How to Create a Cryptocurrency: Everything You Need to Know
With the advancement of blockchain technology, more and more people have begun to jump on the train, wondering how to create a cryptocurrency that would be the next Bitcoin.
In this article from Savvycom’s R&D experts, we will guide you through new cryptocurrency creation’s leading technical and business aspects. Learn how coins and tokens differ from one another and which solutions can be utilized to make your own Cryptocurrency, all the while find out more about the followings:
- Define what Cryptocurrency means in simple words and terms
- Elaborate on how Cryptocurrency works nowadays
- All the pros & cons of Cryptocurrency
- Ways that you can build your own Cryptocurrency
- Step-by-step process to make a new cryptocurrency
- Price to pay to create your own crypto coin
So without further ado, let’s get started with the details regarding how you can make your own Cryptocurrency.
1. What is a Cryptocurrency?
“A cryptocurrency, crypto-currency, or crypto is a digital currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority, such as a government or bank, to uphold or maintain it.” – Wikipedia.
Cryptocurrency, sometimes called Crypto, is a decentralized digital currency that uses encryption techniques to regulate the generation of currency units and secure transactions using Cryptography. Crypto’s main features include “Anonymity, Decentralization, and Security”; thus, it is not held or tracked by any centralized authority, government, or bank.
Blockchain, a decentralized peer-to-peer (P2P) network comprised of data blocks, which is an integral part of Cryptocurrency. These blocks chronologically store information about transactions and adhere to a protocol for inter-node communication and validating new blocks. The data recorded blocks cannot be altered or modified without changing subsequent blocks.
So, when did the hype train regarding Cryptocurrency and Blockchain start?
Even though virtual money became available a long time ago, Bitcoin is the first known and successful Cryptocurrency holding the leading position in the Cryptocurrency market. According to Statista, as of today, there are over 10,000 types of Cryptocurrencies, including the most popular ones like Bitcoin (BTC), Ethereum (ETH), and Tether (USDT). Nowadays, the number is still growing, with newer Crypto being added, and the number of transactions tends to skyrocket at any given moment.
- Following a report on Statista, at the end of July 2021, the Cryptocurrency Ethereum will be processed more than 1.1 million times per day. This was more than six times that of the more commonly known rival Bitcoin, which saw only 250,000 daily transactions that month. Other leading cryptocurrencies also saw significantly less transaction activity.
- The price of Bitcoin has been erratic, and most other cryptocurrencies follow its more significant price swings. This volatility attracts investors who hope to buy when the price is low and sell at its peak, turning a profit. However, this does little for price stability. As such, few firms accept payment in cryptocurrencies.
Read on to learn more about the benefits of blockchain and how to create a cryptocurrency.
2. How Does a Cryptocurrency Work?
As mentioned above, Cryptocurrency is an integral part of the blockchain. And because distributed ledger technology is built on the consensus algorithms regulating the creation of new blocks, all participants in the P2P network have to accept a block for it to be registered.
There are several types of consensuses as follows:
- PoW (proof-of-work)
- PoS (proof-of-stake)
- DPoS (delegated proof-of-stake)
- PoA (proof-of-authority)
Cryptocurrency is issued every time a new block is created and is used as a reward and incentive for blockchain participants taking part in the consensus mechanism and closing blocks, i.e. allocating their processing power, stakes of coins, and other resources to support the transparency and trust of blockchain and to verify new blocks.
Bitcoin was eventually created with this purpose.
Crypto holders can transfer Cryptocurrency assets from their wallets to another or to blockchain addresses, exchange for fiat money, or participate themself in Cryptocurrency trading.
Everyone on the network can view transactions, but the identities of the people behind these public addresses will remain anonymous, as they are encrypted by unique keys that bind an individual to a personal account.
3. Difference Between Coins and Tokens
In general, Cryptocurrencies can be divided into two large subcategories which are coins and tokens. And while they are both considered cryptocurrencies, there is a difference between a coin and a token. Understanding their main concepts will help you determine how to make your own Cryptocurrency for specific business needs.
3.1. What is a Coin?
A coin operates on its own blockchain where all transactions occur. To put it in simpler terms, a coin is a blockchain’s default cryptocurrency. For instance, Ether (ETH) is the default currency on the Ethereum blockchain. A coin is defined by the following characteristics:
|1. Operates on its blockchain|| |
A blockchain keeps track of all transactions that involve its native crypto coin.When you pay someone with Ethereum, the receipt goes to the Ethereum blockchain.
If the same person pays you later with Bitcoin, the receipt goes to the Bitcoin blockchain. Each transaction is protected by encryption and is accessible by any member of the network.
|2. Acts as money|| |
Bitcoin was created for the sole purpose of replacing traditional money. The paradoxical appeal of transparency and anonymity inspired the creation of other coins, including ETH, NEO, and Litecoin.
Using crypto coins, you can purchase merchandise and services from many major corporations today, such as Amazon, Microsoft, and Tesla. Bitcoin has recently become an official currency of El Salvador alongside the US dollar.
|3. Can be mined|| |
You can earn crypto coins in two ways. One is through traditional mining on the Proof of Work system.
The other method is Proof of Stake, a more modern approach to earning coins. It’s lighter on energy consumption and easier to do.
3.2. What is a Token?
A token works on top of an existing blockchain infrastructure, like NEO or Ethereum, which is used to verify transactions and make them secure. Tokens are often used like smart contracts, representing everything from physical objects to digital services.
Or you can put it like this when a cryptocurrency uses or “borrows” another blockchain’s network, it is considered a token. Tokens have their own price, name, and utility that differs from the native Cryptocurrency. Transactions made with tokens are eventually settled on the blockchain that they use.
Anyone can use Ethereum or Neo as the underlying technology to start a new cryptocurrency. The primary use for tokens is a security token offering (STO), which helps projects and startups fund operations through a crowd-sale. This is the main reason why everyone has started considering the possibilities of how to create a Cryptocurrency in the first place.
3.3. Sum Up Between Coin and Token
The difference between token and coin isn’t vast, but it can cause a significant headache if you overlook these 2 terms. One quick way to decide which one you should use is to pay attention to what you’re buying. If it’s a product, most often, you would need coins. If it’s a service, there are utility tokens that you can use.
4. Advantages and Disadvantages of Cryptocurrencies
If you are thinking about the burning question of how to create a cryptocurrency, you first need to know the pros and cons of making them first. Follow us as we explore the reasons why cryptocurrencies are popular and why you should use cryptocurrency in your business operations.
4.1. Advantages of Cryptocurrencies:
High Risks – High Rewards
There are more than 10,000 cryptocurrencies on the market today, and each has its particular quirks. But all cryptocurrencies have a few things in common, like their tendency to experience sudden spikes (and drops) in value.
Prices are driven primarily by the supply of coins from miners and the demand for them by purchasers. And these supply-demand dynamics can result in hefty returns. The price of Ethereum, for example, roughly doubled from July 2021 to December 2021, which was relatively prosperous for investors who jumped on the train at the right time.
In blockchain, decentralization refers to transferring control and decision-making from a centralized entity (individual, organization, or group thereof) to a distributed network. This makes cryptocurrency independent from any authority so that no one can dictate the rules for cryptocurrency, neither developers and owners.
Fast and Unlimited Transactions
Fiat money transactions take significant time to be processed and settled. Your business will end up waiting days to receive money. With cryptocurrency, you can create an unlimited number of transactions and send them almost immediately to anyone with a crypto wallet anywhere in the world.
Low Transaction Fees
Banks and other financial institutions issue considerable transaction fees. This doesn’t mean you don’t need to pay a fee for cryptocurrency transactions; however, the amount you need to pay is relatively small.
The sender and the recipient of funds can be in different parts of the world and still exchange cryptocurrency. You can save money on currency conversion and the fees that accompany international funds transactions.
Transparency and Anonymity
Thanks to the distributed nature of blockchains, every transaction is recorded, and those records are immune to changes. At the same time, if a crypto address is not publicly confirmed, no one will know who made a transaction and who received the cryptocurrency.
4.2. Disadvantages of Cryptocurrencies:
Some countries are very hesitant about granting any cryptocurrency to their system. In everyday life, there are still limited possibilities for those who want to make purchases with cryptocurrency.
Very often, users thinking about how to get started with cryptocurrency forget about an important factor – high volatility. The cryptocurrency market is unstable, with frequent ups and downs even for famous cryptocurrencies like Bitcoin and the most recent Crypto like LUNA. It is highly risky to invest in cryptocurrency, as you never know whether it will be a profitable investment or not.
Transactions are Non-Reversible
Mistakenly entering an incorrect cryptocurrency address may cost you money. There is no way to reverse a transaction. You may request a refund, but if it is declined, be ready to say goodbye to your money.
You’ve probably read horror stories about cryptocurrency owners who lost their devices, forgot their private keys, and could not access their cryptocurrency fortunes. These situations can happen to anyone, so anyone can lose their money accidentally if not careful.
These benefits and drawbacks should all be considered when considering how to create a cryptocurrency that will elevate your business goals.
5. Overview on How to Create a Cryptocurrency
You can launch a brand-new cryptocurrency by forking an existing blockchain and producing a token, or you can create an altogether new blockchain with a coin. Online guides on how to start a cryptocurrency can be found in abundance. But they all need to know at least the fundamentals of coding and have a thorough grasp of blockchain.
|What are the Different ways of Creating Cryptocurrency?||Method 01: Building your cryptocurrency on a new blockchain|
|Method 02: Altering an existing cryptocurrency|
|Method 03: Creating a new cryptocurrency on an existing blockchain|
5.1. Creating a Coin
This option is unsuitable if you are looking for an easy and fast way to create your own cryptocurrency. You need to be an experienced professional in decentralized technologies or have someone willing to take on the role of technical expert.
It might only take five minutes to create a coin. All you need to do to create a blockchain and coin is to copy the Bitcoin source code, add a new variable, or even modify the value of something. However, you must comprehend the code and know how to alter it, which requires strong coding abilities.
Another issue is maintaining, supporting, and promoting the coin, as you have to create the whole logic of blockchain to launch your coin. Hiring a team of professionals to handle the task would save more time. Still, you would have to pay for custom software development services. Go for it if you can afford to allocate a budget toward creating and supporting your own blockchain.
5.2. Creating a Token
This is a more feasible way to become a cryptocurrency creator. While having complete control over the blockchain may sound like a great idea, this has certain drawbacks like increased development time, significant spending, and much more.
Fork cryptocurrency is created on top of an existing blockchain by utilizing the underlying technology’s trust, popularity, and consensus mechanism. When you build a token on top of a robust blockchain, like Ethereum, your token runs on a secure network protected from fraudulent attacks. Token creation is less costly in terms of money and time, as you utilize the existing decentralized architecture and implemented consensus mechanisms.
5.3. Key Takeaways
As already said, creating a token is significantly easier than creating a coin. You must create and properly manage a blockchain in order to create a coin. Although you could fork (create a clone of) another chain, this doesn’t address the issue of how to locate users and validators to support your network’s existence. However, creating a new coin has a larger chance of success than simply creating a token. Here is a short explanation of each option:
|Requires the creation of a new blockchain||Relatively easy to create with open source code|
|Can be built on the existing and trusted blockchains||Blockchain development requires more investment|
|In-depth knowledge of blockchain and coding skills are required||Token creation is easier, faster, and more cost-efficient|
6. How to Make a Cryptocurrency – Key Processes
After considering everything above, you can start taking the initiative to build your desired Cryptocurrency. Some of these steps will be less relevant when you choose to outsource Blockchain Development to a professional IT vendor, much like Savvycom. But even then, anyone undertaking the task should be familiar with these aspects of how to create a Cryptocurrency.
6.1. Define Your Idea
Making a cryptocurrency could be entertaining, but in actual business, you need to have a strategic plan. Define your goals for your dApp, including the audience it will serve, in addition to the technical aspects of creating a cryptocurrency. This crucial step might be aided by expert business analysis services. It’s possible that you wish to exclude banks or other middlemen from transactions or develop a revolutionary healthcare solution.
6.2. Choose a Suitable Blockchain Platform
You must choose the blockchain on which to mint your cryptocurrency if you want a token. Popular choices include BSC and Ethereum, although sidechains may also be a bright idea. You’ll need to consider developing or hiring someone to create a unique blockchain if you want to establish your own coin.
6.3. Pick a Consensus Mechanism
Consider the consensus mechanism you want if you’re building your own blockchain or aren’t sure which one to choose for your token. These procedures govern participants’ methods for confirming and validating network transactions. Due to its numerous versions and minimal hardware requirements, most blockchains use Proof of Stake. Some people believe Proof of Work, the security method employed in Bitcoin, to be more secure. However, it is frequently expensive to maintain and not as environmentally friendly.
6.4. Design Blockchain Architecture
You only need to complete this step if you’re making a coin. Not every blockchain enables users to run nodes or verify transactions. Choosing whether to have a private, public, permissioned, or permissionless blockchain is crucial. Your blockchain architecture will change depending on what your coin and project are trying to accomplish.
6.5. Begin Blockchain Development
You will require outside assistance to develop your ideas unless you possess advanced development skills. It is pretty challenging to alter the fundamental concepts and principles of the blockchain after it has been put into use. Utilize a testnet to ensure everything goes according to plan, and ideally, work with a large development team to create your blockchain.
6.6. Double-Check Legal Aspects
Now that your blockchain is operational and you are prepared to mint your cryptocurrency, it is advisable to get professional legal counsel to determine whether you need to submit an application for authorization. Again, completing this step on your own is challenging and requires assistance.
6.7. Spend Time Making a White Paper
Your white paper should answer the following questions:
- What is the problem and why is a new solution needed?
- What is your company planning to spend ICO/STO funds for?
- When will tokens will be released, how many, and on which exchanges?
- What roadmap will the project follow?
- Who is on your team, what experience do they have, and how can they bring value to the project?
6.8. Mint Your Cryptocurrency
You will eventually need to mint the cryptocurrency, whether you’re making a token or a coin. Your tokenomics will determine the specific approach. For instance, fixed supply tokens are typically created via a smart contract all at once. As miners approve brand-new transactional blocks, coins like Bitcoin are eventually made.
7. Five Best Cryptocurrencies on The Market
According to Coinmarketcap, there are 20,000 cryptocurrencies on the market and the number is still growing. While it is impossible to name the single best cryptocurrency on the market, below we have listed the most popular ones.
Decentralized open-source blockchain platform Ethereum has its own coin called Ether. ETH serves as both a framework for the execution of decentralized smart contracts and a host of other cryptocurrencies.
This was the first cryptocurrency to be created. To this day, Bitcoin is still at the top of the game, even with the recent downfall in terms of value.
Short for Build and Build, BNB is the native crypto asset of the Binance ecosystem. Binance began as essentially just a crypto exchange, but it has since branched out its offerings. It launched Binance Coin in 2017 via an initial coin offering (ICO). In 2022, Binance unveiled a rebranding that included changing the asset’s name from Binance Coin (BNB) to simply the ticker BNB (shorthand for Build and Build), abandoning the name Binance Coin.
It is Solana’s native and utility token that provides a means of transferring value as well as blockchain security through staking. SOL was launched in March 2020 and has strived to become one of the top 10 cryptocurrencies entering the space by means of total market capitalization.
NEAR Protocol uses a native token called NEAR, which allows users to pay fees for transactions, run applications and pay for storage. Applications on NEAR must pay storage fees to the NEAR Protocol for any data that they store on the network and for performing computations.
8. The Costs to Create a Cryptocurrency
The cost of creating a cryptocurrency depends on a project’s particular requirements and whether you decide to start from scratch or use an existing blockchain as the underlying technology. The following costs are typically included in the price of developing a coin, however, they can vary greatly: