Ready to get into the crypto game? It is not as difficult as you think! Learn how to create your own cryptocurrency with our step-by-step guide!
Cryptocurrencies and other decentralized digital assets, such as non-fungible tokens (NFTs), fulfill an ever-evolving range of blockchain-powered cases for converging industries, which include the likes of decentralized finance (DeFi), both Web2 and Web3, the Internet of Things (IoT) and Artificial Intelligence (AI).
If you’ve ever thought about following in Messieurs Satoshi and Vitalik’s pioneering footsteps and creating your own cryptocurrency to help build the future of money, then be prepared for a fascinating but very challenging journey.
In this beginner article, we’ll take a look at what it takes to create your own cryptocurrency, and the various options available to you.
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What To Understand Before You Start
There are many things to grasp before you start the complex process of designing your crypto. Just like any digital real estate on the web, you’re going to need to market the new asset effectively to ensure it gains traction and gets adopted by a community.
Let’s start with the basics:
When creating a cryptocurrency, you have the option to create either a coin or a token. A coin operates on its own blockchain, while a token is built on an existing network. Both rely on a blockchain for security and decentralization.
There are three main ways to create a cryptocurrency yourself: building your own blockchain (coin), modifying an existing blockchain (coin), or building on top of an existing blockchain (token). To choose the right option for your project, you’ll need to weigh up additional factors such as legality, use cases, tokenomics, and startup costs beforehand.
Depending on the route you take, you may require anything from basic to specialized technical and programming knowledge as well as a hefty commitment of time, money and other resources (patience, grit and a bit of insanity come to mind). Finally, maintaining, nurturing and growing your cryptocurrency over time will be the biggest challenge of all.
Why Does a Blockchain Need Cryptocurrency?
It’s important to understand why cryptocurrencies actually exist. They are generated by public blockchains as rewards to incentivize their network infrastructure service providers (e.g. mining or staking validators) who help secure and scale the chain and process transactions and users, who help the network grow through their interactions (e.g. DAO voting) and transactions. Without cryptos there would be no reason for network participants to provide and maintain their own equipment and/or staking investment for the blockchain’s benefit.
Example: Public blockchains like Bitcoin incentivize network participants called miners with cryptocurrency rewards for solving a complex mathematical puzzle. This reward system motivates participants and helps achieve consensus. By eliminating cryptocurrency rewards, there is no motivation for stakeholders to secure the consensus mechanism, especially as they actually have to lay out a significant investment in funds to acquire and maintain their computer hardware and cover monthly overheads. The risk of crypto breaches and threats, such as the 51% attack, is due to less decentralization and fewer gatekeepers to protect the network.
However, if you’re going to be building a private or permissioned blockchain where you or selected entities control the nodes and validators, like the new Amazon NFT chain, you don’t need a crypto asset, because there’s no need to incentivize a validator. Examples of private blockchains include Hyperledger and Corda.
Only public blockchains require cryptocurrency to function; private blockchains don't need it. Public blockchains are permissionless and open to anyone, while private blockchains are, in most cases, invitation-only networks run by a single organization that retains full control over the blockchain.
Coin vs Token
Cryptocurrencies can be split into coins and tokens, and it’s crucial to understand the difference. While a coin like Bitcoin (BTC) or Solana (SOL) exists on its own blockchain, a token lives on a specific base chain, adhering to a specific format like ERC20 (Ethereum), BEP20 (Binance Smart Chain), SPL (Solana) and so on.
Coins have a specific utility over their whole network (such as for gas or governance) and are normally used to store, create or transfer monetary value between all participants. For example, some ETH is required as a gas fee to power any transaction on the network, whether the currencies involved are ETH or an ERC20 token.
Tokens meanwhile are built on blockchains that already exist and provide a specific utility for their own projects, such as governance or staking. They are not used for gas, which limits their use case and value.
Whitepaper
A founder will usually create and publish a crypto whitepaper before launching a cryptocurrency. It’s a detailed technical document that explains what the crypto project is trying to achieve and how.
A whitepaper is very important for early fundraising and drawing attention from early supporters. It blurs the line between an academic paper and a business plan, relaying both technical and economic specifics including how the cryptocurrency aims to meet a specific need, solve an existing problem(s) and improve our lives.
Whitepapers should also provide insight into the crypto’s tokenomics and roadmap. They should be easy to understand and offer technical explanations of the project's competence.
To get some inspiration, start with the original. Bitcoin’s “A P2P Cash Electronic System” whitepaper bible is mandatory reading for all cryptocurrency founders.
What To Consider Before Starting?
Before creating a cryptocurrency, there are a few important considerations to mull over. While most will be simple enough, others (such as legality) could cause you a massive headache if you don’t do your homework.
Is It Legal in Your Country?
First, check if your cryptocurrency project is legal to execute and maintain in the country you are in. Cryptocurrencies are still banned outright in some countries like China, while in other countries they are strictly regulated. Even in the US, there’s a constant battle going on between regulators and crypto companies. Regulators often keep crypto in a legal gray area, where regulations could suddenly change from crypto-friendly to hostile.
What Is the Purpose and Use Case of My Cryptocurrency?
Every cryptocurrency should, in theory, have a use case or purpose that serves as a unique selling proposition (USP) for your crypto. This use case, as outlined in the whitepaper, will determine the type of blockchain and technology you will use.
Which Consensus Mechanism Should I Use and Why?
The early days of crypto saw a preference for proof-of-work (PoW) over proof-of-stake (PoS) networks consensus mechanisms.
A consensus mechanism helps to process transactions and secure the network, and its choice will affect the energy consumption, decentralization and security of the cryptocurrency. While PoW chains like Bitcoin are praised for their great decentralization and security, they are also energy-intensive and expensive to maintain. Ethereum last year became 99.95% more energy-efficient when it moved from PoW to PoS during its Merge upgrade.
Should I Issue a Coin or a Token?
There are big benefits to creating a token over a coin: it’s easier and much cheaper to create a token than to issue a coin, which requires you to establish your own blockchain and then try to secure it. For example, an ERC20 token can be created in minutes and immediately leverages Ethereum’s superior and battle-tested security, while also having access to a huge compatible ecosystem and community of existing users.
Of course, lest we forget, many hugely popular coins such as Cardano (ADA), BNB Coin (BNB), Tron (TRX) and Chainlink (LINK) started life as humble ERC20 tokens before they finally migrated to their own mainnets once they grew too big.
However, if you decide on issuing a token, you’ll have to adopt the architecture and rules of the underlying blockchain, and likely also all the transaction fees you generate will be denominated in its native asset. For example, all ERC20 token transactions require some ETH for gas in order to execute.
Tokenomics
Tokenomics is an absolutely vital component of any cryptocurrency which is still completely misunderstood by some crypto investors.
Tokenomics relate to the supply and demand of your cryptocurrency, and is an essential element for any savvy investor, who might look at how many coins or tokens will be created, how they are released over time, how much is owned by the creators or early investors, and how they are burned or bought back in order to curb emissions. Get it wrong, and your project will eventually pay the price.
Do I Get a Developer or Build It Myself?
Designing, building and maintaining a cryptocurrency is no small feat (even Satoshi Nakamoto had some help when launching Bitcoin) and requires specialized technical expertise. If you’re not a developer, there are options to create it yourself or hire a blockchain developer or service provider. This can become very costly depending on the scale of your chain’s scope and activity.
Whitepaper and Website
Is your whitepaper sophisticated, specific and different, yet simple enough to understand? Creating a clear and concise whitepaper and website helps to claim a rightful stake for your cryptocurrency, and aligns your vision and strategy with its roadmap for the whole world to see and invest.
3 Ways to Create a Cryptocurrency
Now that you hopefully know what you want to build and why, it’s time to actually create your magic internet money. There are three ways in which you can create your own crypto asset:
- Modifying (forking) an existing chain
- Building on an existing layer-1 or layer-2 blockchain
- Create a New Blockchain (Create a Coin)
Launching your own chain to create a cryptocurrency is the most difficult path by some margin, as it requires resources such as advanced coding and other technical skills. While educating yourself through online courses can help, they may require some pre-existing knowledge and also may not be in-depth enough.
Modify (Fork) an Existing Blockchain (Create a Coin)
Don’t have the resources to create your own blockchain? You can use the source code of another blockchain to create a new blockchain and native digital currency. Forking an existing blockchain might be quicker and less complicated than creating one from scratch, since the code for most blockchains is open source, allowing you to download and modify it as you wish. This method still requires advanced technical knowledge to avoid security vulnerabilities, bugs, flaws and other issues.
Of course, there’s plenty of precedent for this method. Imitation is the sincerest form of flattery after all, as you can ask the SushiSwap team that forked Uniswap. Unfortunately, many forks happen as a last resort due to a community split or disagreement that sees them go separate ways, as we saw with Bitcoin Cash in 2017 (and again in 2018 and 2020.)
Both Bitcoin Cash and Litecoin forked Bitcoin Core to create their own currencies, and did you know Dogecoin was actually forked from the Litecoin protocol? It shares its Scrypt mining algorithm instead of Bitcoin’s SHA-256 consensus algorithm.
Use an Existing Platform (Create a Token)
If you don’t know how to code and/or don't have a big budget, this is the path to take, young crypto Jedi. Why open up a shop in the middle of a potential crime zone when there’s a massive layer-1 crypto mall right up your street with nearly impenetrable security?
In 2023, it’s easy to launch a cryptocurrency or token on an existing platform like Ethereum or EVM-compatible chains, such as Binance Smart Chain or ETH layer-2 chains, such as Optimism (see Coinbase’s Base network), Arbitrum and Polygon.
Ethereum network uses the ERC-20 standard, which is less technical than the others and doesn't require as much programming knowledge. However, your cryptocurrency is dependent on the blockchain you choose.
Can’t code? No problem. There are plenty of developers and companies that can do the technical work and then hand you a finished product. It's also a good idea to at least try to learn a bit of programming in order to understand the existing blockchain infrastructure of the platform you're working on and figure out when you’re being overcharged for your ignorance.
How To Create Your Own Cryptocurrency: Step-by-Step Guide
Here’s a step-by-step overview of the general process. To keep things simple, we will assume you’re going to create a cryptocurrency with a real purpose and vision. If you want to launch some silly token on Ethereum or other chains simply, there are plenty of simplified token creation platforms on the web that will allow you to create one in minutes.
Step 1: Research the Use Cases
Before you start building, figure out the following as we covered earlier: What are your use case and unique selling proposition (USP)? What problem does your crypto solve? What benefits will it offer to potential users? Is any other chain already doing it, and if so, can you do it better?
Creating a new crypto asset is no different from launching a new startup business in many ways, and the same planning is required to garner enough hype, something that the new generation of NFT founders is becoming very adept at. Do a lot of marketing analysis and research in order to boost your chances of achieving real product/market fit.
Knowing what problem your token solves will also help you identify a responsive target audience and create a highly targeted marketing plan post-launch.
Step 2: Choose a Consensus Mechanism
Choose a mechanism that aligns with your goals and requirements, such as computation-intensive Proof of Work or energy-efficient Proof of Stake. Some mechanisms are very innovative, such as Solana’s Proof of History (PoH), but can come with other problems.
Step 3: Select a Blockchain Platform
Choose a blockchain platform to host your token. Ethereum and Binance Smart Chain are popular choices, but there are many other options to consider. Consider factors such as cost, scalability and security when making your decision.
Step 4: Publish the Whitepaper on Your Website and Social Media
With steps 1 to 3 behind you, you should really understand what you’re trying to build inside out by now. It’s time to put all this information together in your own manifesto. Research successful launches by other chains and figure out what they did right and wrong. Compare their post-launch results with their tokenomics and network emissions. Create your own tokenomics structure in response. Now, write your whitepaper and publish it on your website. Then share it far and wide.
Step 5: Design the Nodes
Nodes are the building blocks of a blockchain that store and verify your transactions.
Get the necessary hardware such as processors, memory, and disk size if it’s required.
Step 5: Establish Your Blockchain's Internal Architecture
Now, create your blockchain's internal architecture and its rules and parameters, such as address and public/private key formats, permissions and how the crypto asset will be issued. Be sure to carefully consider these factors as they cannot be changed without a software upgrade once the platform is running.
Step 6: Create Your Coin or Token
Now, it’s finally time to create your crypto asset. If you’re going the ERC20 route, you can take an online course first and use one of many free online tools, but be sure to do thorough research first. Make sure the platform can be trusted and is capable enough, in order to avoid malicious code and scams. Alternatively, hire a blockchain developer with good ratings on a crowdsourcing freelancer site if you can afford it.
Step 7: Design the API and User Interface (UI)
Next, design a user-friendly interface to help your blockchain communicate with its participants. Depending on its complexity, you may need web, mail and FTP servers, external databases, and front-end programming languages, such as HTML5, CSS, PHP, C++, Java, Javascript, or Python.
Step 8: Promote Your Crypto and Build a Community
OK, proud new parent, it’s time to spread the word about the newly chosen one to build their devoted followership. Reach out to crypto influencers (but not pump-and-dump shillers!), find a partner IDO launchpad or exchange to list your asset, develop a campaign, do airdrops if viable, and participate in relevant online communities and forums. If you’re in the US, understand what the Howey Test is to avoid securities-related legal issues later.
Conclusion
Creating your own cryptocurrency may seem a daunting challenge at first, but so is the prospect of unbanking yourself and managing your own wealth. Follow the information and steps in this guide closely, and you should be well on your way to what will hopefully turn out to be a passionate new lifelong pursuit (let's hope this pertains to you, and not regulators chasing you!)
Good luck on your journey, keep learning and building, and do what you must to stay off the Dead Coins’ list!
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