How to Create a Digital Coin
· So you have heard of Bitcoin, Ethereum, and maybe other cryptocurrencies
that have taken the world by storm.
·
You are looking to get involved somehow… What if you created your own cryptocurrency?
· It is a radical idea - creating your own money
-, crypto was the best performing asset class of the 2010s. However, if you know how to create a
cryptocurrency, your radical idea can become reality.
· Before jumping right into the development of your own crypto, there are some key
business-related decisions you will want to consider if you want your
project to be more than just a fun project.
o Define a
purpose for your cryptocurrency.
o Consider
the legal implications
o Define a budget
o Hire a
strong development team
o Hire
external auditors
o Promote
your project!
o Nurture and
grow your community
1. Define a purpose for your
cryptocurrency
· If you are
going to create a
cryptocurrency, there should probably be a reason for its
existence. Otherwise, what reason do people have to use it?
·
Nano is an example of a cryptocurrency with a strongly defined purpose - fast
and feeless digital payments.
· Once you
have a purpose for your
cryptocurrency, be sure to explain it in a white paper,
along with other aspects of your project.
2. Consider the legal implications
· As the
blockchain space has grown, so has regulatory scrutiny of the space.
· You want to
make sure that everything you’re doing is legal throughout the
entire process by consulting with a legal professional.
· Creating your own
cryptocurrency is no easy task and will likely
require some financial resources unless you can take care of things
like development, documentation, and marketing yourself.
·
While costs vary from project to project,
here is a rough estimate
of what you can expect:
|
Category |
Time |
Cost |
|
Legal Counsel |
Ongoing |
$20,000-$100,000+ |
|
Development |
15 minutes - 6 months+ |
$0-$100,000+ |
|
Whitepaper and Other
Documentation |
1-2 weeks |
$5,000-$7,000, or about
$500/page |
|
Security Audit |
1 month |
$3,000-$10,000+ |
|
Marketing Promotion |
1 month - 3 months+ |
$10,000/week |
|
Listing (on Sites that List New
Projects) |
1 month+ |
$10,000+ |
4. Hire a strong development team
·
Unless you are developing your crypto yourself, you
are going to need strong
developers to help bring your idea to life.
· This might
be difficult since demand for blockchain developers is through the roof, while
supply of skilled blockchain developers remains low.
·
Nevertheless, finding the right team is crucial, since blockchains
deal with peoples’ hard-earned money and need to be technically sound.
5. Hire external auditors
· Found the right developers to
create your cryptocurrency? Again, since it is peoples’ money on the
line, you will want to double and triple check that your security is top notch.
This is where external security audits come in.
· MakerDAO, a project that has about $400
million of crypto locked in its smart contracts as of writing, regularly
undergoes external security audits.
6. Promote your project!
· Even though
making your cryptocurrency might seem impossible, remember that after you make it,
you need to promote
it! You could have the best project in the world but if no one knows about it,
it will be hard to make progress and grow the network.
· Press releases, social media -
especially channels popular with the crypto community like Twitter, Telegram,
Reddit, and Discord, and blogs are a good place to start.
7. Nurture and grow your community
· After
promoting your project, you need to make sure that you engage with and nurture your community.
Answer their questions and provide updates on your progress.
· Many projects have community management teams for
the sole purpose of growing a loyal user base. Your early adopters will become
your biggest fans and marketers so don’t neglect them!
Summary Steps
1. Know your use-case
Define your
objectives clearly at the very beginning: smart contracts area, data
authentication and verification or in smart asset management.
2. Choose a consensus mechanism
Consensus
mechanisms are the protocols choose from for the best fit for your business
objectives.
3. Pick a blockchain platform
Most popular
blockchain platforms Ethereum, Waves, NEM, Nxt, BlockStarter, EOS, BitShares 2.0,
CoinList, Hyperledger Fabric, IBM blockchain, MultiChain, HydraChain, BigChainDB, Openchain, Chain Core
4. Design the Nodes
· If you imagine a blockchain
as a wall, nodes are the bricks it consists of. A node is an
Internet-connected device supporting a blockchain by performing various tasks,
from storing the data to verifying and processing transactions. Blockchains
depend on nodes for efficiency, support, and security.
· There are several
choices you have to make about the nodes you will
employ:
o What are they going
to be in terms of permissions:
private, public, or hybrid?
o Will they be hosted on the cloud, on
premise or both?
o Select and acquire necessary hardware details,
such as processors, memory, disk size, etc.
o Pick a base operating system (most
common choices would be Ubuntu, Windows, Red Hat, Debian, CentOS, or Fedora)
5. Establish your blockchain's internal
architecture
Tread carefully as some of the parameters cannot be changed once the
blockchain platform is already running. It’s a good
idea to take your time and really think through the following:
· Permissions (define who can
access the data, perform transactions and validate them, i.e.
create new blocks)
· Address formats (decide what your
blockchain addresses will look like)
· Key formats (decide on the
format of the keys that will be generating the signatures for the transactions)
· Asset issuance (establish the
rules for creating and listing all asset units)
· Asset re-issuance (establish the
rules for creating more units of the open assets)
· Key management (develop a system
to store and protect the private keys granting the blockchain access)
· Multi-signatures (define the amount
of keys your blockchain will require to validate a transaction
)
· Atomic swaps (plan for the
smart contracts enabling the exchange of different cryptocurrencies without a
trusted third party)
· Parameters (estimate maximum
block size, rewards for block mining, transaction limits, etc.)
· Native assets (define the rules
of a native currency issued in a blockchain)
· Block signatures (define how the
blockchain participants creating blocks will be required to sign them)
· Hand-shaking (establish the rules of how the nodes will
identify themselves when connecting to each other)
5.
Take care of APIs
· Make sure to check
whether the blockchain platform of your choice provides the pre-built APIs
since not all of them do.
· Even if your
platform doesn’t come with those, not to worry, there
are a lot of reliable blockchain API providers out there.
· Here are some of
them for you to check out:
|
ChromaWay Bitcore Neuroware Tierion Gem Coinbase’s API |
Colored Coin APIs Blockchain APIs Factom Alpha API Colu BlockCypher |
6. Design the Interface (Admin and User)
·
Communication is the key and a well-thought-out
interface ensures a smooth communication between your blockchain and it’s
participants.
·
Here are the things to consider at this stage:
·
Web, email and FTP servers
·
External databases
·
The front end and programming languages (e.g.
HTML5, CSS, PHP, C#, Java, Javascript, Python, Ruby).
7. Make your cryptocurrency legal.
Slowly but surely
the law is catching up with the cryptocurrencies and you better protect
yourself from any surprises by looking into the trends around the cryptocurrency
regulations and the direction they are headed.