#10. Cryptocurrencies and Blockchain
How to Create Your Own Cryptocurrency
Creating your own cryptocurrency from scratch will require technical skills, as the process isn’t easy. However, there are relatively simple ways to create a cryptocurrency:
- pay professionals specializing in creating cryptocurrencies;
- buy special software that will greatly simplify the process of creating a cryptocurrency.
While the first method involves financial investments and management skills from the customer, the second option doesn’t exclude technical savvy, as the customer will have to work with the software on their own.
Before creating a cryptocurrency, the user should clearly understand that the performance of any digital asset depends on following certain rules. So, a cryptocurrency must be:
- protected from inflation;
- safe for users, i.e., secured against hacking and attacks.
If a new cryptocurrency doesn’t meet this bare minimum, it’s unlikely to be successful in the community. And if the community isn’t engaged in it, establishing a cryptocurrency merely doesn’t make sense.
Ways to Create a Cryptocurrency
Well, there are three main ways to create a cryptocurrency. Each has its own features, advantages, and disadvantages and will require a different amount of time and financial investment.
Let’s look at each option separately.
Creating a Token
If you need to create a cryptocurrency in order to use it, for example, as an internal currency in a project or community, it’s easier to build your own token.
You don’t need to deploy a new blockchain to create a token. Just take an existing one. Ethereum suits these needs because it’s essentially a universal platform for building decentralized apps and new tokens. Ethereum smart contracts are easily programmable for specific functions, and the ERC-20 token standard will allow them to be used across most crypto wallets. It’ll also be possible to list them on many cryptocurrency exchanges.
Token development is basically the easiest way to create your own cryptocurrency. Standardized tokens will have a minimal set of features providing the necessary capabilities of the new digital currency. These are often enough for the owners.
Let’s examine the process of creating a token based on the Ethereum blockchain step by step:
- You need to download the source code of the standard token from Ethereum’s official website. It’s advisable to download the full version straight away, as the minimum version will contain some limitations, which can be critical for the token being created in the development process.
- The downloaded code must be placed in the development environment to make changes. The Remix-Solidity IDE, which is available online and completely free, is ideal for working with Ethereum smart contracts.
- The source code must be modified. Note that this method is the easiest precisely because creating your own cryptocurrency requires changing only three parameters in the source code: the token name, the ticker name, and the maximum offer.
- If the standard functionality of the created cryptocurrency needs to be changed, it’s better to consult professionals. The thing is that any function changes in the source code of Ethereum smart contracts automatically change its standard from ERC-20 to another one. Inexperienced developers can simply corrupt the code, creating a token whose functionality will simply be incompatible with any of the existing standards. However, for example, the collaborative development platform GitHub offers many ready-made solutions for modifying the Ethereum source code for various purposes.
- When the smart contract of the new token is ready, all that remains is to publish it on the blockchain. To do so, you need a cryptocurrency wallet supporting Ethereum smart contracts. For example, the official Ethereum Wallet. Select the Contracts section in the wallet menu and click on Deploy New Contract.
- The opened menu will require entering the entire source code of the created token, as well as specifying the wallet address from which the fee for adding the smart contract to the blockchain will be deducted. Yes, the token creation process isn’t free. More precisely, the token itself can be created without financial investment, but to add it to the blockchain, you will need to pay a certain amount of ETH, depending on many factors. Keep in mind that the wallet address deposited for payment will later be considered as the owner of the created token by the system.
- Next, in the Add token menu, you’ll need to enter once again the initial data of the new token: the name, the ticker, and the amount. Specifying the desired amount of commission in the network will also be necessary to create the new token on the blockchain. The smaller the fee, the slower the process will be.
- The Send Token button will complete the token creation process and add it to the Ethereum blockchain.
That’s it, the new token is ready. You can now plan an ICO or IDO to attract investment. And if only a limited number of users need the project, you can start offering tokens.
Ethereum isn’t the only blockchain suitable for creating your own token. For example, the BNB Chain network is also gaining popularity — the process of creating tokens on its basis will be technically more complicated, but the commission costs will be lower. You can also create tokens on Solana, Polygon, and several other blockchain networks. But it’s important to emphasize that Ethereum was originally created as a development software environment, that’s why the token creation process on it is the easiest.
Creating a Fork
Unlike creating a token based on an existing blockchain, building a fork is a time-consuming process as it involves creating a new cryptocurrency on a separate blockchain.
Creating a fork of an existing blockchain requires a deep understanding of distributed ledger technology. A whole team of developers can work on a fork, which definitely costs a lot of money for the customer. Therefore, you should consider whether the future cryptocurrency is worth the money and time invested. In other words, whether the customer has a unique idea of using the new cryptocurrency, which requires more functionality than just receiving and transferring coins.
So, to create a fork, you need to:
- Determine which blockchain fork will form the basis of the new cryptocurrency. The key technical aspects are consensus algorithm, network bandwidth, smart contract functionality, and technical token standard.
- After choosing a blockchain, you must download its source code. Both the official website and the aforementioned GitHub can help with this.
- You’ll also need to modify the downloaded code within the development environment. At this point, users without appropriate experience usually face difficulties. This is because the project may contain many folders, each with dozens of separate pieces of code. And every part of the code will need to be changed — at least to change the name of the cryptocurrency, which can be written in different formats. Skilled developers use special software for automatic changes, but it still doesn’t eliminate the need to check if the data in each file is correct.
- Next, you need to make changes to the settings of network ports. Technical knowledge is required here, as even the slightest mistake will lead to the complete inoperability of the blockchain. Remember that there can be port information in many source code files, and you have to change it in every file.
- Once the ports are configured, changes must be made regarding the maximum supply of coins, their issuance, and the introduction of block generation rewards for miners or stakers (depending on the consensus algorithm chosen).
- The last step in creating the fork will be a change in the cryptocurrency’s appearance — icons, illustrations, and various media files must be replaced with the original ones.
As a result, after making all the changes and checking the functionality, you’ll get the new cryptocurrency running on the new blockchain. And yes, since the blockchain is basically yours, you won’t pay any fees for creating cryptocurrencies on it.
Interestingly, there are a number of tools for creating forks that are designed to simplify the process, such as the Coingen service. With the help of this kind of service, the fork creation process is relatively simple but also requires attentiveness from developers. Of course, using this service isn’t free. Curiously, such services often propose the Bitcoin blockchain to create the fork. The reason is that there are already a large number of forks of the first cryptocurrency in the market, and their creation is fine-tuned and debugged.
Creating a Blockchain
Creating a completely new blockchain is probably the most time-consuming and expensive way to build your own cryptocurrency. In addition to in-depth technical knowledge of programming and distributed ledger technologies, having an innovative idea is also desirable. After all, you should create your own blockchain only if none of the existing solutions is suitable for solving a particular problem; otherwise, developing the new blockchain will only be a waste of time and resources.
The main task of developers in this process is to implement the customer’s ideas. To keep it as simple as possible, the basic steps of creating your blockchain are as follows:
- Choosing a consensus algorithm and encryption mechanism.
- Creating nodes, network ports, and addresses.
- Working on blockchain architecture. At this stage, it’s worth considering all the functions of the future network: from the format of the crypto address to interaction capabilities with other blockchains.
- Integration of the application programming interface (API).
- Designing the future cryptocurrency. Creating web interfaces and FTP.
- Studying legal regulations for using the future cryptocurrency. Mistakes at this stage can lead to the use of the created cryptocurrency being prohibited by regulators.
There are also several services for creating your own blockchain that are designed to help streamline the process. For example, these services include CryptoLife. Its developers will create not only the blockchain but also a wallet for a new cryptocurrency, mining pools, etc., based on the ideas suggested for a fee. The speed and cost of blockchain creation through these kinds of services will vary depending on the customer’s requests. You should keep in mind that a code created in this way will have to be checked because the service doesn’t accept claims after the project is delivered and the payment is made. Therefore, a code audit will be added to the to-do list. After the project is launched, you’ll need to maintain its work, marketing promotion, build a community, attract investment, and so on.
The process of creating your own cryptocurrency requires both technical skills and financial investment. The most important question to answer before creating your own cryptocurrency is “why?” It is important to have a clear idea of what the new cryptocurrency is needed for, what specific purposes it will serve, and how it can be used. After all, any cryptocurrency must be useful and attractive. Otherwise, no one will use or invest in it, and it will remain just a code in the network.