Cryptocurrency is one of the words you can’t avoid these days. News, blogs and even big-time financial authorities obsess over it, and by now everyone has to admit: the world is changing in front of our eyes. Miss this bandwagon now and you will be left so far behind that you might never recover.
So, here you are with this great new business idea or getting ready to launch a startup, and you want to embrace the fascinating opportunities of the new world and create your own cryptocurrency. But how exactly does one do that? The Internet is full of information but, as it often happens, it’s contradicting, spattered all over the place, and sometimes simply hard to understand due to a heavy industry jargon.
After reading this article you will know exactly what a cryptocurrency is, how a token is different from a coin, how to make your own cryptocurrency and whether your business needs it.
Before we dive into the technicalities of how to create your own cryptocurrency, we should set our facts straight and take a look at some basic definitions used in all cryptocurrency-related conversations.
Let’s take a step back and refresh in memory a definition of a currency first. While we tend to think about currencies in terms of banknotes and coins or dollars and euros, a currency is a unit of storage and account and a means of exсhаnge, i.e. a universally accepted way to obtain goods and services as well as to store and distribute wealth.
Now, a cryptocurrency can be defined as a digital currency relying on encryption to generate new units and confirm the transactions. It has all the functions of the currency with the difference of running outside of a single centralized platform (such as a bank).
Cryptocurrencies don’t have banknotes but they do have coins, which are often confused with tokens. So what exactly is the difference between them? Simply put, it all comes down to these three points:
If you want to put tokens and coins in a real-life context, think about tokens as your Frequent Flyer Miles while coins are actual money: you can use both to get an airplane ticket, but with the miles your choice will be limited to the air company that issued them, while with the money you can take your business anywhere you want.
The bottomline is that you need to build a blockchain if you want to create a crypto coin.
In some cases it’s a no-brainer: if your project or startup requires its own blockchain, you need to create your own digital currency to incentivize the nodes contributing their processing power. One more word on blockchains here: many authoritative business analysts foresee a big future and a growing list of the markets and industries where the blockchain technology will significantly disrupt the status quo and generously reward the early adopters. The good news is that for many fields the blockchain technology has never truly arrived yet so it’s not too late to join the ranks of pioneers.
The other important aspect is that when you decide to start a cryptocurrency you get a whole set of powerful marketing tools and consumer benefits which will help you differentiate yourself from the competition. Here is a list of the most significant advantages:
Now that you know how your own cryptocurrency can boost your business, let’s see the main steps you need to take to build a blockchain.
Do your business interests lay in smart contracts area, data authentication and verification or in smart asset management? Define your objectives clearly at the very beginning.
For your blockchain to operate smoothly the participating nodes must agree on which transactions should be considered legitimate and added to the block. Consensus mechanisms are the protocols that do just that. There are plenty to choose from for the best fit for your business objectives.
Your choice of a blockchain platform will depend on the consensus mechanism you’ve selected. To give you a better idea of what is out there, here is a list of the most popular blockchain platforms:
If you imagine a blockchain as a wall, nodes are the bricks it consists of. A node is an Internet-connected device supporting a blockchain by performing various tasks, from storing the data to verifying and processing transactions. Blockchains depend on nodes for efficiency, support, and security.
There is a number of choices you have to make about the nodes you will employ:
Tread carefully as some of the parameters can not be changed once the blockchain platform is already running. It’s a good idea to take your time and really think through the following:
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, not to worry: there are a lot of reliable blockchain API providers out there. Here are some of them for you to check out:
Communication is the key and a well-thought-out interface ensures a smooth communication between your blockchain and it’s participants.
Here are the things to consider at this stage:
Slowly but surely the law is catching up with the cryptocurrencies and you better protect yourself from any surprises by looking into the trends around the cryptocurrency regulations and the direction they are headed.
You’ve come so far, don’t stop now. Get a headstart into the future and think how you can boost your blockchain by tapping into the future-proof technologies like the Internet of Things, Data Analytics, Artificial Intelligence, Cognitive service, Machine Learning, Containers, Biometrics, Cloud, Bots and other inspiring developments.
As you can see, it takes a lot of time, resources and particular skills to build a blockchain. So what can you do if you don’t possess all of the above but still want to build your own cryptocurrency? Then it’s time to talk about Bitcoin forks.
It’s time for another basic definition to make sure that we speak the same language.
In layman’s terms, a blockchain fork is a software update. All blockchain participants (aka full nodes) run the same software and it’s crucial that they run the same version of that software to be able to access the shared ledger to verify transactions and ensure network security. Therefore, every time you want to change your blockchain parameters or introduce new features, you will need to create a fork.
Forks can be divided into hard and soft.
Hard forks require 90% to 95% percent of the nodes to update their software; the system will no longer accept the nodes running a non-updated version.
Soft forks are less demanding. Simply a majority of the nodes is required to update the software and those who run a previous version can continue to operate.
Now, the Bitcoin forks are the changes in the Bitcoin network protocol. Since the Bitcoin code is an open-source protocol, it is a low-lift exercise for those who want to create their own cryptocurrency and built on the existing by adding new features or addressing current imperfections.
If you don’t have any programming skills, services like ForkGen might be a perfect solution for you. ForkGen is an automated fork coin generator where anyone can create a unique Bitcoin offshoot by changing some parameters and rules.
If you want to take a hardcore way to create a Bitcoin fork and aren’t afraid to get your hands dirty, follow these steps:
Bitcoin forks are worth exploring if you want to start your own cryptocurrency leveraging the social and financial capital around the Bitcoin name. Some examples of successful Bitcoin forks include:
To sum it up, you have two ways to go about starting your own cryptocurrency: build a blockchain or create a fork.
To build a blockchain you need to:
To create a Bitcoin fork you can either:
Having read this far, you already have a fairly clear picture of what it takes to create a new blockchain. Before starting any new complex project it’s always a good idea to take a deep breath and evaluate once again if this is something you should be investing your time and money in.
So, how to establish if you even need a blockchain in the first place? Here is a list of question that will help you to answer this question before you make this commitment.
If you’ve answered “yes” to 3 and more of these questions, you will get all the benefits of a blockchain including:
While the benefits are numerous, the amount of work that goes into creating your own blockchain is significant and requires a wide range of knowledge and tools to execute all steps of the process in the most time- and cost-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.
Explore how your business can benefit from its own cryptocurrency and blockchain — schedule your free 30-min consultation with the Ezetech professionals now.