consensus mechanism is a protocol that decides whether or not a given transaction will be considered by the network. To complete a transaction, all nodes must confirm it. This is sometimes referred to as “reaching consensus.” You’ll need a technique to figure out how the nodes will accomplish this.
Bitcoin’s proof-of-work was the first consensus method. Another prominent consensus approach is proof-of-stake. There are plenty of others.
Step 2: Select a Blockchain
This relates back to the three ways discussed above. A currency or token needs a home, and determining which blockchain ecosystem the coin will reside in is an important step. The decision will be influenced by your degree of technical expertise, level of comfort, and project objectives.
Step 3: Make the Nodes
Any distributed ledger technology (DLT), including blockchains, is supported by nodes. As the designer of a cryptocurrency, you must decide how your nodes will work. Do they want a permission blockchain or a permissionless blockchain? What would the hardware specifications look like? How will hosting function?
Step 4: Construct the Blockchain Architecture
Before releasing the currency, engineers should be completely confident in the blockchain’s operation and the architecture of its nodes. There is no turning back once the main net is deployed, and many things cannot be modified. That’s why it’s usual practice to run things via telnet first. Simple items like the cryptocurrency’s address format might be included, as could more difficult things like incorporating the inter-blockchain communication (IBC) protocol to enable the blockchain to connect with other blockchains.
Step 5: Incorporate APIs
Application programming interfaces are not available on all systems (APIs). Making sure a freshly minted cryptocurrency has APIs might help it stand out and get popularity. There are various third-party blockchain API providers that can assist with this phase as well.
Step 6: Create the Interface
It’s pointless to create a cryptocurrency if consumers find it difficult to utilize. Web servers and file transfer protocol (FTP) servers should be up to date, and programming on both the front and backends should take future developer upgrades into account.
Step 7: Legalize the Cryptocurrency
Many of those who began or supported ICOs in 2017 and 2018 faced difficulties as a result of failing to address this last stage. At the time, cryptocurrencies were in legal limbo, and they may not have recognized that creating or promoting new coins may result in penalties or criminal prosecutions, depending on the circumstances. Before launching a new currency, it’s a good idea to familiarize yourself with the rules and regulations governing securities offerings and other connected matters. Given the complexities of the problems and their frequent revisions, you may want to consult with a lawyer who specializes in this area to assist you through this process.
This is merely the tip of the iceberg when it comes to learning how to create a cryptocurrency. Aside from the technical concerns, developers of a new coin or token must consider how their cryptocurrency might bring value to others, how to encourage people to invest, and how the network will be maintained. Hiring a development team, a marketing staff, and other personnel to assist keep things running and conducting necessary improvements is typically required.