The digitalization of the global economy is accelerating, especially due to the COVID-19 pandemic. And since the whole world is already on the transition to digital space, digital money is not the exception.
An estimated 70% of the new value created in the economy over the next decade will be based on digitally enabled business models. And since digital currencies might help to boost businesses, knowledge of how to create a cryptocurrency might be very useful.
However, creating a proper one requires knowledge or hiring an experienced team. In this article, we will review the basic and fundamental steps of how to create a cryptocurrency including strategic, technical, and marketing parts that you should consider before the start.
The key steps of creating a cryptocurrency include:
- Defining a coin
- Setting up a budget
- Building a developer team
- Deploying a smart contract
- Requesting the external audit
- Writing a white paper
- Creating a marketing strategy
Why do you need cryptocurrency?
There are various reasons for having your own cryptocurrency, and so are the benefits. If your project requires its own blockchain, creating your own virtual currency is a must in order to encourage the nodes to contribute their processing power.
However, if your business does not require a blockchain, creating a cryptocurrency might also help to differentiate from the competition and add some significant advantages like the elimination of fraud risk, transaction anonymity, cheaper and faster transactions.
The differences between coins and tokens
But first of all, it is important to understand the difference between the two basic forms of cryptocurrencies: coins and tokens. The decision which one to use is an important choice which sets a lot for future projects, including the number of funds you need to invest into it.
Both coins and tokens are cryptocurrencies, but the first one – a coin (like Bitcoin or Litecoin) operates on its own blockchain, meanwhile, a token is built on top of an existing blockchain like Ethereum. Creating a coin requires building a blockchain at first, which makes the process highly expensive and time-consuming. Creating the token though is a cheaper and faster option as all you need to do is to use the existing network and modify it for the new currency.
And since the code of tokens might be easy to access on sites like Github or DevelopCoins, the process of creating one still requires technical knowledge or the help of experienced developers. Here one of the most common ways to create a token is to use the ERC-20 standard and build it on the Ethereum blockchain.
However, if you are not a developer by yourself and have little experience in writing codes, it is best to find a competent team that could help in creating the proper new cryptocurrency.
How to create your own cryptocurrency?
Generally speaking, the cryptocurrency creation process itself can even be fast, as you could just copy the code and modify it if you have advanced coding skills or a good friend that has them. However, the professional approach contains more fundamentals that need to be evaluated.
Although creating a cryptocurrency is a deeply technical process, it also requires a lot of strategic thinking. Creating a coin might be even compared to creating a startup, where first and foremost you need a business plan.
In short, here are the steps that you need to consider before diving into the digital coin development process.
1. Define you coin
First and foremost thing you need to consider what is the definition of your digital coin. What are the reasons for creating them? Maybe you would like to replace an actual fiat currency, or use a digital coin as a utility asset?
Define the problem you want to solve with your future cryptocurrency. Knowing the very specific function that the coin is going to perform, might be more than helpful in creating a really useful and thus needed coin, that helps to achieve a certain objective. This will also help to make it easier marketable to the crypto community.
2. Set up a budget
Although the idea of cryptocurrency is the key factor, the finances are not less important. Since creating your own cryptocurrency means you will need to deal with the development and documentation as well as with legal counseling, security audit, and marketing, setting up a budget is necessary.
You’ll need adequate capital to get yourself off the ground. Although it can be different to know the exact amount depending on various factors like the country you are based in and the average local prices, you need to do research to find out the approximate necessary capital or get some investors on board.
3. Build a developer team
No matter how good the idea is, it is usually impossible to fulfill it only by yourself. Like building a business, creating a cryptocurrency requires various aspects of experience and knowledge. This is why establishing a professional and reliable developer team is the next key factor to have in mind.
Probably the best way to make the contacts you need is to involve yourself more in the blockchain community. By doing so you could meet qualified specialists, build new relationships within the industry, discuss the ideas, and get feedback that might benefit your cryptocurrency development process.
4. Deploy a smart contract
When you have completed the initial steps, there comes a time for more technical tasks. The first of them is to deploy a smart contract, or a code, that determines the agreement between two parties and allows the operations and transactions among them.
This means that without a smart contract, the blockchain will not be able to operate fluently, as nodes won’t be capable of understanding which operations they have to consider as legitimate ones in order to add them to the block.
The code controls the execution and makes these transactions transparent, traceable, and irreversible. It does not require a certain authority or any external enforcement. Generally speaking, it does not require any intermediary to execute operations, since the smart contracts operate in an automatic manner and the code is verified by all the participants themselves. This allows for reducing costs for the counterparties as well.
Setting the right smart contract rules is a very important step here, as the whole performance of your cryptocurrency depends on them. The stage of technical building requires specific knowledge and clear vision of how your project should operate and look like.
5. Request the external audit
Although smart contracts are transparent and traceable, they still are just codes that need to be verified and you need to be sure that they are secure. This is why any cryptocurrency or blockchain creator should order a professional external security audit.
There are various kinds of smart contract attacks and decentralized systems are vulnerable to hacks. Thus the importance of professional and independent security audits is critical to decentralized systems.
The external audit investigates code to find flaws and vulnerabilities and solves them before the code is publicly deployed. Verification that the blockchain system is working as intended finally brings legitimacy to the project.
6. Write a White Paper
The white paper is a technical and in-depth document of the project that informs about the problem that the product or service is going to solve, as well as presents the detailed description of its technology and methods of operation. It is meant to acquaint readers with the corresponding issue, help them to understand it, or even make a decision.
Since white paper answers the questions what does the project do, how does it work and why is it needed, it is one of the most effective forms of content used for your cryptocurrency Initial Coin Offering (ICO) marketing. The well written white paper should be solution-focused and include:
- Market overview and thorough analysis.
- The description of the existing problem.
- A detailed explanation of the cryptocurrency project and its benefits.
- Token description and distribution details.
- Realistic financial plan of how the raised funds will be used.
- Team presentation.
- The roadmap.
The proper white paper should consist of at least 2.500 words and should be written in a more academic style. Besides, it should generally follow a standard document format like PDF.
7. Create a marketing strategy
No matter how good, or shiny, or innovative your cryptocurrency is, it may get lost within dozens of other similar coins since the competition in the decentralized sector is already tough and growing.
If no one knows about your cryptocurrency project, it could be hard to break through and grow the network. Moreover, it might get impossible to attract investors and raise funds during your Initial Coin Offering (ICO). This is why it is necessary to have a good marketing strategy that may help to stand out, gain attention, and grow.
The proper marketing strategy should create buzz and make awareness of your cryptocurrency project. It may vary depending on your audience and budget, however, key elements remain the same. Here is the list of marketing tools you may use for your cryptocurrency marketing:
- Website. The secure website that presents the project simply and clearly adds credibility and is a must.
- Blogging. Your expert opinion adds value to the crypto community, improves your brand awareness and even gives organic traffic to your website.
- Social media. Use platforms like Youtube, Linkedin, Twitter, Reddit, Discord, Facebook or others to create content and share expertise, engage with users and attract new ones.
- SEO. Use SEO tools to increase traffic to your website through organic search engine results.
- Conferences and industry events. Attending them is a great way for networking, where you could present your project or even find potential investors.
- Public relations. Press releases, interviews, comments on particular topics also help to gain more media coverage and increase your project awareness.
There are hundreds of virtual coins and tokens available, some of them are acting as catalysts to market sectors and the economies. Since cryptocurrencies are becoming more and more mainstream, the importance of them is also growing.
Although yet sufficiently volatile, digital currencies serve on various purposes like raising capital or rewarding users, acting like a governance tool that allows voting for blockchain development or cutting out the middlemen. The majority of them are created to solve the existing problems, and since the digitization is still in progress, it is quite likely that even more new cryptocurrencies will appear in the future.
Creating a brand new coin is not a rocket science, though it is a complex process that requires both broad and specific technical knowledge. It even can be compared with a startup creation, where various factors should be considered. Brand strategy, financial plan, legal counseling, marketing and promoting are equally important parts alongside coding for those who dream of how to create a cryptocurrency.