The rise of decentralized digital currencies, known as cryptocurrencies, has entrepreneurs and developers of all kinds considering work in the crypto space. If you want to create your own cryptocurrency, you can — and the process isn’t all that complicated. However, you will still need some in-depth technical knowledge of how cryptocurrencies work to get started.
Here’s how you can develop a coin or token of your own.
The Basics of Crypto Tech
Developing a cryptocurrency requires an understanding of how it works. At the least, developers need to know some basic terminology, as well as understand the blockchain.
The blockchain is a kind of distributed digital ledger technology. In practice, it’s an ever-growing list of transactions related to a given coin, platform or service.
Tokens and coins are sometimes used interchangeably for cryptocurrencies in general, but actually refer to two different concepts. Coins — like Bitcoin or LiteCoin — operate on their own blockchain. Tokens, on the other hand, run on the blockchain of another platform. Coin blockchains will typically only carry data related to coins, digital wallets and transactions, while token blockchains may transfer additional data.
For example. Ethereum tokens represent both wealth and the platform’s “fuel.” This energy is needed to make changes in apps hosted on Ethereum or set one of the platform’s “smart contracts” into motion.
The Ethereum blockchain includes both information about transactions as well as data related to those apps and contracts.
How to Create a Cryptocurrency
The first step in creating a new altcoin is to develop a blockchain. One of the simplest ways to start is with one of the many available tutorials online. For example, Smashing Magazine hosts one that walks potential crypto developers through the process of building a blockchain in Node.js.
Several cryptocurrencies also maintain public repositories of their blockchain code on GitHub. If someone wants to build on this work, there’s nothing stopping them from forking a copy of that code and tinkering with it to see how it works.
If someone just wants to create a coin for whatever reason and doesn’t want to get involved in anything too technical, they can also contract out development services. Many freelance crypto developers specifically offer altcoin development services, as well as a few companies. An entrepreneur may have an idea for a coin or token — or would like some kind of crypto functionality for a startup — but doesn’t have the technical expertise needed. Working with one of these developers may be an option. It will, however, likely be more expensive than going it alone.
There’s nothing stopping anyone from experimenting at a small scale, either. Building a coin off one of the standard frameworks — like ERC-20 — and using it in daily life can provide valuable experience. For example, an individual could create a currency for an office fantasy baseball league or a coin representing IOUs among friends.
How Crypto Startups Get off the Ground
In general, startups are expensive. Common expected costs often run in the range of hundreds of thousands of dollars, and first-time entrepreneurs are sometimes caught off guard by things like licensing, legal fees and insurance.
An initial coin offering (ICO) is like an initial public offering (IPO) for the crypto industry. With an ICO, a startup offers a certain amount of a new cryptocurrency to potential investors. The money raised will fund initial operations and provide people with a chance to get in on the ground floor of a new coin or token.
A successful ICO also creates a small userbase for the currency and can generate a notable amount of buzz for a new startup or platform. ICOs are not a guaranteed source of income, however. A few would-be coin startups have taken investor money and disappeared, ceasing development on their currencies and platforms once sales were finished. As a result of these scams, people may not be willing to trust just any startup selling new coins.
ICOs are also under increased scrutiny from regulators like the SEC. In May 2020, the commission even brought charges against one company, BitClave, which agreed to return the full proceeds of its ICO to investors. According to the SEC, the company “failed to register their offers and sales of (their tokens)” and started to wind down operations immediately following its ICO.
If the SEC suspects a startup is duping investors — whether intentionally or because it misrepresented offerings and capabilities — it could be subject to serious fines or penalties.
ICOs are not necessary to get a coin started — they’re primarily something startups should consider and hobbyists may want to avoid.
Creating a Successful New Cryptocurrency
Anyone can create a new cryptocurrency if they want to. However, some level of coding and technical knowledge is required, unless a crypto developer will assist.. Crypto startups often fund themselves by selling coins to investors. This strategy can help you get a crypto startup moving, but it may come with increased scrutiny from regulators.
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