How are cryptocurrencies created?
There are many ways to create a cryptocurrency, each with its own level of difficulty. The most difficult way is to create your own blockchain and native cryptocurrency. While the least difficult way is hiring a blockchain developer to do it for you, there are still two other options in between those levels of difficulty. Another option is modifying the code of an existing blockchain or establishing a new cryptocurrency on an existing blockchain.
Most of these options necessitate possessing at least some technical computer skills, in tandem with financial and human resources. The most technical substitutes provide the largest degree of customization, which for some cryptocurrency developers is worth the expense. Read on to explore each method to create a cryptocurrency in-depth.
Create your own blockchain and native cryptocurrency
If you want to design a cryptocurrency that is completely original, then building your own blockchain technology to support that coin is likely your best bet. It requires extensive coding skills and an understanding of blockchain fundamentals but gives you the most creative control.
You can tailor your native coin to your own liking. By definition, native coins have their own blockchains and are held in higher regard than tokens, which are digital currencies that function on other blockchain networks. If you’ve decided that constructing a new blockchain is your best move, then follow these tips.
Before you can create your cryptocurrency, you need to decide on a consensus mechanism. This is also known as the blockchain’s operating protocol. The two most common mechanisms are proof of stake (PoS) and proof of work (PoW).
Once you’ve decided on a consensus mechanism, you need to design your blockchain architecture. This will include things like whether your blockchain should be private or public, and permissioned or permissionless. All of these choices depend on your reasons for making a cryptocurrency in the first place.
Before you launch your new cryptocurrency, have a blockchain auditor check the code for any vulnerabilities. Also, get expert legal advice to make sure your cryptocurrency follows all relevant laws and regulations.
After you have completed all the necessary steps, you can mint your cryptocurrency. The initial number of coins is at your discretion. You have the choice to issue the entire set amount of coins in one go or gradually increase supply as more blocks are added onto the blockchain.
- Change the code of an already existing blockchain
If you want to create a new blockchain and native cryptocurrency, you can use the code from another existing blockchain. However, this will likely require some technical expertise in order to modify the source code to fit your own objectives.
Most blockchains have open-source code, which means that anyone is able to view and download it. You can find these codes on GitHub. After you download and modify the source code of an existing blockchain, you will still need to partner with a blockchain auditor and obtain professional legal advice. Once that is done, you can mint your new cryptocurrency.
- Introduce a new cryptocurrency to an existing blockchain
A new cryptocurrency does not necessarily require the creation or modification of an existing blockchain. Some platforms, such as Ethereum, are designed to host many different developers’ cryptocurrencies. The resulting currency would be classified as a token–digital money that is not native to the blockchain it operates on.
While some knowledge of computers may be necessary, creating your own token using an existing blockchain is not as difficult as it sounds and can be done by almost anyone.
While coins are generally more customized than tokens, token creation is often the quickest and most affordable way to make a cryptocurrency. Your token can take advantage of the security measures already put in place by an established blockchain platform while also benefiting from other innovative features that the platform may offer. In addition, being associated with a well-known blockchain can help increase your token’s value and credibility.
- Hire a blockchain developer to create your own cryptocurrency
Hiring a blockchain development company will allow you to customize your own coin or token to any degree. There are many enterprises, called blockchain-as-a-service (BaaS) companies that create and maintain new blockchain networks and cryptocurrencies.
Some blockchain-as-a-service (BaaS) companies develop personalized blockchains just for their clients, while others use existing infrastructure. You can also collaborate with a BaaS company to release a token that is highly tailored to your specifications on a preexisting blockchain platform. A few well-known BaaS providers are Amazon Web Services, Microsoft Azure, ChainZilla, and Blockstream.
The Advantages and Disadvantages of Creating a Cryptocurrency
Some of the benefits of creating your own cryptocurrency include being able to customize it to your specific needs, learning more about cutting-edge blockchain technology, and having the potential for your currency to gain value over time.
There are a few potential drawbacks to consider when thinking about investing in cryptocurrency, such as requiring technical knowledge, which can be time-consuming and costly, and requiring ongoing maintenance for the cryptocurrency to be successful.
If you’re just curious about cryptocurrency, then making your own token is probably okay. However, steer clear of anything that might be considered an initial coin offering (ICO) by the U.S. Securities and Exchange Commission to avoid breaking any federal securities laws. Many people and organizations are releasing their own coins and tokens, so you won’t be alone in this experiment.
The total cryptocurrency cost depends on how much you want to personalize your coin or token. A more customized coin built from a native blockchain will be pricey while launching a standardized Ethereum token can be gratis through platforms such as WalletBuilders.
Can you legally create your own cryptocurrency?
While it is mostly legal to establish a cryptocurrency, some locations have chosen to ban virtual currency completely or partially. China disallowed all cryptocurrency transactions in 2017 and raising money through virtual currencies has been illegal since then.
Given that cryptocurrency is legal in some places, it’s still possible to break existing securities regulations when launching and promoting a new cryptocurrency. Creating a cryptocurrency is only the beginning. In addition to the more technical aspects, those who create a new coin or token will have to consider how their cryptocurrency can offer value to others. They’ll also need to determine how to persuade people to invest in it and how the network will be kept up and running.
If you want to create your own cryptocurrency, be prepared to dish out some money. You’ll likely need to hire a development team, marketing specialists, and other individuals who can help maintain things and handle upgrades as needed.
With over 5,000 different types of cryptocurrencies currently available on public exchanges (according to Coinmarketcap), the chances of success are slim AND that’s not even counting all of those that have already failed throughout the years.
A more passive route for those who don’t have the time, money, or interest in creating their own cryptocurrency might be to simply participate in trading. You can easily trade crypto, stocks, and exchange-traded funds by opening an investment account on the SoFi Invest brokerage platform.