In this day and age, it would be difficult not to notice just how digital our lives are becoming. With the boom in technological innovations during the past few decades, we are seeing more advancements in various fields. Information storage, photography, and an array of everyday devices are transitioning to digital design. Regardless of whether you see this as a good thing or a bad thing, it’s clear that the world is changing.
Money is not exempt from this transition either. In recent years – since the late 2000s to be exact – cryptocurrency’s popularity has been on the rise. It all began with Bitcoin’s development and eventual launch. From there, the world of digital currency saw a significant upsurge. In 2011, Bitcoin would see rivals in new cryptocurrencies, such as Litecoin, Namecoin, and Swiftcoin. More rival cryptos would follow, leading to the growth of the market and creating new options for traders and investors. As of January 2020, there are over 2,000 cryptocurrencies in existence.
Through trials and tribulations, cryptocurrency still remains prominent. So much so that many companies are allowing them to be payment options for goods and services.
Likewise, blockchain technology is an innovation that would experience extensive popularity. Admittedly, it has not achieved widespread adoption quite yet, but its progress shows that it is getting there. With its notable advancements – not to mention cryptocurrency’s continuous growth – many people wonder how to create a cryptocurrency. If you want to get in on this bandwagon, how exactly do you go about doing it? How do you make your own cryptocurrency from the ground up?
This article will provide an explanation of how to approach this concept.
How it works
For contextual purposes, let’s first shed some light on how cryptocurrency works. Once you have an understanding of this, you will then have a better idea of what you are creating.
Cryptocurrency plays an essential role in the blockchain. This distributed ledger technology draws heavily from the consensus algorithms that are responsible for managing the creation of new blocks. Participants of the peer-to-peer network need to accept a block in order for it to undergo registration in the blockchain. There are a wide variety of consensuses types. Among the most popular are PoW (proof-of-work), PoS (proof-of-stake), PoA (proof-of-authority), and DPoS (delegated proof-of-stake).
Issuance of cryptocurrency occurs whenever there is the creation of a new block. What’s more, when that new block serves as a reward and incentive for blockchain participants. Those who receive these rewards partake in the consensus mechanism and closing blocks. In other words, allocating their processing power and stakes of coins. Moreover, other resources in order to support the transparency and reliability of blockchain, plus verifying new blocks. With this purpose in mind, the creation of Bitcoin came soon after.
Crypto-holders are able to transfer cryptocurrency assets between wallets and blockchain addresses. They can also exchange it for fiat money or even participate in cryptocurrency trading. People on the network have the ability to view transactions. As a bonus, the identities of those behind the public addresses remain anonymous. This is because they are encrypted by unique keys that allow for the connection between an individual and an account.
Coin vs. Token
We need to address a point of confusion for many people: the key elements that separate tokens and coins. But wait, aren’t they the same thing? Actually, no.
You can divide cryptocurrencies into two subcategories. One is ‘coins’ and the other is ‘tokens’. While they are both cryptocurrencies, technically speaking, there is a difference between the two. Properly understanding their main concepts will allow you to figure out how to make your own cryptocurrency. Specifically, for certain business needs.
A coin typically operates on its own blockchain in which all transactions take place. Notable examples include Bitcoin, Ethereum, Neo, and Emercoin. All of these currencies operate on a completely different blockchain. If you are planning to make your own coins, you will need to first and foremost construct your own blockchain.
A token, meanwhile, functions on top of a pre-existing blockchain infrastructure, like NEO or Ethereum. The purpose of this infrastructure is to validate transactions and make them secure. Oftentimes, the use of tokens is similar to the use of smart contracts. In other words, they are representative of everything ranging from physical objects to digital services. Anyone can utilize Ethereum or Neo as the underlying technology in order to properly start a new cryptocurrency.
Overall, the principal use of tokens is a security token offering (STO). This is what assists projects and startups in funding operations by way of a crowd sale. This, above all else, is why companies start to think about how to build a cryptocurrency in the first place.
Creating coins and tokens
Making a coin is not a suitable route if you are seeking an easy, fast, and inexpensive way to create your own cryptocurrency. You need to be a professional with the right amount of experience in decentralized technologies. Alternatively, you need someone who is willing to fill in the role of the technology expert.
The overall process of coin creation could take about a minimum of 5 minutes. You can simply copy the code of Bitcoin, add a new variable, or alter the value of something. That’s it; you then have your blockchain and coin. However, it is imperative that you understand the code and how to go about changing it. This is something that requires extensive coding skills.
An additional problem is maintenance, backing, and promotion of the coin. This is because you have to create the rationale of the blockchain to launch your coin. It would save you some stress to hire a team of professionals to handle the task. Though, you would, of course, have to pay a development team. If you can afford to create and support your own blockchain, then go for it.
This is a comparatively more beneficial way to become a currency creator. Having control over the blockchain sounds like a great idea. However, this has its own drawbacks, such as an increase in development time and considerable spending.
The creation of ‘fork cryptocurrency’ is on top of a pre-existing blockchain by utilizing the consensus mechanism of the underlying technology. Building a token atop a strong blockchain, like Ethereum, means that your token runs on a secure network. Token creation is a lot less costly concerning money and time. This is due to you using the existing decentralized architecture and the implementation of consensus mechanisms.
- Decentralization – Probably the main point in support of cryptocurrencies is their underlying technology, which is blockchain. This is the driving force behind cryptocurrency’s independence from any sort of authority. What’s more, it makes it impossible for anyone to lay down the rules for both cryptocurrency developers and owners.
- Fast and limitless transactions – Transactions of fiat money typically require a substantial amount of time in order to undergo processing and settlement. Your business will end up having to wait for a number of days before receiving money. With cryptocurrency, though, you can create a boundless number of transactions. Moreover, you can send it almost immediately to anyone in the world who has a crypto wallet.
- Low transaction fees – Banks and an array of other financial institutions collect sizable transaction fees. This does not mean that you are free from needing to pay a fee for cryptocurrency transactions. However, the mandatory amount that you will need to pay is actually quite small.
- International acceptance – The funds’ sender and the recipient can reside in different parts of the world and they can still exchange cryptocurrency. Distance is not an issue when exchanging digital currency. You can save money on a currency conversion, as well as the fees that typically accompany international funds transactions.
- Transparency and anonymity – Because of the distributed nature of blockchains, every transaction goes on the record. Furthermore, these records are resistant to any alterations. At the same time, should a crypto address not receive public confirmation, no one will know who made a transaction. For that matter, no one will know who is receiving the cryptocurrency.
All of these qualities are what make companies seriously contemplate starting to create a new cryptocurrency. Be that as it may, there are also some notable drawbacks that you should keep in mind.
- Acceptance is under a limit – As is, several countries are quite hesitant when it comes to granting any cryptocurrency their support. In everyday life, there is still a limit to the possibilities for those wishing to make purchases with cryptocurrency. Thus, rather than inquiring about how one can create a cryptocurrency, people wonder how to even use cryptocurrency.
- High volatility – Most of the time, users thinking about how to start using cryptocurrency neglect to consider an important factor. That being high volatility. The cryptocurrency market is not what you would call “stable.” It is subject to frequent ups and downs; even famous cryptocurrencies like Bitcoin experience these from time to time. It’s incredibly risky to invest in cryptocurrency seeing as how you never know if it will be a lucrative investment.
- Transactions are non-reversible – Entering an incorrect cryptocurrency address by mistake could potentially cost you money. Unfortunately, there is no possible way to reverse a transaction. True, you may send a request for a refund. However, if it is declined, don’t be surprised if you end up losing most – if not all – of your money.
- Cryptocurrency storage – Probably one of the worst things that could happen to cryptocurrency owners is losing their devices. From this, they could forget the private key and would not be able to access their cryptocurrency holdings. These particular situations can happen to anyone, so that means anyone could potentially lose their money by accident.
It is imperative that you take these benefits and drawbacks into account when thinking about creating a cryptocurrency. Specifically, one that will provide proper aid in reaching your business goals. Ultimately, you need to determine what the purpose of this cryptocurrency creation is for your company.
How can I benefit from having my own crypto?
We are about to get into the process of creating a cryptocurrency, but first, we must explain the advantages that come from it.
Let’s assume that your project or startup requires its own blockchain. In this case, creating your own digital currency will be what incentivizes the nodes to donate their processing power. A lot of business analysts predict a big future and an increasing amount of industries where the blockchain technology will alter the status quo. It will significantly disturb what is conventional and will consequently give a generous reward to early adopters of the technology.
For many fields, blockchain technology has yet to truly make an appearance. Therefore, it is not too late to jump on the bandwagon with other pioneers.
When you decide to start a cryptocurrency, you will garner a set of powerful marketing tools and consumer benefits. Both of which will help you set yourself apart from the competition. Below is a list of the most significant advantages of creating a cryptocurrency:
- Elimination of fraud risks – It is impossible to counterfeit cryptocurrency and no party is able to reverse previous transactions.
- Offers transaction anonymity – Customers determine exactly what information they want sellers to know about them.
- Cutting down operating costs – Cryptocurrency is exempt from the exchange or interest rates, in addition to the transaction charges.
- Provides instantaneous transactions – State holidays, business hours, and the geographic location of the parties have no effect on cryptocurrency.
- Guarantees an immediate pool of probable customers – You can now conduct business with those who lack easy access to traditional exchange resources. There are little to no trade restrictions in any market.
- Offers security for their funds – Cryptocurrency is a decentralized system, so higher authority figures like banks or government institutions can’t take control of your assets.
When a company makes the decision to go public on a stock exchange, the company proposes an Initial Public Offering. This is an effective way for them to raise funds in exchange for shares. In this sense, Initial Coin Offerings (ICOs) are very similar concepts. ICOs are the way in which companies that are more blockchain-savvy raise funds to carry out their crypto projects. However, instead of the investors purchasing shares, they obtain ‘tokens’.
Gaining trust is a crucial part of the overall success of an ICO. The more successful ICOs are ones that have a strong team of developers and founders behind them. What’s more, they have a stable roadmap. A ‘roadmap’ explains to investors what the project intends to achieve and how they plan to utilize the funds.
ICOs offer a quick method to raise the funds your project needs. It won’t be easy, though. If you want to successfully start a new cryptocurrency via an ICO, you will need a…
- …“big idea.” In what way will your blockchain project help a specific industry?
- …capable development team that will help create your ERC-20 or NEP-5 tokens
- …strong development team to build your ICO smart contract. When users send crypto to your smart contract, it will send the appropriate amount of your token to them
- …professional external audit. This will ensure that your token and smart contract are both secure, thus lessening the chances of a hack.
- …well-written whitepaper. This document presents your idea, the problem it will resolve, its roadmap, and how it works.
- …solid marketing campaign. This includes a website, social media, community developments pre- and post-sale, forums, and media.
- ..community management team.
Building the development team
Obviously, creating a cryptocurrency is not a one-man operation. Like building a company, you need a team of capable people to make it a reality. One of the most essential parts of creating a cryptocurrency is choosing the right developer(s). This choice can be the ultimate difference between potential success and failure. With that in mind, you need to be very careful and select a developer that you can trust will do a good job.
The idea is the first key factor, of course. However, bringing that idea to life is impossible without a good, strong team. You need a team consisting of great talent to assist in bringing your idea to life. It would be wise for you to mainly hire people with years of experience of working with blockchain technology.
Probably the best way to make the contacts you need is to involve yourself more in the blockchain community. Doing so will allow you to meet qualified people, as well as give you more ideas for your crypto’s development. A good idea would be to go to some blockchain events. This way, you can connect with new people and build relationships within the industry. Doing so will lead you to find the right people in no time.
Smart contracts are a key component in regards to the creation of a cryptocurrency. It is also one of the most prominent driving forces behind blockchain technology’s gradual adoption.
A smart contract is similar to a traditional contract except it is digital and it operates on the blockchain. Its executions are automatic and it is impossible to alter them in any way. The terms of the agreement between the parties reside in the lines of code. In an ICO smart contract, the rules could be something akin to “IF a user sends 1 ETH to the smart contract, THEN that user will receive 100 tokens from the smart contract.”
Smart contracts operate in an automatic manner, so there is no third party in control of them. What this means is that the user does not necessarily have to trust you. In lieu of this, they place their trust in the smart contract, which is essentially just code. If the code is correct, it is unable to cheat you. Therefore, the user fully understands that they will always receive payment of the right number of tokens. Moreover, they know that they will receive them on schedule.
The developers are the ones who write the rules of the smart contract. Because of this, you need to decide what these rules are depending on how you want your ICO to work.
If you want to learn more about smart contracts, read “What is a Smart Contract?”
A professional external audit
To reiterate an earlier point, smart contracts are just code. This is the same thing when it comes to tokens. Figuring out the secret to creating a cryptocurrency also includes figuring out the safety of the procedure. Therefore, for a user to rely on the code, it is imperative that they know that it is secure. This, above all else, is the main reason why you need a professional audit.
Having a professional audit means that the user and/or investor can feel safe. Moreover, it also means that you, too, can feel safe. Look at it this way: it’s not wise to spend all that money on token development and smart contracts only for someone to hack it.
This is a vital step that brings a strong sense of legitimacy to your project. It is not uncommon to refer to these audits as ICO security audits. You are able to obtain them from companies like Practical Assurance. It is important for you to ensure that the audit company you select is credible and has an extensive history.
Getting your ICO the proper verification from a professional audit will facilitate the promotion of your cryptocurrency project. It effectively advertises the fact that your project is correctly following industry standards and data protection policies. It basically adds an extra level of value to your project.
If you want to learn more about auditing smart contracts, read “How to Audit a Smart Contract.”
Writing a whitepaper
An essential element to any cryptocurrency is a whitepaper. If you want to create your own cryptocurrency, then you will need to know how to make a good whitepaper. It is important that it be well-written because it is what investors will use to judge your project.
There are an array of factors that tie into making an exceptional ICO whitepaper. According to the research of VentureBeat writer, Adam Ghahramani, a whitepaper needs to follow this format:
- All whitepapers need to be in PDF format. PDF whitepapers are accessible on a wide variety of systems and browsers. This way, there is no need to be anxious about format/structure and layout problems.
- Whitepapers must have two versions: a regular whitepaper (20-100 pages) and a lite paper (around 2-8 pages). A late paper is essentially a shorter version of the whitepaper, which highlights key information.
- Like any piece of writing, good grammar is crucial. If you have issues with this particular thing, then perhaps hire external whitepaper proofreaders.
- It would be smart to have your whitepaper be available in multiple languages. For this to work, you should hire translators so you can release your whitepaper in the most popular languages. Some suggestions include English, Mandarin, Spanish, and Japanese. The more languages, the better.
In addition, you should answer the following questions:
- What is your idea?
- Is there a purpose that your idea/solution serves? What is it?
- What exactly are the ICO funds going to?
- When is the release of the tokens so that they can be traded and also listed on exchanges?
- When will the project reach completion? (Show a timeline of the steps that you will take)
- Who is on your team? What past experiences do they have? Do they have the proper qualifications for the job?
A noteworthy aspect of how to construct a new cryptocurrency is creating a special marketing strategy for it. You have to build a good amount of support and trust from a local community. To do this, you will need a website, a solid domain, and a satisfactory presence in social media. Additionally, there is an array of marketing and sales tools online that can help with the advertisement of your ICO.
1 – Social media
It wouldn’t hurt to utilize social media platforms as a way to market your ICO. Some of the best recommendations include Facebook, Twitter, and LinkedIn. However, if you are considerably savvy about social media, you should give Instagram and Snapchat a try. In the end, it all depends on what the nature of your project is.
You can either manage your social media yourself or hire a team to do it for you. Whichever approach you choose, you should create a strong social media campaign that boosts your ICO’s popularity.
2 – The press and the media
This method of exposure is how your ICO garners real credibility. Seeing as how ICO is a vital part of successfully creating a cryptocurrency, credibility is very important. If the publication of articles about your project is on renowned media websites (ex. Forbes), then your ICO will be more trustworthy.
You can try to create these yourself or, like with social media, you can hire a team to do it instead. The more popular the website that is publishing about your ICO, the more the article will sometimes cost. Therefore, you should see what’s available before deciding the best route.
3 – Sponsored content
Once upon a time, Facebook ads and Google ads were for ICOs. Nowadays, though, crypto-related ads have now been banned by these two providers. You can thank irresponsible spending from users into ICOs that fail to perform well for that. Perhaps you can look into LinkedIn and Twitter advertising. These two platforms are more business-orientated, so it can be beneficial for your plan on creating a cryptocurrency.
4 – Email marketing
It would be wise to do this at the beginning of your project. You need to collect your supporters’ email addresses. This way, you can keep them up-to-date by way of an email. Whenever you have news or a new promotion, you can contact them directly by simply sending an email their way.
There are a variety of methods you can use to collect their emails. Try inserting a newsletter sign-up for your website. This way, anyone showing interest in your ICO can submit their email address and receive updates to their email inbox.
5 – Blogging
Obviously, a community wants to remain up-to-date on a project’s development. Blogging is an ideal way to do that. You can post to a site like Medium or you can post to a blog on your website. Whatever you go with, it would be wise for the content you post to be relevant to your project’s progress.
6 – Promotions
During your creation of a cryptocurrency, you will evidently need to promote it extensively. Types of promotions could include new bonuses on your ICO and new ‘bounty rewards’. In terms of bonuses, ICOs typically structure their token sale to consist of a bonus to early buyers. An example of this is a discount. In terms of ‘bounty rewards’, you could maybe offer free tokens to people who help promote your ICO.
Overall, this is an incredibly low-cost way to market your ICO. This is primarily due to the fact that there is no mandatory upfront cost.
The community is an advantageous thing to immerse yourself in while learning about cryptocurrency creation. You will need a place where your community can go to interact with one another and ask you questions. The most popular app to use in this case is Telegram. This is an instant messaging app that is similar to the likes of Facebook Messenger. It is known mainly for its security and has become a reliable app in the world of crypto.
Using forums is a good idea, too. Investors will often search forums when they are researching a project. More than anything, they want to see the buzz about a project. Moreover, see how well the team behind it is responding to questions. It doesn’t matter if you use forums to share your path of cryptocurrency creation, group chats, or both. In the end, you will likely need a team for community management. This largely depends on how popular your ICO will be, but regardless, it is smarter to save yourself the time. You can decide between managing it yourself or spending some of your budgets on acquiring a team to manage it.
Take into consideration the fact that your community will trust you more if you respond to messages quickly. Appearance-wise, it will make you more credible and reliable.
Solutions for crypto creation
There are a handful of blockchains that provide the proper means for creating a token. Among the more popular tools are Ethereum, NEO, and EOS, which are also pretty easy to use. When discussing how to create a cryptocurrency, though, you will likely hear about one or all of these solutions.
Ethereum was the first blockchain to provide users with a token creation service. It offers a remarkable level of trust courtesy of its maturity and position in the cryptocurrency market. All tokens that come from Ethereum utilize the ERC-20 standard. The documentation is eloquent and organized, thus making the development process less painful. The writing of a token on Ethereum can only be in Solidity. However, with the HTTP API, you are able to create DApps in almost any language.
NEO blockchain is aimed primarily at the smart economy and it uses the NEP-5 standard. Unlike Ethereum, you can use pretty much any high-level programming language to create your own token on top of it. Such languages include C#, Java, Python, and Kotlin. HTTP API is available for blockchain interaction.
EOS tokens frequently use the EOSIO.Token standard. Their creation comes from using C++ or any other language that arranges into WebAssembly. The blockchain provides users with great scalability and a large number of transactions per second. What’s more, its cost efficiency derives from the lack of a truncation fee. This blockchain often comes to mind when talking about how to create a cryptocurrency.
The financial aspect of crypto creation
You will need money to pay for a lot of what goes into cryptocurrency creation. The development of the token and smart contract, the website, the audit, the whitepaper, the marketing, and the community management.
Clearly, it is an expensive process. Smart contracts and token developers can charge an insane amount of money because there are very few of them. Especially in comparison to the number of ICOs. Unsurprisingly, the rates could start from around $100/hour and some can charge a larger price
The time in which it takes for a developer to complete the smart contract and token can vary. Really, it depends on what you require. Generally speaking, you should allow about 2 weeks, working Monday to Friday from 9 am to 5 pm. In total, that is $8,000 if you were paying $100/hour.
On top of that, the audits are not that cheap, usually ranging from $3,000-$10,000. Once again, it mostly depends on what exactly you require.
The bottom line is it will cost you a pretty penny. Assuming you manage to connect with the right people, you can make the process of creating a cryptocurrency quite inexpensive. The best thing you can do is conduct plenty of research and interact with a good amount of people.