When cryptocurrency was first mooted a few years ago, many skeptics might have dismissed it as a sheer impossibility.
However, cryptocurrency has since evolved into a billion-dollar industry with many investment opportunities. And while it’s far from a get-rich-quick scheme, a growing number of millionaires attribute most of their fortunes to the crypto world.
Building your own currency is one of the smartest ways to invest in the cryptocurrency industry. These currencies can constitute coins or tokens, depending on how you produce them.
In this article, we highlight a step-by-step guide on how to create a cryptocurrency. But first things first.
Benefits of Investing in Cryptocurrency
Cryptocurrency has been around for quite some time. Interestingly, many would-be investors are still ignorant of its immense opportunities. So, before we highlight how to make your own cryptocurrency, it’s only fair that we begin by understanding the benefits of setting up a venture in this lucrative industry.
High fluidity is one of the major draw cards to dealing with cryptocurrency. Crypto assets, including coins and tokens, are readily available at the click of a button. That’s in contrast to the physical currency in your bank account, which may take hours to access.
Cryptocurrency also offers benefits in terms of security. That’s because many of these assets are hosted on blockchains.
Blockchain is a technology that creates a highly secure, uneditable public ledger of transactions. It’s founded on the principles of cryptography, consensus, and decentralization.
Other benefits of investing in cryptocurrency include;
- Decentralization, which means your assets aren’t tied to a centralized regulatory body
- Privacy, as transactions typically do not reveal your identity
- Fast settlement speeds
- Low transaction costs
- Inflation protection
- Cross-border payments
- Flexibility and diversification
- Multiple investment avenues
Ways to Trade in Cryptocurrency
We’ve just mentioned multiple investment avenues as one of the primary benefits of starting a crypto-based business. It’s worth noting that while this industry presents real opportunities for wealth creation, most crypto millionaires earned their fortunes from diversifying their investment portfolios.
Below are the top ways to make money from cryptocurrency;
- Trading – Buying and holding crypto assets until their value rises, then selling them for profit
- Staking – Parking your crypto assets on an exchange or a staking pool for a considerable duration and receiving profits in return
- Mining – Producing new coins using a computing system and releasing the same into circulation
- Gaming – Earning cryptocurrency through play-to-earn NFTs
- Lending – Loaning out your cryptocurrency and earning interest in return
- Giveaways – Receiving cryptocurrency as part of offers and giveaways
- Making your cryptocurrency
Why Build Your Cryptocurrency?
Building cryptocurrency is one of the smartest ways to invest in this profitable industry. Due to the craze for new currencies, your coins could quickly gain value against the existing ones.
Making your cryptocurrency also offers an excellent learning opportunity about blockchain technology. You’ll understand precisely how this technology works and why it’s considered the most reliable platform for hosting and transacting crypto assets.
Another reason to develop cryptocurrency is that you can easily customize your assets. For instance, you could brand new coins with unique initials to distinguish them from other currencies.
On the flip side, it’s worth noting that creating a new cryptocurrency requires technical know-how in computer engineering, including coding and programming. The process of generating a new crypto asset is also costly and time-consuming. Besides, you’ll need to actively monitor your invention to enable it to rise through the crypto ranks.
Things to Consider Before Making Your Cryptocurrency
The benefits of making cryptocurrency far outweigh the drawbacks. However, there are additional factors to consider as part of learning how to create a crypto currency.
First and foremost, is it legal?
While cryptocurrency is legal in most countries and jurisdictions, pressure has been mounting on financial regulators to clamp down on the industry. That’s mainly in the wake of the high-profile crypto failures of Terra/Luna, Three Arrows, and FTX.
So, establish that it’s legal to trade in cryptocurrency in your jurisdiction before building any crypto assets. For instance, China has completely banned all forms of cryptocurrency trade. The same is true for Cameroon, where crypto coins are implicitly forbidden. Countries like the United States allow cryptocurrency only after meeting certain regulatory conditions.
The use case is another major factor to consider before creating cryptocurrency. Draft a cryptocurrency whitepaper that outlines what these digital assets are typically used for.
Be sure to also highlight your currency’s strongest selling points. For instance, is it a permissionless currency or one that requires some form of privacy? Also, where will the currency be hosted, and who controls that blockchain?
There’s also the question of tokenomics to consider. Tokenomics refers to the number of coins or tokens to build. It also entails the frequency with which you’ll release these coins into circulation, their initial distribution channels, and how much you and other affiliated entities own.
Besides, you’ll want to determine if there’s a possibility of releasing more crypto coins after the initial launch date. And if yes, will the coins be mined or minted?
Lastly, set aside start-up capital. At the very least, you’ll require money to pay expenses such as third-party blockchain designers.
Different Ways How to Start a Crypto Currency
1. Creating Your Own Blockchain and Native Cryptocurrency
One of the popular methods to build a cryptocurrency is creating a new blockchain that comes with its native cryptocurrency. Native cryptocurrencies are digital coins that are hosted on their blockchains. They differ from tokens, which operate on third-party blockchain networks.
This approach demands a great deal of time and capital investment. It also requires technical know-how in coding and programming. Besides, you’ll need to have a basic understanding of blockchain technology.
On the flip side, creating your blockchain and native cryptocurrency provides more freedom in designing and customizing your new coins. Many cryptocurrency traders also consider native coins to be superior to tokens. So, your new coins will garner considerable attention fast, causing their values to rise quickly.
Below is a general procedure on how to build a new blockchain complete with its cryptocurrency;
2. Choose a consensus mechanism
A consensus mechanism is a blockchain’s operating protocol. Popular ones include proof of work (PoW) and proof of take (PoS).
3. Design Your Blockchain’s Architecture
This step determines whether your blockchain will be permitted, permissionless, private, or public.
4. Test-drive the Blockchain
While you can test-drive a newly created blockchain, experts recommend hiring a third party. Be sure to engage specialized blockchain auditors to review the system’s code and identify potential vulnerabilities.
5. Mint Your Coins
Once your blockchain is up and running, you can mint your coins. However, seek legal counsel before kick-starting the minting process to establish that your activities comply with existing laws and regulations in your jurisdiction.
6. Modifying the Code of an Existing Blockchain
As we’ve just pointed out, creating a new blockchain from scratch is a time- and capital-intensive endeavor. The faster and cheaper alternative is to modify the code of an existing blockchain.
Ideally, this process entails using the source code of a third-party blockchain to create a new blockchain. The new blockchain would have its native cryptocurrency.
What makes this method achievable is that most blockchains maintain open-source codes. That means anyone can view, download, and customize the codes to their liking. GitHub is an excellent repository where you can find the source code of most blockchains.
Although you’ll require less capital and time investment than creating a blockchain from scratch, modifying the source code of an existing blockchain still needs a degree of technical knowledge. Besides, you’ll still need the new code to be edited and obtain legal approval before you can mint your new cryptocurrencies.
7. Setting Up a New Cryptocurrency on an Existing Blockchain
Another popular method for creating new crypto projects is establishing a new cryptocurrency on a third-party blockchain network. The resultant currencies are known as tokens.
This approach doesn’t involve creating a new blockchain or modifying an existing one. That already says a lot about its time- and cost-efficiency. All you need to do is select a blockchain platform, create your tokens, and then mint your new cryptocurrency.
Creating a new cryptocurrency on an existing blockchain also requires less technical expertise than the above-mentioned methods. In most cases, you’ll only need moderate computer knowledge.
And the good news is that numerous blockchain platforms are designed to host different cryptocurrencies. Ethereum and Binance Smart Chain are noteworthy mentions. Most of these platforms also maintain their native currencies.
The fact that you’re creating cryptocurrency on a network already hosting several currencies also offers benefits in terms of investment diversity. Once your new tokens take off, you can readily trade them on these platforms by pairing them with other existing coins. Besides, your tokens will gain high visibility fast if you create them on established blockchain platforms.
The only noteworthy drawback to this method is that tokens are generally less customizable than coins.
There goes our definitive guide on how to create a crypto coin. As you may have gathered, building coins from scratch requires quite a bit of technical know-how and capital and time investment. However, it can be ultimately rewarding.
Besides, you don’t need to fret if you have no technical skills to create a cryptocurrency. You can always hire professional blockchain-as-a-service (BaaS) companies, such as Amazon Web Services and Microsoft Azure, for the job.