As everyone seems to have gone “crypto-bonkers” these days, I decided to look deeper into how to create a cryptocurrency and look at if it is possible to create a currency within 24 hours.
The subject has been hot with the techy and first-mover crowd for a number of years. As we all know it’s now gone mainstream with even your granny checking her Etherium values.
A quick google on “how many cryptocurrencies are there”, reveals some intereesting facts. They seem to be growing over time.
What is a digital currency?
This is an interesting question because there seems to be a debate going that Bitcoin is not really a cryptocurrency, but a digital asset.
I am going to define it as:
- Transactions must take part over the Internet
- They may or not be anonymous.
- The ownership of the currency is distributed or decentralised.
Also a specific unit of a digital, persistent entity which comes under the control and ownership of one person or legal group, where ownership is transferable.
There will be exceptions to this rule of course.
This is my own definition without spending hours on what others are defining it as, another rabbit hole we could go down. It would be interesting and warm, which is why the rabbit hole is attractive. But does not serve our purpose of focusing on the build and not on philosophical discussions which last long into the night and require many trips to the all-night garage for Chocolate Hobnobs.
I want to focus on being able to answer two questions.
1. How do you build a cryptocurrency?
2. How do you increase the value of a cryptocurrency?
How to build a cryptocurrency
I am starting from virtually zero knowledge, I know certain terms like “blockchain” and “mining” are keywords so lets do a deep dive on the subject.
I am going to deal with the technical issues around creating a cryptocurrency, rather than a wider discussion around what is and what it isn’t. This should help focus on the end goal of creating one, as I think we know enough to move forward.
Discovered there are two options to go with.
1. Create a completely new currency
2. Create a fork from a current currency
Creating a brand new cryptocurrency means having full control over the currency but it seems like the level of expertise you need to implement is very high if you are not a technically savvy individual.
- You have more options to create something different, which stands out
- You can choose between miners and minters (will explain what these are later) and base the rewards to the level you want.
- You can define how much currency will be available and the block size.
I think most will want to create their own currency, it sounds a lot more fun and a step closer to creating your own nation-state and becoming King.
Creating a fork of a current digital currency.
- Increased security from fraud
- Access to exchanges which already take the parent currency
- No coding pain, saving time and effort
Questions to consider whilst building a cryptocurrency
- What is the point of your cryptocurrency? With the market full of alternatives, what is the hook which makes yours stand out from the crowd?
- What are the benefits of buying your currency?
- If building your own cryptocurrency, do you have a build plan and are aware of the issues around building your own?
- How can you break it? You need to have the best security and make sure it works, just like any other app you need to test, hack and try to break it, to allow you to create a more durable system.
- Modify your expectations. Thinking this will make you a billionaire may be a tad optimistic. Much better to see it as an educational experience and even a bit of fun.
- You will need other people. This is not really a solo project. Other people will need to involve themselves in the currency for it to be viable.
How to create a Bitcoin fork
Called “forkcoins”, or “Initial Fork Offerings”, creating forks in cryptocurrency is a popular endeavor and quite a lot of information to do this is available on the web. There is a service which will set it up for you at the cost of 0.01 Bitcoin. You still need to be aware of how the Bitcoin Core software works, as there are some important issues you need to be aware of when running a fork or creating an altcoin and you should carefully read the faq.
There are quite a few resources and guides to creating a Bitcoin fork. Most cryptocurrencies seem to be based on clones of Bitcoin and more importantly most of failed.
Creating your own cryptocurrency
Read the original white paper from the creator of Bitcoin, Satoshi Nakamoto
This gives an insight into the intention and vision of the original crypto
Most cryptocurrencies are based on the same open source code of Bitcoin Litecoin, available to anyone on Github
The act of setting up the code can be done in a day and that the setting up of the system is relatively easy or hard depending on your coding skill level.
And it’s even easier if you want to create a fork in a current crypto with the easy to use apps which are popping up.
What is hard is creating a community of people who back the currency and are willing to host the blockchain.
The biggest part of getting a crypto to truly work is people and how they perceive the currency. This is very interesting as it adds an element of social engineering or even marketing to the build.
Technical types who are comfortable with code, may not be as comfortable persuading people to use their currency and help with building its perceived value. Obviously, this is where the smooth-talking salesman can make a quick, unethical buck and use their persuasion skills to pump up the price of a new crypto, dump their coins and then abandon the project.
Trust and reputation seem to be a big part of building a successful cryptocurrency and whilst we have lots of social tools to enable people to be reached, there is the fact of a distracted crowd and an oversupply of digital currencies which pretty much all do the same thing.
There is a healthy dose of scepticism around cryptocurrencies and the people who push them. Why would anyone invest in a crypto which does the same as the others and has no community.
It seems that a lot of the new currencies are stealth launched, in that they already have a healthy community to support the currency.
It looks like Steemit, has a great idea, allowing users to publish content and be rewarded by the community based on the value of the content. Here is my Steemit blog, it’s still early days with the system, but it is supporting a viable currency whilst others choke and die. Although a crypto that is older than two years is considered ancient.
It may be that those with a unique and exciting idea in which to underpin a cryptocurrency with will be more likely to thrive and survive than those who simply push out a technically fine currency, but with no community support.
A good example of creating a digital asset which creates a community is the Crypto Kitties, of course, it’s ridiculous. But ridiculous gets talked about and people love the ridiculous, remember the durability of a currency has to have people behind it.
6. Ethereum Classic
11. Bitcoin Cash
19. Bitcoin Gold
The common denominator of these popular currencies is sustainability. They work and don’t break. This is the foundation we should aim for when creating our own, new cryptocurrency.
Cryptocurrency markets and exchanges
How to create a decentralised application
A key thing about a cryptocurrency is that it is decentralised. Meaning the ledger of who owns what is not stored in one place but is shared in many places. This is what gives a crypto security and independence from a central authority.Most of the time when you create an app it is centralised, but what if you could create apps that are not.
It means that the perception of the currency is based on its rules, the codification of which is share with many participants. The enablers of this are called miners.
In a sense it is crowd sourcing the perceived value of something.
Creating a decentralised application seems to be the way to go in creating a crytptocurrency. Here’s an interesting video on the theory and practical application of creating a decentralised app.
If you have a few years of coding and web dev experience, it seems with a little time and effort you could create your own currency. However, building that currency into something of value takes vision, leadership and community skills.
It is very tempting for anyone in the tech world to try this stuff out and many have. I am quite intrigued by how the whole digital, valuation system works and will be exploring more in depth and will be creating my own asset. Not a digital currency as such, but something similar. Something a bit different