In theory, anyone can start cryptocurrency, but not everyone has the knowledge or resources needed to undertake this task.
Even after individuals manage to make new cryptocurrencies, they usually need to work on promotion, exchange listings, and continuous maintenance and upgrades. Still wondering what is needed? continue reading:
Understanding Coins vs Tokens
However, before starting, it is important to understand the difference between tokens and coins. Both belong to the general term of “cryptocurrency“, but although tokens like Bitcoin or Litecoin exist on their own blockchain, tokens like Basic Attention Token are in established areas such as Ethereum. Run on top of the blockchain technology infrastructure. Tokens also have no use or value outside of a specific community or organization.
The function of cryptocurrency is similar to fiat currency, without a central bank. Users usually want to use their coins to store, build or transfer wealth.
At the same time, tokens usually represent some kind of contract or have specific practical value for blockchain applications. For example, the basic attention token, which rewards content creators through the Brave browser. Tokens can also be used as contracts or digital versions of something, such as event tickets or loyalty points. A non-fungible token (NFT) represents a unique digital asset, such as an artwork. DeFi tokens have many different uses in this area.
Ways to Create a Cryptocurrency
There are three main ways to create a cryptocurrency, but none of them is quick and easy. Here is how they work:
Create a New Blockchain
Creating a new blockchain from scratch requires a lot of coding skills and is by far the most difficult way to create a cryptocurrency. There are some online courses that can help you through the process, but they assume you have a certain level of pre-existing knowledge. Even so, you may not take away everything needed to create a new blockchain
Fork an Existing Blockchain
Forking an existing blockchain may be much faster and simpler than creating a blockchain from scratch. This will involve taking the open source code found on GitHub, making changes to it, and then launching a new token with a different name. For example, the developers of Litecoin created it by forking from Bitcoin. Since then, developers have forked multiple tokens from Litecoin, including Garlicoin and Litecoin Cash. This process still requires the creator to understand how to modify the existing code
Use an Existing Platform
For those who are not familiar with coding, the third and easiest option is to make new cryptocurrencies or tokens on existing platforms such as Ethereum. For example, many new projects use the ERC-20 standard to create tokens on the Ethereum network.
If you are not familiar with writing code, you can consider using the creation service to complete the technical work, and then hand over the finished product to you.
How to Make a Cryptocurrency in Seven Steps
After considering all the above, you can begin to take steps to build a cryptocurrency. When paying a third party to create a new token, some of these steps will be less relevant. Even so, anyone taking on this task should be familiar with these aspects of how to create cryptocurrency.
Step 1. Decide on a Consensus Mechanism
The consensus mechanism is an agreement that determines whether the network considers a particular transaction. All nodes must confirm the transaction to pass. This is also called “reaching a consensus.” You will need a mechanism to determine how the node will perform this operation.
The first consensus mechanism is Bitcoin’s proof of work. Proof of rights is another popular consensus mechanism. There are many others.
Step 2. Choose a Blockchain
This goes back to the three methods mentioned earlier. A coin or token needs a place to live, and deciding which blockchain environment the coin will live in is a crucial step. The choice will depend on your technical skill level, your comfort level and your project goals.
Step 3. Create the Nodes
Nodes are the backbone of any distributed ledger technology (DLT), including blockchain. As a cryptocurrency creator, you must determine how your node will operate. Do they want the blockchain to be licensed or less licensed? What will the hardware details look like? How will hosting work?
Step 4. Build the Blockchain Architecture
Before launching a token, developers should be 100% sure about all the functions of the blockchain and the design of its nodes. Once the mainnet is launched, there is no turning back, and many things cannot be changed. This is why it is common practice to test on a testnet beforehand. This may include simple things, such as the address format of encrypted currencies, and more complex things, such as integrating the inter-blockchain communication (IBC) protocol to allow the blockchain to communicate with other blockchains.
Step 5. Integrate APIs
Not all platforms provide application programming interfaces (APIs). Ensuring that newly created cryptocurrencies have APIs can help differentiate them and increase adoption. There are also some third-party blockchain API providers that can help with this step.
Step 6. Design the Interface
If people find it too difficult to use, then there is no point in creating a cryptocurrency. The Web server and File Transfer Protocol (FTP) server should be up to date, and the front-end and back-end programming should take into account future developer updates.
Step 7. Make the Cryptocurrency Legal
Failure to take this last step into account caused many people who initiated or promoted ICOs in 2017 and 2018 to have trouble. At the time, cryptocurrencies were in a legal grey area, and they might not realize that creating or promoting new coins might lead to fines or criminal charges depending on the circumstances. Before launching a new token, it is best to study the laws and regulations related to securities issuance and related topics. Given the complexity of the problem and its regular updates, you can consider hiring a lawyer with expertise in the field to help guide you through this step.