What Are Cryptocurrencies and How Can You Create Your Own?

Cryptocurrencies are all the rage right now, and you can’t go anywhere without at least hearing about a cryptocurrency or a blockchain, as people across the globe explore the technology to see what benefits it can offer them.

Whether you have a great new business idea for a cryptocurrency, or are just a techy who wants to develop your own cryptocurrency, creating your own cryptocurrency can be both fun and challenging to do. However, when it’s done, you can finally say that you have your own cryptocurrency, and can become a part of the global cryptocurrency ecosystem.

But how are cryptocurrencies created, and what needs to be considered when creating a cryptocurrency? Well, in this article we will take a look at everything that you need to know to get started creating your own cryptocurrency.

What is a Cryptocurrency?

Before we proceed to take a look at how to create your own cryptocurrency, let’s first take a quick refresher course on what exactly a cryptocurrency is.

A cryptocurrency is a digital representation of value that is transacted on top of a blockchain network. Being built on a blockchain network separates digital currencies from traditional fiat currencies as value transfers in cryptocurrencies do not need to be facilitated by a third party institution, such as a bank.

Furthermore, transactions in the majority of cryptocurrencies in the market are completely transparent, meaning that anyone can view a transaction that took place on the blockchain. They will just have difficulty figuring out who the sender and receiver in the transaction is since all identities on a blockchain are protected using advanced encryption.

Difference Between a Token and a Coin

Cryptocurrencies can be split into two categories, coins and tokens. Coins are cryptocurrencies that require their own blockchain, while tokens are cryptocurrencies that operate on an already-existing blockchain, such as Ethereum.

Tokens are also limited to a specific project, while coins can be used anywhere. Lastly, you can buy tokens using coins but you cannot use tokens to buy coins.

If you want to put coins and tokens into real life context, think about tokens as part of a reward system such as Frequent Flyer Miles while coins are actual money: you can use both to buy an airline ticket, except with Frequent Flyer Miles your choice of airlines will be restricted to the airline that offered you the miles.

Benefits of Having Your Own Cryptocurrency

In most cases it’s a no-brainer that you need your own cryptocurrency. If your project or start up has its own blockchain, you will need a native cryptocurrency for your chain that will be used to incentivize nodes to contribute their computing power to your network.

Secondly, with your own cryptocurrency comes a whole set of powerful marketing tools and consumer benefits that will help you differentiate your project from other similar projects in the market.

Some of the most significant advantages of creating your own cryptocurrency also include the mitigation of fraud risk since a cryptocurrency is impossible to replicate and past transactions cannot be reversed. You can also cut down operating costs when you have your own cryptocurrency since a cryptocurrency is free from exchange interest rates and transaction charges.

By having your own cryptocurrency, you also ensure an immediate pool of potential customers since you can do business with people that might not have access to traditional exchange resources – removing any trade restrictions in the market.

There are several other advantages to having your own cryptocurrency such as the ability to offer immediate and anonymous transactions, security of funds, etc.

Now that we have taken a look at the advantages of creating your own cryptocurrency, let’s take a look at one of the most important tasks that you will need to complete before you can create your own cryptocurrency: creating a blockchain.

How to Create a Blockchain

There are a number of steps that you will need to follow as well as a number of decisions to make before you can create your own blockchain and, subsequently, your own cryptocurrency.

Know Your Use Case

The first step before you can create your own cryptocurrency is to figure out what the use case for your coin will be. How will you create a business using cryptocurrency and blockchain technology? Once you have answered this question, you can proceed to the next steps and begin creating your own blockchain and cryptocurrency.

Choose a Consensus Mechanism

The second step in creating a cryptocurrency is to decide what consensus mechanism you will build your network around. A consensus mechanism plays a vital role in a cryptocurrency as it defines how transactions are processed and verified before they get written to the blockchain. It also defines how nodes in the network work together to reach consensus on transactions.

Popular consensus mechanisms used in the blockchain space are Proof of Work and Proof of Stake. However, more projects are opting for Proof of Stake because of its higher level of sustainability and lowered environmental impact.

Pick a Blockchain Platform

The blockchain platform you choose will depend on the network consensus you have selected for your project. There are a variety of blockchain platforms to choose from. Some of the most popular are Ethereum, Waves, EOS, Hyperledger Fabric, IBM blockchain, and MultiChain. By using blockchain platforms, you can leverage an existing network to create your own blockchain with customized parameters if you prefer to use network parameters that are different to the ones already set by the blockchain platform.

Design the Nodes

This step is more for the technically inclined, and can be skipped in most scenarios when using blockchain platforms such as EOS and Ethereum where all you have to do is write the code for your cryptocurrency and deploy it. However, if you use platforms such as HyperLedger Fabric or IBM blockchain, then you may need to design and configure the nodes on your network.

A blockchain consists of a network of nodes. These nodes process transactions on the blockchain and are responsible for maintaining the decentralization on the network, so it is important to design the nodes that will make up the network for optimal performance.

There are some decisions that you will have to make when deciding what nodes to employ. First, you need to decide what the permission of the nodes will be, they can either be private, public or hybrid. Next you will need to decide if the nodes will be hosted on the cloud, on premise, or on both. Depending on what you decide to go with, you will need to get the necessary hardware, such as processors, memory, disk size, etc. Lastly, you will need to pick a base operating system. This can either be Ubuntu, Windows, Red Hat, Debian, CentOS, or Fedora.

Take Care of APIs

The final step is to make sure to check whether the blockchain platform of your choice provides the pre-built APIs, since not all of them do. Even if your platform doesn’t come with those, do not worry: there are a lot of reliable blockchain API providers out there.

After you have completed the above mentioned steps, there are a few things to consider at this stage. You will need to decide on a service provider for web, mail and FTP servers, and where you will host your external databases for network backups and user data. To create the user interface, you will need to decide on which front-end programming languages you will use to create the interfaces, for example HTML5, CSS, PHP, C#, Java, Javascript, Python, or Ruby.

Is Creating a Cryptocurrency Worth It?

While there are several benefits to owning your own cryptocurrency, the amount of work and resources required to do so can become substantial. Creating your own blockchain and cryptocurrency will require a lot of human and capital resources in every stage of the development. A lot of experience and knowledge is also required to create a blockchain and cryptocurrency in a cost and resource efficient way.

Having employed the help of professional developers you will significantly cut down your expenses in the long run by eliminating the room for errors, and, therefore, time and cost of the rework and updates; future-proof your solutions by working with the experts who stay on top of all the latest industry developments and innovations, and free up your time for growing your business.

Create an ERC-20 Token (Ethereum)

Ethereum is one of the most popular blockchain platforms in the market for cryptocurrency development. This is largely due to how easy it is to create a cryptocurrency using Ethereum’s ERC-20 token standard. Given how easy it is to create an Ethereum-based cryptocurrency, the majority of cryptos and Web3 products in the market offer support for Ethereum.

One thing to take into consideration when creating an Ethereum-based token is that the popularity of the Ethereum blockchain means that there tend to be higher transaction and deployment fees. This is because the network is normally congested with all of the applications running on the Ethereum blockchain.

An alternative to Ethereum is the Binance Smart Chain (BSC), which allows you to develop an ERC-20 token but deploy your token on the BSC instead of the Ethereum blockchain. Using BSC for ERC-20 token deployment is by far much cheaper than using Ethereum.

For comparison, deploying a token on Ethereum costs around $400 and deploying the same token on BSC may only cost a few dollars.

Deploying Your Token

There are multiple ways to deploy your newly coded token. If you created an ERC-20 token, then you can use Solidity to deploy it. To complete this process, you will need the Metamask browser wallet installed.

Once you have installed Metamask, you can connect your Metamask wallet to the blockchain that you want to support. Remember, if you created an ERC-20 token then you will want to connect to a blockchain that supports Ethereum-based tokens, such as BSC or the Ethereum blockchain.

If you select Ethereum as the blockchain that you want to deploy your token to, then make sure that you have enough ETH in your Metamask wallet to pay the deployment fees. Otherwise, if you choose to use BSC, make sure that you have some Binance Coin (BNB) in your wallet.

Once Metamask is downloaded and set up, and you have sent the required BNB or ETH to your wallet, you are now ready to deploy your token.

You will then need to compile the token code and send it to the blockchain you chose. So, compile the contract in Remix, then head over to the deployment/run tab in remix once your code compiled with no errors.

Usually the default deployment environment for Remix is a blockchain server running on your local programming environment. To change this, go to the Environment dropdown menu and select Injected Provider – Metamask as your environment. Metamask will now ask you to sign the transaction to complete the connection, so just sign the transaction.

At this stage, you now have Metamask installed and funded for the deployment fees, your code compiled in Remix successfully, and you are connected to the blockchain that you want to deploy to.

The last thing that you will need to do now is run the code in Remix. However, this time running the code will push the code to the main blockchain. When you’ve clicked the run button, you will need to sign the transaction on Metamask. After that, your ERC-20 token is deployed!

Verifying Your Token’s Code

Verifying your token’s code is the process of proving that you are the person that created and deployed the token. This verification instills a sense of trust for your community and puts their minds at ease.

The process for verifying your ERC-20 token is pretty much the same on both BSC and the ETH blockchains. You will need the original code that you deployed and will need the deployment configurations that you used at the time. These deployment configurations include the compiler version and whether or not you enabled optimization.

Connecting Your Front End to the Deployed Token

Your token is now deployed and you want to create various applications to connect to your deployed token. These applications can include Web3 wallets, decentralized exchange platforms, and much more.

In order to connect these applications to your deployed token, you will need two things: the ERC-20 token’s ABI and the contract address for your deployed token. Both of these can be obtained on the blockchain explorer for the blockchain that you used if you verified your token’s code. Otherwise, you can use Remix to get these details.

If you want to do it through Remix, then you will need the original code for your ERC-20 token. Open a file in Remix and paste the token’s code there. Now, head over to the compilse tab on Remix and compile your token.

In the compile tab, click the ABI option to copy the token’s ABI to your clipboard. You can then paste this ABI in the code of the application that wants to connect to your token.

Lastly, you can then open up your Metamask and look for the transaction where you deployed your token. By viewing the transaction on the block explorer, you will then be able to obtain the contract’s address.

Raising Funds for Your Project

A great thing about cryptocurrencies is that they offer a simpler way to raise funds. Although it’s still difficult to raise funds with cryptos, it is easier than doing so for a non-crypto business. There are various fundraising methods that you can employ, but the two main methods are an ICO and an IEO.

Initial Coin Offering (ICO)

An initial coin offering was the most popular way to raise funds for a crypto project, but regulators have clamped down on ICOs now, so this method may not be available in your jurisdiction.

This is the process of selling a portion of your project’s token at a much lower rate than you will sell your tokens at in the market, which allows early stage investors to buy into your project.

Initial Exchange Offering (IEO)

An initial exchange offering involves listing your token on an exchange platform’s launchpad, which allows you to raise pre-seed funds and anyone interested in your project can purchase the token at a cheaper price.

To Recap

The ERC-20 token standard is the most widely used token standard for cryptocurrency creation since it’s so easy to do. You can deploy an ERC-20 token through Remix and Metamask, and can use either the ETH blockchain or BSC depending on your preferences. Each option will include a deployment fee.

To raise funds for your project, you can either run an initial coin offering (ICO) or an initial exchange offering (IEO).