Creating a new cryptocurrency is easy, but not that easy. The first question you want to ask yourself is whether your project needs a coin or a token. Yeah, they are different. Coins are launched on their native blockchain, while tokens are hosted on other blockchains; you can consider them a rental.
So, coin or token? It depends on your intentions for your crypto project and the utility it intends to serve. This will then dictate if you want to create your own blockchain, modify one, or just piggyback on one that already exists.
Continue reading to find out more.
The Utility/Intention Behind Your Cryptocurrency
The best new crypto coins on Michael Graw’s curated list have a clear identity. Investors know what they are getting with each listing; it is immediately clear what value the project intends to offer. Knowing what value your crypto will offer is an important aspect of the creation process, which is dictated by your answer to the token or coin question.
Coins offer more utility and can be used for a number of different things, while tokens are more niched down. Most tokens are used in decentralized applications, such as the SAND token, an ERC-20 utility token that’s used for staking, governance, and value transfers in a decentralized gaming platform called the Sandbox.
Coins, on the other hand, most notably Bitcoin, are used as a store of value. What this means is that you can order for yourself a Cybertruck or fund your favorite crypto casinos using Bitcoin and NOT the sand token.
Having determined the intention, it informs your blockchain situation. If you want full functionality, you need to build your blockchain; here’s how:
The Blockchain
Blockchain is necessary when creating your own crypto because of its decentralization feature. Without the blockchain, you will need a centralized authority to manage and record all transactions, defeating the purpose of creating crypto in the first place.
Building your blockchain
If you possess the right skills and have access to the right amount of funding, you can create your own blockchain. Dedicate time to learning blockchain technology. Not only does a new blockchain encourage innovation and uniqueness, but it also grants the developer freedom to determine how the currency operates.
The following is a step-by-step process for building your own blockchain:
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Create a whitepaper
A whitepaper is a document that outlines critical Information about your product. This must be written from the onset as it answers any questions investors have about the currency. when information such as the problems it seeks to solve, the benefits of using the currency, and its functionality are clearly stated, it helps the developers stay on course and progress as planned.
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Choose consensus mechanism
A consensus mechanism is the blockchain’s communication protocol. It processes transactions and protects the blockchain from attacks. Different mechanisms, like the Proof-of-Work (PoW) and Proof-of-Stake(PoS), work on different principles. Your choice mechanism must align with the goals outlined in your whitepaper. For example, PoW is best if you aim for mining, while PoS is the go-to if you’re tending towards environmentally friendliness.
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Design nodes
Blockchain nodes make a copy of the distributed digital ledgers and are tasked with ensuring the reliability of the data. Nodes are the pillars of a blockchain as they store and verify transactions. The hardware, the operating system, the host network, and accessibility are considerations when contemplating node design.
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Design architecture
There are four main styles for designing blockchain architecture: public, private, hybrid, and consortium. Once again, your design should be guided by your set goals. The significant discrepancies between these designs are that private blockchains are more centralized in control, while public blockchains are decentralized and open-ended. Hybrid combines features from private and public, while consortium is governed in partnership.
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Design API
Designing your Application Programming Interface (API) enables you to manage digital wallets, trade currency, and track the market value of your currency. Multiple APIs can be incorporated to achieve different results, such as pulling Information off the blockchain and providing data security.
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User Interface
A good UI promotes user satisfaction. A simple and visually pleasing interface will encourage crypto use. This can significantly impact your currency’s market performance and grant you a competitive edge.
Modifying an existing blockchain (or forking)
This method is less daunting than the first because it requires less coding. Instead of building from scratch, the source codes for existing blockchains like Bitcoin and Ethereum are open-source and can be modified to make your cryptocurrency work. Some popular cryptocurrencies, such as Litecoin, were made using this method. Litecoin derived its blockchain by modifying Bitcoin’s open-source code.
The following are considerations when choosing a blockchain to modify:
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DAO
A decentralized Autonomous Organization (DAO) gives management control to blockchain members who hold tokens. By distributing control to different entities, a DAO ensures members under a blockchain participate in decision-making. If a governing layer is important in your project, you need a blockchain that allows for it rather than coding it later.
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Consensus Model
The different consensus models offer different advantages to your crypto project. Ethereum’s proof of stake (PoS) mechanism is cost-effective, environmentally friendly, and faster than Bitcoin’s proof of work (PoW) mechanism. You also have the option of spending more time and resources to tailor the models to suit your needs better.
Using existing blockchain
This is the least demanding option; it requires the least amount of skill and resources. The following is a step-by-step guide to launching your token on an existing blockchain.
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Choose existing blockchain
You are basically shopping for the blockchain that fits your project, like hands in gloves. Blockchains, like the BNB chain, support the creation of tokens that are not native to the blockchain. Ethereum is the most popular blockchain globally; it is great if you are trying to create fungible tokens (ERC-20) or non-fungible tokens (NFTs).
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Create token
The amount of customizability you want determines the time you spend creating your token. Although it still requires some technical knowledge, you can speed up the process by using online tools like WalletBuilders.
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Mint the token
After creating the token, all that’s left to do is mint your cryptocurrency. But first, you want to ensure legal compliance.
Legal compliance
Regardless of your choice, your crypto project must be on the right side of the law. It is crucial to seek the guidance of a legal professional to ensure you are not breaking any laws. Some countries may require that you obtain a license before minting or registering as a legal entity.
