Topics Crypto
Bybit Learn
Bybit Learn
Intermediate
Aug 18, 2022

How to Create a Cryptocurrency: Step-by-Step Guide

Did you know there are over 20,000 cryptocurrencies listed on CoinMarketCap (as of August 2022)? Ever since Bitcoin hit the market in 2009, the global financial system has never been the same. With the rate at which new coins are entering the space, it seems easy to create your own cryptocurrency.

But before you rush into creating your own digital coin, you need to understand exactly what a cryptocurrency is and the technology behind it.

You may have a lot of questions about creating a cryptocurrency, such as: Is it legal to create a cryptocurrency? Do I create a crypto coin or crypto token? Where do I list my cryptocurrency? Do I need millions of dollars to launch a cryptocurrency?

We have the answers.

In this article, we dig deep into digital currencies and bring you a detailed guide on how to create a cryptocurrency.

What Is a Cryptocurrency?

A cryptocurrency is an electronic medium that allows the peer-to-peer transfer of value without the need for authority from third parties. Indeed, the decentralized nature of cryptocurrencies as one of its distinctive traits is what has lured many people like you into its world.

Digital currencies leverage blockchain technology to provide a faster and low-cost way to make payments (more so international payments), compared to traditional systems such as banks. Transparency through the ability to record transactions in a public ledger (the blockchain) adds to the charm of cryptocurrencies.

A cryptocurrency isn’t complete without a blockchain, a decentralized peer-to-peer (P2P) network comprising data blocks. These blocks conform to an internode communication protocol, validate new blocks and store information about transactions in the order in which they occur.

Here’s a closer look at how a blockchain works:

Source: Medium

Creating Crypto Coin vs. Crypto Token

Before you create your own cryptocurrency, you first need to know the difference between a crypto coin and a crypto token. While the two terms are often used interchangeably in the crypto world, they differ in some ways. Crypto coins are digital currencies designed to work within a particular blockchain, while crypto tokens are digital assets created by decentralized applications (DApps) and platforms built on top of an existing blockchain.

Coins are designed from scratch to function as a currency and are built on their blockchain. They are a form of transaction and function similarly to fiat currency. Coins store value and are an exchange means between two parties. For example, Bitcoin is a coin and not a token.

Meanwhile, crypto tokens are digital assets coded within smart contracts and used in DApps and platforms on an existing blockchain. For instance, ERC-20 tokens are built on top of the Ethereum blockchain. There are many types of tokens, such as gaming tokens, utility tokens such as stablecoins and governance tokens, and digital assets like non-fungible tokens (NFTs).

It is typically easier to create a token than a coin as tokens are built on existing blockchains. This means you can take advantage of the existing blockchain technology to create a token. Some tokens can even be created without coding! For example, the CoinTool app helps you generate an ERC-20 token with just a few clicks.

Methods for Creating Cryptocurrency

The following are the three ways to build a cryptocurrency, from most to least difficult:

  1. Develop your blockchain and cryptocurrency from scratch
  2. Make changes to the existing blockchain code
  3. Create a cryptocurrency to operate on an existing blockchain

These choices typically need technical knowledge, money and a team. For some cryptocurrency developers, more technologically advanced solutions provide greater customization.

Option 1: Develop Your Blockchain and Cryptocurrency From Scratch

By creating codes, you can build your own blockchain and create a native coin. This choice gives you the most creative flexibility and control over your coin, but it requires a significant level of technical skill in blockchain development. You’ll also need to invest money and time in developing the entire blockchain technology.

Option 2: Make Changes to the Existing Blockchain Code

You can develop your own cryptocurrency by altering an existing blockchain source code, also known as forking. Litecoin and Bitcoin Cash, for instance, were forked from Bitcoin.

This route will undoubtedly require you to have some technical expertise. Luckily, major blockchains such as Ethereum and EOS have open source codes that are easily available on GitHub.

After downloading and modifying the source code, you still need to collaborate with a blockchain auditor and seek an experienced attorney counsel. From there, you can begin creating your own cryptocurrency.

Option 3: Create a Cryptocurrency to Operate on an Existing Blockchain

If all you wish is to make a crypto token, you don't need to create a new blockchain platform or change an existing blockchain infrastructure. Platforms such as Ethereum are designed to allow people to build on their ecosystem. This option suits people who are unfamiliar with coding. The popular meme token, Shiba Inu token (SHIB), is an ERC-20 token made on the Ethereum blockchain.

How to Create a Cryptocurrency

Source: Deqode

The following is a step-by-step guide to creating a cryptocurrency:

1. Define Your Aims

What do you aim to achieve with your cryptocurrency? Do you want it to function as a monetary exchange or as a store of value?

From the start, you have to define your purpose for the digital currency with a clear use case in mind. Identify a problem and look for ways that your cryptocurrency coin can solve it from a new perspective.

For example, the creators of CELO, a mobile-based crypto token, recognized that smartphone users could be key to the mass adoption of cryptocurrencies. So they created a token that lets anyone with a mobile device send payments using addresses on their contact list.

Another good example is Bitcoin, which was developed as a decentralized substitute for fiat currencies following the 2008 global recession. Ethereum, by contrast, was built as a platform that fosters the creation of decentralized apps (DApps) by programmers.

After deciding what you want to accomplish with your digital coin, the next step is to name it and design its logo. A logo is the face of your coin and helps it stand out among other brands.

Next is a critical part of your cryptocurrency project: The creation of a white paper. The first stopover for most investors in the crypto space is a currency’s white paper. This document digs deep into cryptocurrency and provides detailed information about it.

It often includes a statement of the problem, the solution, the crypto’s ecosystem and the tokenomics of your coin. You can write a white paper or hire experts to do it for you.

You’ll also need a website and social media accounts for your cryptocurrency. Once the white paper is ready, include it on the website together with an “About” page and other essential information about your coin.

Lastly, to entice people to invest in your project during the initial coin offering (ICO) or initial dex offering (IDO), make sure that all documentation regarding your project is simple, clear and free of excessive technical jargon.

2. Design a Consensus Mechanism

Next is to select a method for reaching a consensus on the validation of your cryptocurrency transactions. A consensus mechanism provides a system for nodes on a computer network to agree on the validity of transactions to help secure that network.

The two most common consensus mechanisms are proof of work (PoW) and proof of stake (PoS). They differ in various ways as shown below:

Source: LeewayHertz

Initially, PoW was the commonly used method. It’s a computer-heavy protocol that underpins the Bitcoin blockchain and many other cryptocurrencies. Miners engage in a cutthroat competition to solve a mathematical puzzle on the PoW system to verify transactions. A reward in the form of cryptocurrencies is awarded to the miner who successfully adds to the blockchain block.

However, the PoW consensus mechanism has come under serious criticism due to its electricity consumption and concomitant strain on the environment. Consequently, mechanisms that are less heavy on computing resources have been developed. PoS, in which a validator confirms transactions by staking coins rather than through competitive mining, is viewed as a credible alternative to PoW.

You can also opt for other consensus mechanisms that are available in the blockchain space. Delegated proof of stake (DPoS) is a popular version of PoS used by Tron and EOSIO. There are also the proof of authority (PoA) and proof of burn (PoB) consensus mechanisms.

3. Choose a Blockchain

Regardless of the method of creating a cryptocurrency that you settle on, you need to have a blockchain. Depending on the consensus mechanism you feel best suits your cryptocurrency, you’ll need to pick an existing blockchain platform that supports it. For example, if you want to use a PoS algorithm, then you can opt for the Cardano or the Near blockchain.

There are four main types of blockchains: Public, private, hybrid and consortium. Have a look at the details of each below:

Source: TechTarget

If you’re creating a cryptocurrency for private use, then a permissioned blockchain is necessary, rather than a public blockchain that can be accessed by anyone on the web.

4. Create the Nodes

Once you’ve decided on a platform, the next step is downloading the necessary software and configuring a node. Nodes are the devices that run a blockchain’s software. A node computer participates in validating and relaying transactions and storing the transaction history on the blockchain.

There are many types of nodes available to validate crypto transactions. When you create your cryptocurrency it is important for you to know which types of nodes you want for your blockchain.

Remember, creating a node from scratch needs advanced technical skills. Most blockchains have an existing node structure used to validate transactions.

5. Establish the Blockchain Architecture

In this phase, you plan the internal workings of your cryptocurrency's infrastructure. How will your cryptocurrency’s network operate? This caters to things such as the transactions' format, the network protocol and the consensus algorithm.

If you opt to build your cryptocurrency on an existing blockchain, you’ll benefit from its existing architecture. Most major blockchains have an immutable, proven, decentralized cryptographic architecture.

A basic blockchain architecture looks like this:

Source: Blockgeeks

Additionally, you need to come up with your coin’s tokenomics at this point. How many coins do you intend to produce? What will be the size of the circulating supply? Careful consideration of tokenomics factors is essential for successful cryptocurrency creation.

Always strike a balance. Whenever there is an excessive number of coins in circulation, the coin may have a low value. In contrast, fewer coins might be expensive for investors to buy into them.

6. Integrate APIs

After designing your cryptocurrency's internal architecture, the next is to incorporate the application programming interfaces (APIs). An API provides a channel of communication between nodes in a network and also helps make software intelligible to end users).

Integrating an API plays an important role in ensuring the security and privacy of your cryptocurrency. APIs also ensure collaboration within the blockchain, especially when carrying out transactions.

When selecting an API, ensure that your preferred blockchain has functionality for it. For instance, if you’re using a PoW blockchain, you’ll need to integrate the Bitcoin API.

7. Design the Interface

For crypto adoption success, the interfaces used must be simple and beautiful to look at. A well-designed crypto interface draws in new users and adds to a customer’s experience.

Have an intuitive user interface for your crypto. Remember cryptocurrencies are already a complex subject. So, users are looking for a user-friendly and easy-to-navigate interface for their crypto transactions.

Dribbble and Fireart are good sources for inspiration for your cryptocurrency interface.

8. Generate a Wallet Address

Once you’ve installed the node, the next step is to build a wallet address to facilitate transactions. A wallet address is a unique string of letters and numbers associated with a particular cryptocurrency.

You can create a wallet address by utilizing an online service or an installed program on your local computer.

9. Make Your Cryptocurrency Legal

While cryptocurrency started free from government interference, the field has been attracting a lot of attention from regulators. The legality and regulations around cryptocurrencies differ, depending on the jurisdiction.

Don’t mint your own crypto coin if you aren’t in a crypto-friendly country. And before creating your ICO, start researching on whether ICOs are allowed in your country. You can engage a legal advisor to obtain the right information. Also, at the bottom of your coin’s white paper, ensure that you capture the legal aspects of your project.

Source: ComplyAdvantage

10. Grow Your Cryptocurrency

To ensure the success of your cryptocurrency creation, you need to market it. To create buzz around the coin, you can announce airdrops on your official social media accounts. You can also engage influencers to market the cryptocurrency to their followers.

You’ll need to create an active and vibrant crypto community on social media channels, such as Telegram, Reddit and Twitter. You can promote your coin’s ICO by having a strong white paper, or hire a marketing firm to do the job. You can also have an airdrop campaign, similar to Arbitrum’s Odyssey airdrop to market their project.

Once your cryptocurrency is up and running, you need to regularly audit the system to build credibility and trust with your crypto’s users.

How Much Does It Cost to Create a Cryptocurrency?

The cost of creating your own coin depends on the complexity of the project. For crypto coins (which are considered more flexible and secure), the cost is higher due to the immense initial development costs and recurring maintenance costs.

It can cost you between $10,000 and $30,000 to create a new crypto coin, and the cost may go higher depending on its level of customization.

You’ll need to hire a blockchain developer and other crypto experts, including designers and legal advisors, to help with creation. The average rate for a blockchain developer around the world is between $81 and $100 per hour.

Below is a basic budget breakdown of creating a cryptocurrency coin:

Source: 4IRE

Crypto tokens, on the other hand, are cheaper and easier to create since you only need to develop and deploy a smart contract. With as little as $500, you can deploy an extremely basic smart contract to create a crypto token.

How Long Does It Take to Create a Cryptocurrency?

Depending on the difficulty level, cryptocurrency development from the ground up can take from one to six months. Your level of technical expertise directly correlates to the time needed to edit the existing cryptographic code.

Building a basic cryptocurrency with automated tools only takes a few minutes. You can copy Bitcoin's code, add a variable, or modify a value for your own blockchain and coin. However, changing the code takes substantial coding expertise.

Another challenge is maintaining, supporting and promoting the coin, since you must build your own blockchain logic to start your coin. Hiring experts can reduce time, but you'll have to pay for specialized software development.

Why Create Your Own Cryptocurrency?

Cryptocurrencies are increasingly disrupting various industries, such as entertainment, sports, supply chain and many others. With the imminent transition from web2 to web3, the crypto industry will continue to expand.

Coincidentally, there’s a growing number of corporations turning to blockchain technology to develop original solutions to complex business problems. Whether you’re a company or a personal brand, there are several reasons to create your own cryptocurrency.

Financial Freedom

Cryptocurrencies aren’t controlled by centralized financial institutions, such as central banks. There’s more financial flexibility around creating and managing your money. You can tailor the currency's functionality to specific business operations.

If you’re in a business involved in international trade, having your own cryptocurrency can ensure fast cross-border payments at a lower cost, compared to using banks and other traditional financial systems such as SWIFT.

Business Branding

Having a cryptocurrency increases the value of your brand. It’s no wonder that big brands such as Tesla, JPMorgan, Meta and many others are incorporating cryptocurrencies into their long-term strategies.

Having your own cryptocurrency provides an edge over the competition through increased efficiency and superior customer experience. Customers have the impression that you’re knowledgeable about technology (which you are, or will be), which increases their confidence in you. You also provide a payment alternative for global customers, including unbanked users.

Project Crowdfunding

Cryptocurrencies are a superb way to raise funds for a project. Whether you need to finance your company early, or want to start a crowdfunding campaign, issuing your cryptocurrency will be a means to reach potential investors.

You may decide to have an ICO or an IDO to raise funds for your operations from public or private investors.

Security and Savings

Since crypto is a global currency, you save on currency conversion and transaction fees that come with international payments. Moreover, your currency isn’t subject to inflationary measures.

It’s the Future

The adoption of cryptocurrencies and blockchain is growing. As fiat currencies continue to grapple with a myriad of challenges, such as centralization and lack of privacy, digital currencies are providing an attractive alternative.

Three Best Cryptocurrencies in the Market

Bitcoin

No matter how many cryptocurrencies are launched, Bitcoin (BTC) still rules supreme in the space. As the first still-existing coin to enter the cryptocurrency market, Bitcoin’s value has grown tremendously and has experienced remarkable year-on-year gains.

As both a blockchain and coin, Bitcoin provides a decentralized platform that facilitates the anonymous and transparent transfer of value.

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Ethereum

Ethereum (ETH) introduced the concept of smart contracts and DApps to the crypto world, broadening the capabilities of blockchain and cryptocurrency.

Ethereum charges a gas fee to facilitate validation of transactions on its network. The overwhelming popularity of Ethereum has led to network congestion, which consequently resulted in high gas fees and slow transaction speeds.

But with its upgrade to a PoS consensus mechanism through Ethereum 2.0, the network will potentially be able to scale, thereby increasing transaction speed and lowering gas fees.

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Tether

Tether (USDT) is a token that’s pegged to the U.S. dollar at a 1:1 ratio. The Tether stablecoin is issued on multiple blockchains, such as Algorand, Ethereum and Tron.

As one of the most popular stablecoins, Tether was created to cushion crypto users from the volatility of the crypto market. It enjoys a high trading volume, and users can hold it on different crypto platforms to earn interest.

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Closing Thoughts

Learning how to create a cryptocurrency is no easy feat. As much as you may want to have your own cryptocurrency, it takes a considerable amount of time and resources. You’ll need to create complicated codes, immerse yourself into a fundamental understanding of blockchain technology and have a solid marketing plan. Even with all that preparation, the cryptocurrency you create may not bring about success.

Luckily, you don’t need to learn code to own cryptocurrency. You can sign up on cryptocurrency exchanges and start trading crypto in minutes.

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