Cryptocurrency is the word which is in buzz these days. News, blogs and even big-time financial authorities are obsessed over it.
If you are with this great innovative business idea or getting ready to launch a startup, and you want to embrace the exciting opportunities in the new world and want to create cryptocurrency.
Once you complete reading this article, you will know exactly what a cryptocurrency is, how a coin is different from a token, how to make your own cryptocurrency and whether your business needs it.
Before we start into the technical aspects of how to create your own cryptocurrency, we have to set our facts straight and should learn some basic definitions used in all cryptocurrency-related discussions.
What is a cryptocurrency?
A cryptocurrency can be defined as a digital or virtual currency dependent on encryption to generate new blocks and confirm the transactions.
Cryptocurrencies do not have banknotes, but they are digital coins, which are often confused with tokens. So what exactly is the difference between token and coin? The following are the three points which explain the difference.
- Coins need their own blockchain while tokens can operate on the existing blockchain.
- Tokens are limited to a specific project; coins can be used anywhere.
- Coins can buy you tokens but using tokens you cannot buy coins.
You need to build a blockchain if you want to create a crypto coin.
Benefits of having your own cryptocurrency
- Eliminating risks of fraud – It is impossible to counterfeit cryptocurrency and no party can reverse past transactions.
- Transaction anonymity – Customers can decide what exactly they want sellers to know about them.
- Cutting Operating costs – Cryptocurrency doesn’t charge you from the exchange or interest rates.
- Immediate transactions – Crypto transactions can process your transaction immediately it doesn’t get affected by state holidays, business hours or geographic location.
- Providing Security – Since cryptocurrency is a decentralized system, there is no regulatory or authority who can seize your assets.
How to Create a Blockchain?
1.) Determine your use-cases: You have to clearly define your business interests, like whether your business is to develop smart contracts, data authentication and verification or in smart asset management.
2.) Select a consensus mechanism: For your blockchain to function smoothly, the participating nodes must agree on which transactions should be considered valid and it should add to the block. Consensus mechanisms are the protocols which do the same thing. There are many to choose from the best, for your business objectives.
3.) Select a blockchain platform: Your selection of a blockchain platform will depend on the consensus mechanism you have selected. The following are the list of the most popular blockchain platforms:
- Waves (WAVES)
- BitShares 2.0
- Hyperledger Fabric
- IBM blockchain
4.) Create the Nodes: If you assume blockchain as a wall, then nodes are the bricks in the wall. A node is an Internet-connected appliance supporting a blockchain by executing various tasks, from storing the data to verifying and processing transactions. Blockchains depend on nodes for support, efficiency and security.
There are a number of choices you have to make about the nodes which you are going to employ:
a.) What are the nodes going to be in terms of permissions like private, public, or hybrid?
b.) Are they going to be hosted on the cloud, on premise or both?
c.) Select and obtain necessary hardware details, such as processors, disk size, memory, etc.
d.) Choose a base operating system (most common choices would be Windows, Ubuntu, Debian, Red Hat, CentOS, or Fedora)
5.) Establish your blockchain’s internal architecture: You have step carefully as few parameters cannot be changed once the blockchain platform is already running. It is a good idea to invest in your time and think through the following:
- Authorities (define the authority as to who can access the data, perform transactions and validate them, i.e., you have to create new blocks)
- Address formats (you have to decide what your blockchain addresses will look like)
- The format of the Key (decide on the key format which will be creating the signatures for the transactions)
- Asset issuance (establish the rules for building and placing all asset units)
- Re-issuance of Asset (establish the commands for creating more units of the open assets)
- Key administration (develop a system to save and protect the private keys allowing the blockchain access)
- Multisignatures (define the number of keys your blockchain will need to validate a transaction)
- Atomic swaps (plan for the smart contracts authorizing the exchange of different cryptocurrencies without a trusted third party)
- Parameters (measure maximum block size, bonuses for block mining, transaction limits, etc.)
- Native assets (determine the rules of a native currency issued in a blockchain)
- Block signatures (explain how the blockchain participants building blocks will be required to sign them)
- Hand-shaking (establish the rules of how the nodes will recognize themselves when correlating to each other)
6.) Take care of APIs: You have to make sure to check whether the blockchain platform of your choice renders the pre-built APIs. Even if your platform does not come with those, you don’t have to worry; there are various reliable blockchain API providers for you to check out:
- Coinbase’s API
- Blockchain APIs
7.) Create the Interface (Admin and User): Communication is the key and a well-built interface ensures smooth communication between your blockchain and it’s participants. Some of the things to be considered are:
- Web, mail and FTP servers
- External databases
8.) Make your cryptocurrency legal: You have to surely adhere with the law of cryptocurrencies and protect yourself from any shocks by looking into the trends around the cryptocurrency regulations and the direction they are headed.
You have come so far, don’t stop now. Get set to know, how you can promote your blockchain by tapping into the future-proof technologies like the Internet of Things (IoT), Data Analytics, Machine Learning, Artificial Intelligence (AI), Containers, Biometrics, Cloud, Bots, and other inspiring technological developments.
Main Steps of How to Make Your Own Cryptocurrency
You have two ways to start your own cryptocurrency- build a blockchain or create a fork.
To build a blockchain, you need to:
- Define how will it be applied in your business model
- Select upon a consensus mechanism
- Select a blockchain platform
- Create the blockchain and nodes properties
- Provide APIs for the tasks achieved on your blockchain
- Develop an intuitive and comprehensive User and Admin Interfaces
- The Legal side should be taken care of your business.
To build a Bitcoin fork you can either:
- Adopt an automated fork coin generator like ForkGen.
- Download the Bitcoin code
- Publish and manage your code.
Having read this article so far, you now have a relatively clear picture of what it takes to build a new blockchain. Before starting any new complicated project, it’s always a good idea to evaluate once again.