What Does it Take To Make a Cryptocurrency - Beginners Guide
What is a currency in the first place? A currency is not necessarily a banknote or coin showing signs and numbers of how many dollars and euros it represents. It is more than that. A currency is a unit of storage and value and a means of exchange. These units are accepted within a particular society, members of which unconsciously decide it has value, most likely because their governments said so. This concept has been working for quite some time now, and it has become a way to get the goods and services we desire. Moreover, it is also a way how we distribute wealth to each other.
A cryptocurrency, if simply put, is just another type of currency, a digital currency. What makes cryptocurrency unique is how it works. It has all the functions of traditional money, although it has some major differences, such as being independent of a single, centralized entity. Digital currencies rely on encryption to generate new units and confirm the transactions. Using them also offers greater anonymity, decentralization, security, and fast non-stop transactions. These are, among others, its main features. At the time of writing, cryptocurrencies are not regulated in most countries worldwide, yet many are preparing for it. Some governments, large companies, institutions, and banks are even looking to engage in crypto and start operating with them.
Now, many newcomers or people who have never heard of cryptos may wonder what they look like and where to get them?
Cryptocurrencies or any other digital asset is not physical, meaning it is transferred virtually across the internet. But they do have coins, often confused with so-called tokens — digital ones, of course.
What is the difference between a coin and a token?
If you understand their main concepts and purpose, it will definitely help you to make your own cryptocurrency for any business goal you may need.
Firstly, let's find out what "coin "was designed for. The most significant, utilized, and popular coins are Bitcoin, Ethereum, Litecoin, Dogecoin, and others. The most important aspect is that they operate on their own blockchain, where every single transaction occurs. That being said, if you wish to make your own specific coin, you must create your own blockchain in the first place.
That means a developer created these particular cryptocurrencies from scratch, together with a broader network. Take Bitcoin, for example. It exists as an anonymous and resistant store of value and a medium of exchange in most places, with fixed monetary policy.
No matter what these coins are called, their purpose is practically the same. Their principal goal is simply to provide a store of value and medium of exchange. New coins may usually draw inspiration from already made options and unite with their idea to turn into a newly developed innovative network with a specific objective.
Tokens, on the other hand, are most of the time used like smart contracts since they represent both physical objects as well as digital services. A token works on already existing blockchain infrastructure, such as Ethereum, NEO, TRON, and other top players. These networks are used in order to verify transactions which makes them safe. The good thing is that anyone can set up a new token on the public blockchain, such as Ethereum or Neo, where they serve as the underlying technology to develop a new cryptocurrency.
Another vital role of these tokens is a security token offering (STO), which helps projects and startups fund operations through a crowd sale. This is one of the main reasons why modern companies and startups are seriously considering how to produce a cryptocurrency to offer new exciting products to their customers.
Just remember these three points:
Coins need their own blockchain, whereas tokens simply operate on the developed ones.
Coins can be used anywhere; tokens are limited to a specific idea.
Coins can buy tokens, but not vice versa.
That being said, you need to build a blockchain if you desire to launch a coin. The theory sounds easy and attractive, but how is it in practice?
So what are the options?
Looking for ways to make a cryptocurrency? Luckily, there are a few different options, which vary in difficulty:
You can create your own blockchain and run a cryptocurrency on it.
Adjust the code of an already developed blockchain.
Form a new cryptocurrency on an already existing blockchain.
Recruit a developer with appropriate skills to create a cryptocurrency as you desire.
Before starting, one should know that almost all of these varieties require minimum technical computer knowledge besides financials and human resources.
You have the ability to create your own blockchain together with a native cryptocurrency
Every capable individual can write a code themselves to create a new blockchain that will support a native cryptocurrency. However, this decision obviously, requires extensive proper training to develop functioning codes and a fundamental understanding of blockchain technology.
Do you want to build a cryptocurrency from zero that will be brand new and innovative? If your answer is positive, then developing your own blockchain to support that specific coin is perhaps the best suitable option.
By choosing this option, you will be able to design your native coin in any way you desire. It is also worth noting that native coins with their personalized blockchains are believed to be way better and more efficient than tokens that operate on other non-original blockchain networks.
Do you think you have enough skills to finish these steps by yourself? If yes, then here's what you need to do:
Firstly, it is crucial to choose a consensus mechanism. Consensus mechanisms prove the validity of entries into a blockchain, ensure its security and allow distributed systems (networks of computers) to work together. There are several types of these protocols, yet the most common, as of today, are proof of work (PoW) and proof of stake (PoS). You may also consider Proof of Capacity (PoC), Proof of Activity (PoA), Proof of History (PoH), or Proof of Burn (PoB).
Secondly, outline your blockchain structure. It is entirely up to you whether your blockchain will be private or public. Only you decide, and it all depends on your objectives of what type of cryptocurrency you want to offer.
Audit your new blockchain and its code. Even the most proficient developers often hire specialized blockchain auditors to double-check their blockchain's code and explore their work to discover possible exposures.
Verify the legitimacy of your project. Experts on legal issues are here to confirm that your new coin will be law-abiding with your local rules and regulations. Consider also hiring legal advice before you release your new cryptocurrency.
Once you successfully finish all these factors, you are de-facto ready to mint and present your new venture. Also, it is entirely up to you how many coins you decide to issue from the very beginning.
You can also decide to mint the complete supply of coins in a single set, or increase the supply step by step, as new blocks will be recorded to the blockchain.
Adjust the code of an already developed blockchain
Another option you may consider is to use the source code of another blockchain to create a new blockchain where you will run your new native cryptocurrency. However, remember that choosing this option still requires a particular advanced technical knowledge. It is because you may decide to modify the source code to fulfill your design plans.
One of the great benefits of the code for most blockchains is that it’s open-source, which means that absolutely anyone can explore it and even download it on their computer. You can, for example, find all source codes of most blockchains on GitHub or other software platforms.
The same rule is applied here as it was in the previous point. After you finally conclude that downloading and modifying the source code of an existing blockchain is the right and most suitable option for you, you still need to work with a professional auditor and seek professional legal advice, depending on your jurisdiction, where rules vary. When you get this step complete, you are finally ready to start your new project.
Once released, don't forget to work on your marketing and PR since, because, as we already mentioned, there are thousands of coins and tokens. Therefore, do your best, so your solution will attract the users.
Construct a new cryptocurrency on an already existing blockchain
This is a less complicated option for those without appropriate software development knowledge. It is good news that you have the possibility to build a new cryptocurrency without first creating or modifying any blockchain. Among the most popular platforms is the Ethereum blockchain, whose native token ETH is the second-largest by market capitalization, and it’s designed exclusively for hosting the cryptocurrencies designed by certain developers.
However, here comes the main difference. When you decide to choose this option, the created currency will be classified as a token and not a coin. As we said earlier, any digital asset that is not original to the blockchain on which it was created is a token.
Also, creating a new token that already runs on an already developed blockchain will need some technical expertise. However, it is much easier to create a token than to build a new coin since it is accessible to everyone who has basic computer skills.
What are the basic steps to creating a new token?
Pick the blockchain platform: Your first step must be to choose which of the existing blockchain networks should run your desired token. Nowadays, there are plenty of options and counting, but people typically decide to go with the Ethereum or Binance Smart Chain. They are the most popular and most effective, but competition might one day bring something we have never seen and dethrone them.
Produce your token: The method required to make your token changes depends on how much you want to customize it. For the most part, making a profoundly customized token demands sophisticated technical education. However, nowadays, there are plenty of free among paid versions of online tools that facilitate the creating process of a specific token.
Mint your new product: You are ready to mint the new tokens after creating the cryptocurrency. When you decide to use the most reliable platforms out there, such as Binance Smart Chain (BSC) or Ethereum, you are not required to do extra services, such as those of professional auditor or legal issues, before releasing your set of tokens, since it is all included in these systems.
Consequently, tokens are easier to get done than coins. Most of the time, making a token is the fastest and cheapest way to build final-worthy cryptocurrency assets.
Also, when people realize that you are working with a respected and trustworthy blockchain platform, it can certainly boost your token's value and authority.
Recruit a developer with appropriate skills to create a cryptocurrency as you desire
Yet another option for bringing a new project into the crypto world is to recruit a blockchain development professional or even a firm. There are already dozens of reliable enterprises, also known as blockchain-as-a-service (BaaS) companies, that were invented to maintain and develop blockchain networks and cryptocurrencies.
If you came this far, you already have a pretty clear picture of what it takes to create a new blockchain, and your intentions are serious.
However, before you decide on starting any project, re-think all the steps once again and ask yourself or your business partners if this is something you should be investing your time, energy, and capital into.
Sure, the benefits and attraction to it are impressive, but there is another side to the coin. Compare it to the amount of work that might go into creating your own blockchain and making a cryptocurrency from scratch. Yes, it is indeed significant, and it will undoubtedly require loads of knowledge and tools to execute all steps of the process in the most systematized way.
Suppose you decide to employ the help of professional developers. If so, you will be able to free up time to focus on growing your business and significantly reduce your expenses by eliminating many elements, such as editing and specific updates, by working with the experts that stay up to date with the latest industry developments and innovations.
Remember, you should possess a solid purpose and goal when thinking about building a new cryptocurrency. It will be hard to attract people by simply creating some new token or a coin. That may have worked in the past. However, we live in a period when there are over 20,000 cryptocurrencies on the market!
You should know that not more than a few hundred are popular and widely used. Still, there are many ways to improve already existing systems or come up with some new solutions with the help of blockchain technology or with a new cryptocurrency.
It will be worth hiring a qualified specialist for consultations to see what can be done and what solutions potential users of your digital currency need.