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The 7 Steps to Develop and Create Cryptocurrency

Cryptocurrency is a great opportunity for a startup that wants to make the most out of blockchain technology, and getting started is actually easy.

Bob Leibholz

By Bob Leibholz

As SVP of Business Development, Bob Leibholz uses his expertise to create proactive expansion and development plans to accelerate key company growth.

10 min read

At face value, it would seem that entering the crypto market after 2022 would be irrational. We’ve seen some of the biggest names in the business freeze their assets, close their doors and come crashing down like a meteorite. But where there is a crisis, there is also an opportunity.

Cryptocurrency, or crypto, is an innovative technology that has been around since 2009, the basis for which dates all the way back to at least 1983. It’s a decentralized form of currency that relies on a digital ledger (known as blockchain) to keep track of the transaction and ownership of each unit.

To call the crypto market a complex and convoluted system would be an understatement. There is so much going on under the hood that a whole book wouldn’t be sufficient to cover all the basics. Fortunately, you don’t need a Ph.D. to create a cryptocurrency token or app. In fact, even creating your own cryptocurrency is actually a very straightforward process. But should you?

Why Cryptocurrencies?

With a fluctuating market, distrust toward crypto (anything web 3.0 related), and a genuine preoccupation with the energy costs of blockchain, it would seem like this isn’t the best time to get involved. But, everything that’s going on is actually a very good thing. Hear me out.

The bad rep cryptocurrency is getting isn’t a byproduct of the technology itself, but rather the get-rich-quick culture that has surrounded it. Some readers might be too young to remember, but those of us who were there to see the rise of the world wide web remember the dot-com bubble and the crash that followed in the late ’90s.

In short, thanks to the low interest rates of the 1980s, we saw exponential growth in startups. Many of the new enterprises saw an opportunity in a disruptive technology called the internet. This translated to a massive surge in e-commerce, and for many companies this was their catapult toward success (Amazon for example). Many others died out, unable to become profitable in a market that was beyond saturated.

On top of it all, we saw everything from impossible promises (at least at the time) to scams and ill-defined projects. Sound familiar? New technologies bring both dreamers and opportunists who rely on the potential of the tech to sell a possibility, a dream, a mirage. 

But such lofty promises are unsustainable in the long term, and the inevitable crash ends up separating the wheat from the chaff. The dot-com craze gave us PayPal, Google, Amazon, and dozens of companies that grew way beyond their initial idea. 

Cryptocurrency is going through its painful adolescence, and that’s a good thing, as these shake-ups are necessary for a market to mature and grow. There are plenty of reasons to be carefully optimistic about the future to come. 

The Easiest Way to Create a Cryptocurrency

There are many approaches one could take to build a cryptocurrency. The history of Bitcoin is evidence of just how convoluted and complex it can be. Fortunately, thanks to the growing popularity of the technology, the process has been streamlined to the point where you can summarize it in seven steps:

1. Define Your Objectives. 

The first step is determining why you want to create a cryptocurrency. Not everyone who starts a project like this is trying to topple Ethereum and Bitcoin as the reigning champions. Sometimes you want something small; for example, cryptos are great for building brand awareness, raising capital, or as a foundation for a rewards program.

Your objective will help you understand the scale of the project and choose the best approach in each of the following steps.

2. Choose a Consensus Algorithm

Since cryptocurrency is decentralized, you need a process to validate each transaction on the blockchain. The two most common consensus methods are proof of work and proof of stake. 

With proof of work, several workers (AKA miners) compete to validate a transaction, and whoever finishes the calculations first is awarded a token or a coin for their effort. With proof of stake, each worker bets a certain amount of resources; the higher the amount the bigger the chance of calling the shots, and if the worker makes a mistake, they lose their stake.

While proof of work is by far the most secure method, proof of stake is ecologically friendlier. There is no right or wrong answer here.

3. Choose a Blockchain Platform.

Yes, you could build your own blockchain from the ground up. But there are easier ways to create your own cryptocurrency. You could either grab the source code of an open-source blockchain platform and use it as a basis for your own blockchain, or you can use already existing blockchains.

Which blockchain to choose depends on your decision in the last step. Cardano and Polkadot are well-known proof of stake solutions. Ethereum, probably the most popular blockchain on the planet, is proof of work, but they are migrating their operations toward proof of stake. 

4. Create the Nodes

Nodes are the computers that participate in the blockchain network. They run the software protocol, validate transactions and keep the network secure. 

You have to make a few choices at this step: Will the nodes be public or private? Will you have them on site or in the cloud? How many nodes? Which operating system are they going to run?

5. Design the Internal Architecture

Now you have to build the internal architecture. This step is extremely important since once you go online there is no turning back. Aside from the technical aspect, you must make some important decisions regarding accessibility and the economy of your currency:

  • Define who can access, create, and validate new blocks;
  • Create the rules for asset issuance;
  • Build a management system for private key protection and storage;
  • Decide on the number of digital signatures your blockchain will require to verify the transactions;
  • Estimate the block reward, block size, transaction limits, etc.;
  • Estimate how many coins you’ll offer.

6. Generate a Wallet Address

Now that your nodes are up, you need to have an address so people can interact with your network to buy or sell cryptocurrency; that’s your wallet address. You can generate it on your own or use a third party to create the address for you. 

7. Integrate the APIs

While this step is optional, it’s a good idea to think about an API for your cryptocurrency, as this will allow your users to build new tools and interact with your network in inventive ways. APIs are a fantastic way to build trust with a community of developers and tech enthusiasts.

Is It Legal to Create a Cryptocurrency?

The short answer is yes. The long answer: it’s complicated. 

Cryptocurrencies are in a gray area right now. Some countries accept them wholeheartedly, others only accept a few, and some ban them altogether. Depending on what you want to use your cryptocurrency for and your potential market, you might have to get acquainted with the legality of crypto.

Aside from that, some companies offer a seal of approval for cryptocurrencies, a great asset for any company that’s trying to make a break in the world of crypto. As long as you follow these steps and understand the laws regulating your market, there is nothing to fear.

Bob Leibholz

By Bob Leibholz

As SVP of Business Development, Bob Leibholz helps BairesDev create proactive development plans. With more than 20 years of proven leadership and expansion experience, Bob spearheads many of the company's highly successful key growth initiatives and international plans.

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