How to Create a Cryptocurrency: A Beginner’s Guide
Governments have long monopolised the act of creating money until Satoshi Nakamoto created Bitcoin a decade ago. Now, thanks to blockchain technology, anyone can create a digital currency. In this guide, you will learn how to create a cryptocurrency for your project or just for the fun of it.
What is Cryptocurrency?
A cryptocurrency is a digital medium of exchange that uses blockchain technology to secure financial transactions.
A cryptocurrency functions like fiat money with a key difference: it is decentralised. Furthermore, it is important to differentiate coins from tokens.
So, how can you make your own cryptocurrency? There are four ways:
- Create one from scratch – this means building a blockchain and its native coin to incentivise the nodes that will keep it running
- Obtain open-source code on Github to fork an existing cryptocurrency
- Use an existing blockchain platform like Ethereum
- Approach a Blockchain-as-a-service (BaaS) company
How to Create a Cryptocurrency from Scratch
To make a cryptocurrency from scratch, you need to create a blockchain. However, this task requires in-depth coding knowledge. Here is how to go about it:
- Plan your task by identifying your use case, the name of the coin, the consensus mechanism, and all the other functions that make a blockchain.
- When designing the nodes, choose whether the permissions for your blockchain are public, private or hybrid. Moreover, decide whether you will host them on the cloud or on-premise and acquire the required hardware.
- Build the internal structure of your blockchain. This entails the permissions, the format of blockchain addresses, the format of keys, storage of private keys, smart contracts, multi-signatures, asset issuance, the rules of the native cryptocurrency, block reward, block size, and block signatures.
- Get application programming interfaces (APIs) to allow communication with your blockchain over the web.
- Build the admin and user interfaces for your blockchain. This will make it easy for you and your users to utilise it.
- Once your blockchain is complete, ask beta testers to help you test it.
How to Create a Cryptocurrency with Open-Source Code
You can fork an existing cryptocurrency with its open-source code to create a new coin. If you want to fork Bitcoin, for instance, you can do the following:
- Figure out all the details about your coin such as the name, the block halving interval, and block time.
- Visit Github to access the Bitcoin code.
- Download and compile the code.
- Change the code to your preference. For instance, you might change the block difficulty, the block time, and the block halving interval. This stage requires programming skills.
- Publish the changed code on Github.
- Create a website and whitepaper for your new cryptocurrency. The whitepaper will explain the flaws in Bitcoin that your new coin is solving.
- Create a community for your new coin and market it to increase adoption.
- List your cryptocurrency on exchanges.
According to this Bitcoin Stack Exchange discussion, creating a new cryptocurrency through Bitcoin forking is a lot of work especially if you are going to change the protocol rules. Also, you may need to constantly update your code.
Make a Cryptocurrency on a Blockchain Platform
Existing blockchain platforms like Ethereum, EOS, TRON, and Stellar help project owners to create cryptocurrencies. This choice is suitable if you do not mind using another platform’s functionalities for your project.
If you want to create a cryptocurrency on Ethereum, for example, you will need help unless you are a programmer. Below are the steps you should take:
- Figure out your project’s objectives and goals. Ask yourself why you need a token or coin and how your target users will utilise it.
- Talk to a skilled programmer about your project needs. Ask them which token standard suits your project. Once you have agreed on all the details, let your programmer get to work.
Before deployment on the main network, your programmer will test your cryptocurrency on a test network like Rinkeby. When your programmer has created your crypto on the Ethereum platform, they will give you an Etherscan address to track transactions from your project website.
Have a Company Create a Cryptocurrency for You
Using a BaaS company is the easiest option for anyone without coding skills. These companies build and maintain blockchains for others at a price. A BaaS company will create a customised blockchain for you with a native cryptocurrency or base your solution on their existing infrastructure.
You can approach a blockchain-as-a-service company for a blockchain solution inclusive of a native cryptocurrency if you are in industries like banking, insurance, health, and supply chain.
To use this option, follow these steps:
- Contact a BaaS company and set up a meeting
- Tell them what you want
- Discuss the terms
Once product development is complete, the company will implement your solution and help onboard your team into the new system. Your blockchain provider should offer maintenance services for the new solution.
Is it Worth it?
From the above options, it is clear that creating a cryptocurrency is not an easy task. It will cost you time and money. Additionally, it requires programming skills. Therefore, before you start creating a cryptocurrency, you need to make sure that it is a necessary step for your business or project.
If you are doing it for fun, you will need coding skills or disposable income to get someone to do it for you. Otherwise, you will only end up frustrated and with a massive headache.
That said, creating a cryptocurrency is good practice for programmers that want to learn more by challenging themselves.