In October, the price of Shiba Inu (SHIB) spiked and turned many into millionaires. Before SHIB there was Dogecoin, and before that there was Bitcoin. Cryptocurrency has caused strong ripples in the world and is on the lips of every investor.
If you’re reading this article, you might be an investor who wants a more active role in the crypto space or you might be a brilliant tech developer or entrepreneur. Either way, you want to develop your own cryptocurrency and need a guide on how to do it.
The Difference Between Coin and Token
You should know the difference between coin and token before you begin.
Coins and tokens are both cryptocurrencies and are similar in many ways. A coin can be swapped for a token and vice versa. Both are also used to make payments. The difference between them lies in how they are used.
Coins are virtual forms of banknotes. They are used to purchase assets and can be changed back to real money (liquidized). In comparison, tokens verify that a transaction has been made.
A new blockchain is developed for a coin while a token uses an existing blockchain. An example of a token is Tether (USDT) which uses the Ethereum blockchain.
A token physically changes location when exchanged. A coin, however, remains in your account although your wallet balance has changed. For example, when you transfer Bitcoin, it does not actually leave your account. Your wallet balance is just changed and the blockchain records the transaction. But a token such as NFTs (Non-fungible tokens) moves physically.
In the real world, a voucher or coupon is a token while your cash is a coin. Both can be used for payment but in different ways.
Creating A Cryptocurrency
There are two ways to create a cryptocurrency. If you want to create a coin, you will need to develop a blockchain from scratch. This requires extensive coding skills and a big budget.
To create a token, you will need to fork from an existing blockchain. Forking can be compared to a software update. Most blockchains are open source so you can access their source code. Using software tools, you can add new coding to the source code which would be used for your token.
Benefits of developing your cryptocurrency
Cryptocurrencies cannot be tracked or controlled by financial institutions. This makes it easy to develop your crypto according to what your business requires. It can also help you conduct international trades without worrying about unnecessary costs.
Having a cryptocurrency gives your business a certain appeal to customers. It shows you are keeping up with trends and could make customers’ trust your business more. You also have better payment options to offer them.
Initial coin offerings (ICO) are similar to Initial Public Offerings (IPO) but are solely for cryptocurrency startups. Creating your coin would help you to reach more investors who might be interested in your project. There is always a chance that it could be the next big thing.
A blockchain is far more secure than traditional banking. All transactions can be tracked and it is difficult to tamper with. You also get to save up on bank fees, international tax, and other transaction fees.
Cryptocurrency is on the rise and the financial markets are accepting it. Coinmarketcaps lists 13,792 cryptocurrencies on its site.
Your business would also be able to leverage future opportunities. The cryptocurrency trend is on the rise and is not going to end soon.
How To Create A Blockchain
If you have decided to create a coin, you will need to create a new blockchain for it. Here are eight steps for developing a blockchain.
1. Know your use-case
Having clear objectives before you begin a blockchain project is important. Pick a niche that your business will occupy. Would it be smart asset management or smart contracts? Do your research carefully.
2. Choose a consensus mechanism
Consensus mechanisms are protocols that decide whether transactions are legitimate or not. This is an important part of the blockchain because it eliminates the need for a third party.
There are many you can choose from including, Proof-of-stake, proof-of-work, and deregulated proof-of-work. Ethereum uses proof-of-work. But according to Ethereum’s founder, Vitalik Buterin, Ethereum will switch to proof-of-stake by 2023.
3. Pick a blockchain platform
The consensus mechanism you choose determines the blockchain platform for your coin. Here are some top platforms you can choose from:
4. Design the nodes
Nodes are devices that support your blockchain. They perform various tasks such as storing data and providing security. Ensure you satisfy certain parameters such as user permissions, host, and operating system.
5. Create the internal architecture for your blockchain
Do a double check on all the parameters and be sure about what you decide on. When your blockchain is launched, you won’t be able to change several parameters that have already been chosen.
6. Take care of the APIs
Blockchain platforms usually provide APIs but some do not. Do a check to find out whether the APIs are available. If the platform does not provide any, you will need to get one from an API provider.
7. Design the admin and user interface
When developing software, the user interface will make or break you. A neat, easy-to-use interface will make communication between blockchain and users much smoother.
8. Make your cryptocurrency legal
Countries all over the world are seeking better, and stricter, regulations on cryptocurrency. China has signed regulation policies that ban cryptocurrency and it is not the only country doing so. Protect yourself by keeping up to date with the legal trends and off the radar of national agencies.
Developing a cryptocurrency has both challenging and easy aspects to it. There are several tools and video tutorials online to aid you. Professional blockchain developers can also be hired to quicken the pace and reduce errors.
There are several benefits of creating your own cryptocurrency and the sectors you can invest in are just as many. The results, in the end, justify the effort.