How to Create Your Own Cryptocurrency: Step by Step Guide
What is Cryptocurrency?
A Crypto Coin is a secured digital currency running on blockchain technology. The framework is decentralized, so no one/main entity controls the currency. Bitcoin was the first blockchain and cryptocurrency. Currently, there are up to 8000-9000 cryptocurrencies, and they are increasing.
A user accesses and transacts their cryptocurrency via a wallet. Each wallet has a unique identifier and a user name or personal details which do not appear on the blockchain. Blockchain is a network of distributed databases that store cryptocurrency data. You can develop your blockchain or use an existing one.
Cryptocurrency is immune from central authorities such as governments and central banks. They have a total market value of about $2 trillion, and it indicates the huge development of crypto coins that has taken place over the years.
How does Cryptocurrency Work?
The blockchain provides a platform for transactions of cryptocurrency. It is a distributed database that is often referred to as a ledger. No main entity owns cryptocurrencies but the users on the network. After a transaction, the changes update through the network immediately. Cryptocurrency is generated through mining.
The process involves solving challenging mathematical problems through computers, and every solution results in a cryptocurrency coin. Users can buy coins from popular crypto market platforms like Binance, Coinbase, or Robinhood, and they have a limit for the number of coins you can purchase.
These platforms operate many digital currencies offering a simple way for users to transact and store their cryptocurrency. You are still assigned a wallet but accessible through the broker. When an individual loses their physical wallet, for example, if they had it on a hard disk, there is no way they can recover it again.
Cryptocurrency transactions are typically fast, but the speed varies depending on the following factors:
- Network traffic: when there are many users on the blockchain, the transaction speed might slow down because there is a long queue. It leads to longer processing times.
- Transaction fees: blockchains with higher transaction fees provide faster processing.
- Block size: a huge blockchain has many nodes, which might take longer to resolve transactions.
- Block time: all the validators on the network need to accept the transactions for completeness. If they take longer, then the transactions will take time too. Cryptocurrency developers are now adopting new technologies to speed up transactions.
- Consensus mechanisms in XRP, Algorand, and Stellar(XLM)
- Block-lattice blockchain in Nano
The blockchain operates under a consensus algorithm that controls the new blocks. The network participants must agree to the registration of the new block. There are many types of consensus algorithms. The most used mechanism are: Proof-of-authority (PoA), DPoS (delegated proof-of-stake), and PoW (proof-of-work)
Owning a cryptocurrency does not mean you have a tangible asset. It is a unit of measure or record transferable between two parties, and no third-party entity engages in the transaction.
How to make your own Cryptocurrency?
Here is a step-by-step method to start cryptocurrency:
Step 1) Define the cryptocurrency concept.
A cryptocurrency is not innovative on its own, and it requires a strategic plan to make it a real-life business. It should be a problem-solving solution so that the audience can buy in and invest in the coin. You need to put your thoughts on a whitepaper.
Step 2) Choose how to develop.
Coding a cryptocurrency from scratch is tough, and it takes a lot of time. There are open-source cryptocurrency codes on GitHub for Litecoin and Bitcoin. You can edit it the way you want it to look. For that, you can hire a development team to complete the task.
Step 3) Select a consensus mechanism.
It involves choosing smart contract rules. They define the guidelines of blockchain transactions. After establishing them and launching your cryptocurrency, they cannot be changed. The consensus mechanism is usually declared during the initial coin offering (ICO).
It gives users the rules that they should expect on the blockchain. The type of smart contract chosen will also determine the speed of transactions.
Step 4) Launch an initial coin offering (ICO)
It is the start of your cryptocurrency journey. The ICO is the first part of the marketing plan, and it should involve main industry players, users, press media, and brokers.
The next step is promotion through email marketing, guest blogging, and social media marketing. It increases awareness of your cryptocurrency attracting users to invest in it if viable.
Step 5) Start mining.
Mining generates the coins for distribution. After promoting the cryptocurrency, the demand is likely to surge. Mining is important to keep up with the needs of the users. It is inconvenient to buy something only to find out that it is not available. Mining can begin with the ICO.
Step 6) Build a community.
Many platforms exist to build a community, such as Discord and Reddit, or develop your blockchain platform with its unique domain. The community helps you communicate with the investors, and it is also an interactive platform where you will answer their questions. The members need a fundamental understanding of how cryptocurrency works.
Step 7) Do a Regular Audit of your Cryptocurrency
The cryptocurrency world is not all merry because some have been scams over the years. Auditing your cryptocurrency is a stamp of credibility, and it will give users an incentive to buy into your idea. You need an external auditing company to make it legitimate. Moreover, it should be one with a positive reputation and trusted industry wide.
What are the Different ways of Creating Cryptocurrency?
You can create a cryptocurrency by:
Method 1: Building your cryptocurrency on a new blockchain
It involves creating a new cryptocurrency with a blockchain from which it will operate. It is extremely difficult because it requires a deep understanding of blockchain, coding skills, and technical cryptocurrency skills.
The advantage of this method is that you have more freedom to customize. It provides you a chance to implement many ideas because it will be your own coin. It will result in a native coin because it is different from all the others. They are better than tokens because they are created on a new blockchain. There is no specific limit to the number of coins to be issued.
Method 2: Altering an existing cryptocurrency
There are open-source cryptocurrency codes you can choose from, modify, and build yours based on it. It is not as easy as it looks, but it is not as hard as building your own. You will still need development, basic cryptocurrency, and technical skills to achieve the desired design. The codes are accessible, and you can download them straight from GitHub.
After obtaining it, seek professional legal and auditing guidance. It will ensure that you do not break any rules, for example, copyright. Also, to make it viable to users, you need a unique value proposition.
After development, auditing, and getting legal clearance, you are good to go. Launch an ICO, start minting the coins, market and create a community. You can present it to brokers to help you distribute the coins because they usually have a wide audience.
Method 3: Creating a new cryptocurrency on an existing blockchain
If you do not want to go through the rigorous process of building your blockchain, this is the option for you. It is different from the first option because you are only creating a cryptocurrency.
Blockchains offer a chance for users to build their cryptocurrencies, and it does not affect the main ones running on them. Such cryptocurrencies are referred to as “altcoins” or “tokens.” They are referred to as so because they are non-native in the network.
They are popular in the cryptocurrency market because they are easy to build. One does not need extensive coding skills and technical knowledge to create a new token. Even a person with average computer skills can navigate through with ease.
Here are the steps to follow.
Step 1) Select a target blockchain: scour the market to find the most viable platforms. One such popular coin is Binance Smart Chain.
Step 2) Develop the new token: it depends on the idea you want to pull out. Extensive customizing will need top development skills to get it done. There are automated tools to help you with this, for example, WalletBuilder.
Step 3) Start mining: you will need legal clearance for this. Also, it involves auditing services to make the token credible.
Step 4) Hiring a blockchain development team:
It is one of the highly effective processes to build a cryptocurrency.
You can outsource the maintenance of the cryptocurrency through a blockchain-as-a-service enterprise, and they might already have an existing blockchain or create a whole new one for you. Examples of such enterprises include Blockstream, ChainZilla, Microsoft Azure, and Amazon Web Services.
This option gives you a broader range to change the cryptocurrency. The development team does everything, and they can also offer auditing and legal clearance. The outcome is of high quality, giving it a higher probability of succeeding in the market.
List of ready-made blockchain infrastructure and how to use them
Ethereum is a popular blockchain infrastructure because of its efficiency and extensive blueprint in the market. It is like the bitcoin blockchain network which formed the first cryptocurrency. Its primary advantage is the incorporation of the coin, and the main limitations are high transaction costs and slow processing. The leading cryptocurrency running on the platform is Ether(ETH) which was the first.
Ethereum supports the development of decentralized applications on the network, and they are referred to as dApps. It is one of the main exchange platforms for nonfungible tokens (NFTs), gaining more popularity. Ethereum runs on a virtual machine which allows users to develop smart contracts. It is possible through the solidity programming environment.
Ethereum is set to launch an upgrade to its security mechanism for lower transaction costs and speed. Ethereum is reliable because it has a development community consisting of Microsoft, JPMorgan, and Intel. In total, it has over 250 members. The Enterprise Ethereum Alliance started the group.
Free to use
The TRON blockchain network provides services, including decentralized applications, wallet clients, and the public chain. They fall under the Tron Ecosystem as they are interconnected to provide stability.
The blockchain works on the TRON protocol. Users can transfer assets, vote and stake gains, or run and deploy dApps. It has token standards that allow users to develop their own tokens.
The standards include TRC-721, TRC-10, and TRC-20. Its security mechanism makes it one of the safest networks amongst blockchains, and it is more stable and efficient because of its structured code and architecture.
The TRON network uses Netty, a message response system that allows fast and efficient transactions. It has two nodes, discovery and communications, and they are the main modules that facilitate the transactions on the network.
TRON network utilizes on-chain governance. It is a way that blockchain controls the network through super representative partners. They are responsible for making decisions on behalf of the community. Community members who stake tokens when voting gets transaction network rewards.
Free to use
3) Binance Chain
Binance owns it, as the name states, and the Binance community maintains it. The main goal of the Binance Chain is to ease digital assets exchange. You can use Binance Chain to create your cryptocurrency, tokens, and nonfungible tokens.
The Binance decentralized exchange (DEX) allows users to exchange their tokens. The blockchain facilitates transactions through the secure network. Users can access the Binance Chain through the Binance Chain Wallet.
Binance Chain Wallet is unique because it offers a wide variety of features. You need to have a Binance account to access it.
Lifetime Free Basic Plan
What are the costs of creating a cryptocurrency?
There is no fixed cost of creating a cryptocurrency, and it can be as cheap as $50 or rise to $5,000. The cryptocurrency business model grew three times faster than many investments in the market.
Yet, one issue that lingers is the cost. What you want from the cryptocurrency will determine the cost. For example, if the cryptocurrency has a lot of customization, it will be high. Another scenario is that you might be outsourcing a developer or a team. These are some of the costs that you should factor in.
Other costs may lead it to escalate. They include.
- Promotion– marketing your cryptocurrency. Costs can involve blogging, social media marketing, press media, or email marketing.
- Auditing– external auditors often do this to ensure credibility. They will do it at a fee, and it will vary depending on the ones you choose.
- Development- if you have the technical skills, you will save a lot. Otherwise, you have to hire a developer or team to handle this. It comes at a cost.
- Legal issues– you will need a specialized lawyer for this. There are many firms offering blockchain expertise. With the above factors, you can set your budget.
How long does it take to create a crypto coin?
It depends upon the method you are using to create your cryptocurrency. Using automated tools, your crypto coin will be ready in as low as 5 to 20 minutes. The time to modify the existing cryptocurrency code differs depending on your technical expertise.
On a proficient level, the process can take up to 4 hours. You can outsource the process to allow specialized developers to work on your behalf. They will also complete it within a short time. When creating a crypto coin from scratch, the process can take months. It is because the development process takes a long time, and other systems need time, such as auditing and launching an ICO.
Where and how to launch a cryptocurrency?
After creating your own cryptocurrency, you need a place to launch it. The method you used to create your cryptocurrency does not matter because you still need to launch it. It is launched through an initial coin offering.
The most popular platforms to launch your initial coin offerings are:
- Cyber Fund
You are just a few clicks away from launching your ICO as these platforms are accessible online. All you need is an account, log in then set up all the necessary details. However, your success depends on your marketing strategy and the value proposition. One with a good strategy and is marketed well is more likely to succeed. However, before listing your cryptocurrency, take precautions by seeking legal advice.
It is because the process will involve handling a lot of investors’ money. A cryptocurrency launch attracts the Securities and Exchange Commission (SEC), protecting investors from fraud. As much as cryptocurrencies are decentralized, defrauding investors has legal repercussions.
Legal frameworks like the Simple Agreement for Future Tokens (SAFT) ensure your cryptocurrency is safe. After this, write a whitepaper it describes the cryptocurrency’s distribution strategy, token generation, and community, if any.
Advantages and Disadvantages of Cryptocurrencies
Decentralization: cryptocurrency is not regulated by a central entity like governments or banks. Everything occurs on the blockchain, a distributed database that stores data and transactions. The blockchain eliminates the risk of error, for example, leading to an economic recession.
Ease of use: It allows an easy buying, spending, and transfer of assets. They can transact securely facilitated by proof of stake and proof of work. A user can also get unbacked loans.
Fast transfers: Everything on cryptocurrency blockchain occurs through third parties, and the transactions are fast because of the framework’s automation.
Unlawful practices: The confidentiality in cryptocurrencies makes it a huge playground for illegal activities. For example, users use it to launder money and trade illicit goods such as unlicensed arms and uncontrolled substances.
Ownership concentration– Some cryptocurrencies are volatile because of the concentration of ownership. Many refer to them as ‘Whales.’ If they decide to liquidate, the monetary value of a cryptocurrency can dwindle.