A Guide On How To Create Your Own Cryptocurrency (With Technical Details)
Introduction- Creating Your Own Cryptocurrency
There was a time when Gold and precious stones were considered to have the most value. It still is true. But, Cryptocurrencies are in much more in demand throughout the world than any other precious stones or metals. A cryptocurrency allows value to be transacted over the internet. Some of the most notable cryptocurrencies include
Cryptocurrencies operate on the Blockchain application development platform. The blockchain network is a highly transparent system. Information on the network is saved in individual blocks and is secured using cryptographic ciphers. Any attempt to make changes in the data will be recorded with the user details along with a timestamp. This makes the network difficult to breach and assures the users of a high level of data confidentiality. Ideally, the blockchain network has all the technological frameworks to support the smooth functioning of cryptocurrencies
Virtual currencies usually raise funds through an Initial Coin Offering process or ICO. It is similar to how companies raise capital for their operations. The initial coin offering process is done to promote the virtual currency and attract investors. The success of a cryptocurrency totally depends on how useful the token is. So defining the objective for creating the cryptocurrency is a very crucial exercise. If the objective is well defined by the owner, there is a better chance that the cryptocurrency becomes the next best thing online. On the other hand, there are many poorly defined digital currencies which could not attract any buyers from the crypto community.
How to Create your own cryptocurrency
Creating a cryptocurrency is very easy once you know the steps. Here are some guidelines for creating your own virtual currency.
Difference between a coin and a token
The first thing you need to know before kickstarting a blockchain project with your own virtual currency is to understand the difference between a coin and a token. Both these terms are often used interchangeably, but there is a vast difference between the two. This is the most basic thing everyone should be aware of in the cryptocurrency space.
A Coin will always have its own private blockchain network. For instance, Bitcoin is a cryptocoin. Bitcoin operates on its own personal blockchain network. Whereas, a token does not have its own designated or private blockchain. A token uses an existing blockchain network that is already up and running. Some examples of tokens are Kyber Network, Power Ledger, ETHLend, WePower, Restart Energy, DENT, Telcoin, DragonChain etc which all re ERC-20 tokens built on Ethereum Blockchain.
If you need to start your own virtual currency then you will have to choose between a coin or a token. If you plan on making a crypto token, then you can built it on existing blockchain network.
For creating Virtual currencies one may need a little background in coding. If not extensive, some basics will surely help. As mentioned above, the parameters of the virtual currencies need to be defined. This is the most fundamental and basic aspect when you are creating a cryptocurrency.
The objectives behind creating the crypto, the number of coins or tokens that will be in circulation, all these terms are defined in the Blockchain application development network by using the smart contracts functionality.
In a way, the smart contracts are similar to a company prospectus. These instructions will lay the ground rules for how the coin will behave when there is a transfer. The smart contracts also contain the information about the total number of coins the owner possesses, and how to send or receive these coins over the net.
The smart contracts are defined by accessing the Solidity IDE through the Ethereum GitHub handle. A major portion of codes for all the digital currency is the same. You only have to tweak (or change) the name of the currency, the symbol or ticker for the crypto, and decide how many coins will be in circulation. There is also a definition about the decimal places in the coin. This specifies how many times the coin can be further subdivided. The code also has the instructions for handing the wallets of the sender and receiver with the calculation logic to get the balance in wallets.
For handling the distribution of a virtual currency one needs to install a plugin called as the Metamask. Metamask is a bridge which allows users to make transactions with Ethereum tokens through regular websites. Every user that logs in with the metamask is also provided with a ‘mnemonic phrase’. This is a kind of security feature on the plugin. The mnemonic words allow the user to restore his wallet in case he is logged out of the system before the transaction is completed. The metamask also allows trading with fake virtual currency through an option called ‘Ropsten test network’. Any transaction done through this module does not affect the actual ethereum balance. After the transaction is done, the wallets are updated with the new balances. The contract is auto updated with the new values and a miner is alloted the contract for mining the tokens.
Initial Coin Offering
The Initial Coin Offering process marks the launch of the virtual currency. It is the procedure where the owner of the currency issues the coin or token to investors. Initial Coin Offering or ICO is similar to the IPO process followed by companies to raise capital. However, in the case of cryptocurrency, the investor is not entitled to ownership or dividends. The alloted crypto tokens or coins can be used by the investor for pay for using features of the project. The maximum number of coins that can be issued in the ICO is defined in the smart contracts. The entire process is carried out through a Decentralised Autonomous Organization or DAO. Investors participating with the ICO end up being a consumer for the services offered by the company issuing the cryptocurrency.
Disclaimers about Cryptocurrencies
- Cryptocurrency market is not yet completely established. The participants generally help in mining tokens and coins in return for some services. The payment for these services (to the company and the miners) is made by way of the cryptocurrency itself.
- The cryptocurrency market is an entirely unregulated space. In other words, there is no federal monitoring, tracking or managing of the currency fluctuations. There is absolutely no regulatory oversight in this domain. This makes it a little risky since it is already exhibited a potential to create a parallel economic system.
- Creating your own cryptocurrency might seem like a fun thing to do. However, there is no assurance that your cryptocurrency will become popular or raise funds like the Bitcoin.
- In many countries, there are laws against creating your own cryptocurrency. Many regulators explicitly forbid citizens from creating their own currency which can be used to substitute the legal currency.
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