The Beginners Guide on How to Create a Cryptocurrency
A couple of months ago, Elon Musk appeared on SNL and explained cryptocurrency and Dogecoin to Weekend Update hosts Michael Che and Colin Jost.
“So it’s a hustle?”
“Yeah, it’s a hustle.”
If you spend any time on Reddit forums or finance Twitter, you’re probably familiar with the saga of Dogecoin. Started in 2013 as an altcoin or memecoin, this cryptocurrency was created largely as a joke, but experienced an impressive rise in value over the last year, thanks in part to famous owners like Musk and Mark Cuban.
In many ways, Dogecoin represents the possibilities of what crypto can look like, how it can succeed, and how it can fail. Social media support for the coin made it trendy to own, while volatility in the marketplace made its success short-lived. At least for now. Dogecoin is set to roll out huge upgrades in the coming months that will scale its ability to make transactions and reduce fees. So you never know.
In any case, you may be looking at the popularity of DOGE or cryptocurrencies in general as an opportunity. Certainly, the world of digital currency has only expanded in the last decade; it’s currently valued at over $2 trillion.
But if just owning cryptocurrency is not enough, you may also be considering creating your own. The good news? It’s a wide-open field with lots of resources to help support your endeavor. The bad news? It’s a whole lot of work.
Still game? Good. Keep reading for The Future Party’s beginner’s guide to creating your own cryptocurrency.
Wait, What Exactly is Cryptocurrency?
Told you we were doing a beginner’s guide. Let’s look at cryptocurrency from a distance. What is it, and what makes it different from the green pieces of paper in your wallet?
Let’s consider currency first. Currency is defined as circulation as a medium of exchange. It’s what empowers us to exchange cash for goods or services. Cryptocurrency is simply a coin that is accepted on a digital platform. Unlike the money in our wallets, cryptocurrency is free of regulation surrounding where and when you can exchange it.
In other words, no banks.
Cryptocurrency operates on a model of decentralization. It’s typically based on open source technology and is distributed by means of the blockchain. It does not need to be minted like cash, and anyone (with the ability to code) can specify its rules. Though legal oversight has increased in recent years, especially related to how crypto exchanges are taxed, it is generally less restricted by financial regulatory bodies than traditional currency.
Do I Want to Build a Coin or a Token?
One common misconception in cryptocurrency is the difference between a coin and a token. Think of coins as a cash exchange and tokens as a bartering exchange.
Unless you’ve been living under a well-insulated rock without internet access, you’ve probably seen the acronym NFT in recent headlines. Non-fungible tokens are pieces of digital art or media that have a unique value. Like cryptocoins, tokens are sold on blockchains. Unlike coins, tokens don’t require their own blockchain. They can be sold or purchased on existing blockchains.
In other words, coins can buy tokens, but tokens can’t buy coins.
If you’re looking to create your own cryptocurrency, you’re really looking to create your own blockchain.
Step 1: Know How to Code or Find Someone Who Does
Alright, assuming you’re still in, let’s get down to the business of how to actually create a cryptocurrency.
First, you’re going to need to start with a solid understanding of the code and algorithms on which cryptocurrencies are built. Even with a strong business mind and a seasoned knowledge of how the market works, you cannot create crypto without technical skill.
If you don’t speak code and want to learn, you may want to consider enrolling in a boot camp. Do your research. Many programs offer a variety of payment plan options, but as there is no national accreditation system for coding boot camps, the quality of education can be equally as varied. If you want to learn to code, set a specific goal for what you want to achieve and find the right program that will help you get there.
If coding is not your thing, start looking for a partner. This is a strong path for people who have marketing savvy but aren’t interested in going deep into the technology. While there are plenty of resources out there that can help support you in creating cryptocurrencies, your best bet is to have someone on your team who can fluently speak the language.
Step 2: Define Your Objectives
It can be tempting to want to jump into cryptocurrency as soon as possible. Especially right now, it can feel like a big, online party (where they’re just handing out cash!) that you’re late to.
Try not to give in to that sense of impatience. The truth is they’re not just handing out cash, and you’ll need to develop a solid strategy and differentiating features if you want your cryptocurrency to succeed. Beyond digital money, cryptocurrency can be used as a means to exchange the following (and more, because blockchain technology is so versatile):
- Access to personal finance
- Smart contracts
- Internet of Things
- Digitized metals
Like with all businesses, you’re going to want to consider the problems your cryptocurrency will solve and how you can make it stand out from an increasingly crowded field.
Step 3: Create Your Own Blockchain or Modify An Existing One
So let’s say you’ve got your team, and you’ve set your goals. Next, you should decide whether you want to create a new blockchain from scratch or alter an existing one.
Because so many cryptocurrencies are open source, there is a widely available pool of information when it comes to creating a blockchain. Unless you’re looking to reinvent the proverbial wheel, it’s probably a good idea to fork an existing codebase.
You can find open-source blockchain code on sites like GitHub. Start with a proven crypto, and then figure out what you want to modify. You’ll also need to decide what your consensus mechanism will be, which is how your database will recognize a transaction as legitimate.
Check out these blockchain platforms to start:
- Ethereum (Market Leader With 82.70% Shareholding)
- Waves (WAVES)
- Hyperledger Fabric
- IBM blockchain
Step 4: Define What Makes Your Architecture Different
Once you have the basis for your blockchain established, you’re going to need to decide how it works. A lot goes into what makes a cryptocurrency run, but here are some areas you’ll need to consider and develop with your team:
- What do the nodes look and act like? How do they store data, verify transactions, and keep exchanges efficient?
- Who can access data, and what gives them the permissions to do so?
- What does key management look like? How many are needed to validate a transaction, and who has access to them?
Defining how your blockchain operates is an essential—probably the essential—step in creating your cryptocurrency. Apply some patience here. Not all of the decisions you make at this stage can be reversed. It’s important to be intentional and strategic.
Step 5: Design a Simple and Efficient Interface
Once the backend is looking spick and span, you’re going to want to prioritize your interface. After all, the best blockchain database in the world isn’t going to become popular if your interface is confusing or poorly designed.
Make sure your frontend website and marketplace effectively communicate information, read clearly, and are operating on an efficient server. With so much competition out there, crypto customers can be pretty discerning about user experience.
Step 6: Differentiate Yourself With Marketing
Speaking of competition, once you have a product you’re proud of and you’ve launched your first coin or token, make marketing your next step. Regular communication with coin holders is essential. Remember that just like in marketplaces of the past, storytelling, customer service, and sleek design can convert a prospective buyer into a regular customer.
Cryptocurrency is essentially useless until it is given value. Find out what makes your offering valuable and tell that message to as many people as possible.
Step 7: Stay Adaptive and Future-Proof Your Business
Change is pretty much the only constant in the world of cryptocurrency. It’s important to always stay adaptive and open to reimaging your blockchain.
Diversifying your use cases is a strong way to future-proof your business. Explore the value of crypto outside of digital currency through technology like the Internet of Things, contracts, and Data Analytics.
Bottom line? Never stop learning (The Future Party can help with that). Stay up to date on what’s happening in the market today and be suspicious of all advice. Trends tend to be short-lived in this industry, and common sense goes a long way.
Get Ready to Hustle
As far as we can tell, cryptocurrency is only going to become more relevant and more widely available. Many businesses now require blockchain technology to function, and the demand for coins and tokens is higher than ever before.
If you’re willing to work hard, partner with smart, technical executors, and differentiate yourself from an increasingly crowded field, you’ve got what it takes to make a cryptocurrency viable.
Who knows? You could be the creator of the next Dogecoin.