Have you ever thought of having your own digital money? Why not? You won’t be the first one. Actually, the creator of the first digital money declared bankruptcy in 1998 just because nobody wanted to put trust in “imaginary money.” A decade later, the mysterious programmer (more likely to be a group of programmers) Satoshi Nakamoto presented a revolutionary trustless system and vivified the idea of digital cash using the blockchain. That’s how Bitcoin was born.
One of the main attributes of blockchain technology is decentralization. This tells us that Bitcoin isn’t a brand product of a single corporation that hired a development company to build a licensed project and make it copyright. On the contrary, Bitcoin has an open-source code available for the public on GitHub.
So, technically, nothing prevents you from downloading the code and making your own version. In fact, the public nature of Bitcoin, directly or indirectly, enabled the launch of over 10,000 cryptocurrencies. For sure, not all of them have survived to see the light of the day, and not all of them derive from the Bitcoin source code.
The point is that while it’s relatively easy to craft your own crypto, it’s extremely difficult to give people a reason for buying it and sustain its liquidity. That’s why, in this step-by-step tutorial, we’ve gathered all the necessary prerequisites to consider before becoming a “crypto boss.”
What Is Cryptocurrency?
In a word, the term cryptocurrency covers a broader range of digital currencies that rely on encryption to create new units and verify the transactions of already existing ones. They don’t have physical representation in the outside world, and their supply isn’t controlled or maintained by any government.
The world found out about crypto with the inception of Bitcoin (BTC) in 2009, in the aftermath of the global financial crisis of 2008. However, it took a lot of time until they became an investment routine of the general public. Bitcoin was the icebreaker in cryptocurrency development, and that’s why we always take the Satoshi Nakamoto white paper as a “schoolbook” for explaining the principles of crypto.
BTC is a cryptographically secure asset designed to serve universally as a cash system. It enables users to communicate financially in a peer-to-peer manner outside the reach of authorities and central banks to dictate the rules of that communication. In other words, Bitcoin has all the functions of a regular currency — you can send, receive, trade, pay, or get paid in BTC — with the difference that Bitcoin runs independently of a centralized platform.
More precisely, Bitcoin lies on a complex structure called a blockchain, which uses cryptographic signatures to verify transactions. The blockchain is a public ledger distributed to the computers (nodes) of all participants (miners), which aren’t subordinate to a single controlling system. Miners use mathematical proofs (proof-of-work) and financial incentives (mining rewards) to ensure secure transaction flow and prevent any kind of human manipulation of the virtual monetary system. As we mentioned at the beginning, this automated structure is what makes the idea of digital money feasible.
What Gives Cryptocurrency a Value?
It may be difficult to grasp the technological aspect of crypto, but its purpose is pretty clear. The key question is what made Bitcoin worth $65,000 in September 2021 and whether such blooming success could possibly happen ever again (maybe with your altcoin).
While there is no straightforward answer to this question, at least we can try to clarify the crypto myth through some basic concepts.
First, Bitcoin is undeniably the largest crypto on the market, but it’s not a single player. Soon after the release of Bitcoin, a vast range of blockchain products appeared on the scene. While some of them served as an improvement of the Bitcoin speed and performance, others presented brand new blockchain mechanisms and use cases (you can read more about this difference in the coin-vs-token section).
However, all cryptocurrencies carry a set of core features that bring them very close to fiat currencies like USD, CAD, or EUR — scarcity, utility, divisibility, counterfeit ability, and durability.
The thing is that the scarcity of fiat currency is well “cushioned” by inflation, political conditions, and government interventions. Cryptocurrencies have none of that. Their scarcity is a result of a single factor: supply vs. demand. Simply put, Bitcoin is expensive only because people are willing to pay for it.
This leads us to utility. Bitcoin is mostly used as a store of value, i.e. digital gold, earning that privileged status by being the first one. Other crypto-to-come had to show broader utility to ensure a stable place on crypto charts. For example, Ethereum (ETH) excelled in this role. Apart from being a home of the ETH coin, the Ethereum blockchain can be used as a basis for other cryptocurrency and decentralized apps (dApps).
Why Make Your Own Cryptocurrencies?
You can’t jump into a brand-new crypto project just because you’ve heard that cryptocurrencies are the future of the digital economy. There are a few legit background stories for developing your own coin, some of which include:
- Enhancing your startup with a new payment method;
- Creating a new type of internet service or e-commerce provider;
- Making a flexible speculative asset suitable for advanced trading platforms.
Whatever the motive, you must have something we call a Unique Selling Proposition (USM) — a feature that will distinguish your product from the thousands of existing cryptos. Besides our Ethereum example, there are quite a few high achievers. Stablecoins led by Tether (USDT) were invented to simplify the trading process.
In some way, they’ve replaced fiat by pegging their value to the American Dollar or other fiat currency or commodity. On the other hand, Bitcoin Cash (BCH) and Litecoin (LTC) had a clearly defined purpose of creating a more scalable version of Bitcoin, while the goal of XRP and Solana (SOL) was to enable fast cross-border payments across various industries. There are plenty more bright examples but for now, let’s focus on your crypto.
Where to Start — the Difference Between a Coin and Token
One of the fundamentals you should understand when choosing a route for developing new crypto is the difference between coins and tokens. That’s because these basic types of crypto differ in the process of creation and utility. Otherwise, both coins and tokens represent a certain value and have the ability to process payments. Also, trading platforms allow you to swap tokens in exchange for coins and vice versa.
What Is a Crypto Coin?
First and foremost, coins run on their own blockchain and mirror real money in the ecosystem of that blockchain. Needless to say, Bitcoin is a coin. Many corporate services like Amazon and Tesla have started accepting coins as a regular payment method. If you pay for a service in bitcoins, the merchant receipt goes to, or better say, stays on the Bitcoin blockchain.
Coins can differ to a great extent in the mechanisms they employ to prevent double-spending, but the only way to create a new one – to mine or stake them – is either through the Proof-of-Work (PoW) or Proof-of-Stake (PoS) consensus mechanism.
What Is a Crypto Token?
On the other hand, tokens don’t need a “personal” blockchain — they operate on the blockchains of existing crypto coins. The most popular hosting blockchain is Ethereum. It supports ERC20 tokens as well as ERC1400 and ERC721 tokens, popularly known as NFTs (non-fungible tokens).
But there are also other token-friendly blockchains, such as EOS, Tron, Wave, Stellar, Tezos, and BNB Smart Chain (BSC) or all blockchains that use smart contracts. Smart contracts are automated pieces of code that facilitate ultimately trustless interaction between two involved parties.
Unlike coin transactions, when you spend a token, it really moves from one “virtual spot” to another. The easiest way to understand their movement pattern is through the trending NFT tokens. They represent digital art or another form of intellectual property that is tokenized and sent manually to a buyer as a piece of art. This means coins represent digital money only, while tokens can represent anything — from assets to contracts and deeds.
Last but not least, tokens don’t require much effort and knowledge for a non-tech-savvy individual to build one. That’s why there is an endless array of levitating tokens in the DeFi sphere with different purposes: governance tokens, utility tokens, payment tokens, and security tokens. The stablecoins we mentioned above are also tokens.
Ways to Create a New Cryptocurrency
Following the coin-vs-token discussion, we can conclude that there are four ways of creating new cryptocurrencies.
Build a New Blockchain
Hard Fork a Present Blockchain
As we said, cryptocurrencies are decentralized projects, for the most part, with a public GitHub repository. Downloading an existing code is much easier than coding a new one, but it still requires solid expertise in the field of information technology and cybersecurity. This re-duplicating approach is called forking, and it’s a legit way of creating new crypto under the blockchain rules. The fork analogy comes from GitHub, where the project’s new version is forked to another branch.
We distinguish between hard and soft forks based on the compatibility of the new version with the old software. For a new cryptocurrency, you need a hard fork. Understandably, Bitcoin has a dozen forks, but there are also forks of forks. For instance, Litecoin is derived from the Bitcoin code but serves as a basis for Litecoin Cash.
Use an Existing Blockchain Platform
This is the approach for creating new tokens, and compared to coins, crafting tokens is far easier. You don’t need coding skills, but you should understand the blockchain so that you can find a suitable template and APIs and come up with a genius idea for making a profitable investment.
How to Make Your Own Crypto
Now that things are clear, let us remind you that making crypto from scratch requires a substantial amount of money and energy. However, as cryptocurrency is entering the mainstream digital culture, this process has become drastically streamlined due to the existing templates of consensus mechanisms, hash and mining algorithms available online.
Well, if you don’t have a clue what hashing algorithms are, then you’re very likely to spend the entire budget on professional assistance before you even start. These are all stages you need to consider regardless of whether you’re building a token or a coin.
Creating a White Paper
In crypto jargon, the business plan is called a white paper. That’s the key document consisting of a full description of your idea, ultimately convincing potential investors and partners that your project is worth contributing.
Method for Building the Crypto
This stage includes everything we listed in the previous section — if you create a fork, you need to determine a base blockchain. For tokens, you’ll have to select a suitable smart contract that will match the utility scope of your product.
You may leave the entire job in the hands of skilled developers but you’ll still need clear insight into the algorithm frameworks, integration with crypto wallets, engine, and the official promo website, just to be able to pick the most favourable one, depending on the current market needs.
Regulatory Framework of the Crypto
Each legislation has an individual attitude towards cryptocurrencies. Your job is to carefully examine to what degree crypto has been regulated in your country. However, even if your government has established strict crypto policies, they mainly refer to the profit you achieve through crypto trading or staking as a basis for a taxable event. So, expect a face-to-face encounter with authorities and legal liability after you start earning from the newly-released crypto.
It’s been a common practice today for entrepreneurs to present new token projects through an Initial Coin Offering (ICO). Similar to traditional crowd sales, ICO consists of pre-selling a new crypto at a very attractive price in exchange for already existing coins or tokens.
Despite the numerous successful projects that started their journey with ICO (Ethereum itself was crowdfunded to raise money for further blockchain development), these events are closely associated with a common scam — the investor collects the investment funds and runs away. For that reason, the USA financial sector requires every ICO to be regulated by the Securities and Exchange Commission (SEC).
Another thing is that statistically, 90% of the completed ICOs are doomed to vanish very soon after the ICO event. But, you’ll never know what can catch investors’ eyes until putting it on sale.
As you can see, your total costs depend on your blockchain expertise and production technicalities that will possibly require a professional development team. All in all, the entire process will cost you something between $10,000 and $30,000. But let’s be optimistic and say that if your crypto repeats the Bitcoin success, the investment will pay off after you sell a single unit.
A Few Words Before You Go…
Given the number of circulating cryptocurrencies, it seems that all workable ideas have been drained. This isn’t true because the digital space is continuously transforming and hence, always looking for new payment and governance solutions.
However, having your own token or coin is huge. Don’t start at all without a profound plan and all the necessary resources for “healthy” maintenance. Finally, in this industry, the luck factor sometimes decides the destiny of your new coin.