Having an investment portfolio made up of multiple different cryptocurrencies is nothing new anymore, but how about generating income by creating a digital asset? More cryptos are added to the cryptocurrency market every day, which means anyone with technical computer programming knowledge can create one.
8 essential steps to create your own cryptocurrency!
To help those interested in embarking on this adventure, Finbold has put together a quick guide to creating their own cryptocurrency, along with the top considerations to keep in mind to get the best results for this potentially very profitable endeavor and ensure its author doesn’t.
#1 Creating a use case
Any new cryptocurrency needs to have a use case that stands out from the rest and offers something innovative, as this is the first thing investors will learn about it. This purpose and characteristics of the token should be specified in a whitepaper.
An ideal example is the mysterious Bitcoin (BTC) creator Satoshi Nakamoto created for the flagship digital asset and is available in Mandarin Chinese, Bengali, Swahili, Yoruba, Lingala and Isikulu.
#2 Consideration of legal consequences
As regulators around the world increase their pressure on the crypto industry, investigations and lawsuits against crypto companies continue to rise, with the most publicized ones including those against crypto hedge fund Three Arrows Capital (3AC), Terra (LUNA) ecosystem, and crypto trading FTX platform. .
Therefore, it is extremely important to ensure that cryptocurrencies are not illegal in the jurisdiction in which they were created and that there are no laws and/or regulations standing in the way of their creation and operation.
#3 Planning the token economy
A portmanteau of “tokens” and “economics”, “tokenomics” is the term used to describe a token’s supply – the number of planned cryptocurrency tokens and their distribution among creators, other team members, affiliated third parties, and investors.
However, planning the token economy also includes making decisions such as the release schedule, the means of supply control, the initial distribution method, and whether it will be possible to create tokens after launch.
#4 Calculating startup costs
Whether it is a matter of hiring an outside expert to design and creating the cryptocurrency, or paying for the gas used to create it on an existing blockchain, the process will inevitably involve some initial costs.
This means planning a budget in advance based on how much customization is planned. While launching a token on an established blockchain like Ethereum (ETH) can be done for free or very cheaply, creating a new blockchain can be very expensive.
#5 Deciding on the blockchain
To begin the cryptocurrency creation process, it is necessary to choose a blockchain platform where the token will exist, its transactions will be permanently and immutably recorded, and the token will be distributed.
Depending on the consensus mechanism used to verify transactions, there are several types of blockchain – Proof of Work (PoW), Proof of Stake (PoS), Proof of Stake (DPoS) and Proof of Elapsed Time (Poet). Popular blockchain platforms include Ethereum, Cardano (ADA), Tron (TRX), and Ripple.
#6 Preparing the nodes
Once the blockchain has been decided, it is time to create nodes, which are computers connected to the blockchain network that will take part in the verification and processing of transactions, as well as the recording and distribution of data.
In doing so, node availability (public or private), hosting (cloud network or local nodes), operating system (ideally open source), and hardware (GPUs, processors, RAM, hard drives and the like).
#7 Choosing a blockchain format
There are three basic models of blockchain architecture. Centralized (one central node receives data from others), decentralized (nodes share data between each other) and distributed (ledger moves between nodes) and one should be chosen.
Also, developers will need to define details such as blockchain address, blockchain data access, key formats, entity generation rules, block size, transaction limitations, rewards, and node identification (also known as handshake).
#8 Setting up APIs
An application programming interface (API) acts as a link between various nodes and/or networks, for example between a crypto exchange and a crypto data collection application, and is typically used in crypto trading, data security, or tracking digital assets.
Today, there are numerous API solutions available for blockchains, including NOWNodes, Factom, Bitcore, Infura Ethereum API, Nomics API, and others. However, external API experts may need to be brought in for this task as this will require their specific expertise.
According to the latest data from crypto tracking platform CoinMarketCap, there were 22,273 cryptocurrencies that crossed the 21,000 milestone in September 2022, indicating a huge interest in creating new cryptocurrencies. Having said that, creating a digital asset is actually the easiest part. The real challenge comes with managing it and stimulating its growth.