In a short answer, cryptocurrencies can be created by anyone with technical computer programming knowledge.
Cryptocurrencies can be created by anyone with some technical programming knowledge.
Apart from paying someone to create it, there are three main ways of doing it yourself – build your own blockchain, modify an existing blockchain or build on the back of an existing blockchain.
However, there are things to consider beforehand, such as legality, use case, tokenomics, and startup costs.
How Can You Start Your Own Cryptocurrency?
There are three main ways to start your own cryptocurrency:
1. Create your own blockchain and native coin
This is the most complicated method and requires you to have the advanced technical knowledge to write your own code but it also offers you the most flexibility to create an innovative cryptocurrency.
2. Modify an existing blockchain
Using the open-source code of another blockchain, you can modify the code to suit your new cryptocurrency coin. This method still requires advanced technical knowledge in order to avoid flaws, loopholes, and other bugs that have even plagued established cryptocurrencies such as Ethereum (in the DAO Heist). However, since the framework is already built and tested, it does mean less development is required.
3. Build a new cryptocurrency on the back of an existing blockchain
Platforms such as the Ethereum network, Binance, Solana, and Ripple all allow for new cryptocurrencies to be built upon their established blockchains. While this method offers less customization of your token, it is perhaps the easiest method of building your own blockchain. The downside of this method is that your cryptocurrency is dependent on the blockchain that you choose since if that blockchain ever goes down or fails, the ability to transact with your token would be compromised.
Things to Consider Before You Build Your Own Cryptocurrency
Before you create your cryptocurrency, there are a few things to consider, including:
First of all is the legality. While it is decentralized, the recent high-profile failures of Three Arrows, Terra/Luna, and the FTX cryptocurrency exchange have increased pressure on regulators to clamp down on Cryptocurrencies.
So before you start your own cryptocurrency, you should ensure that the jurisdiction you are in allows for cryptocurrencies. For example, cryptocurrencies are absolutely banned in China, implicitly banned in Cameroon, and allowed under certain regulatory frameworks in the United States.
This is the purpose of your cryptocurrency and generally the first thing that cryptocurrency investors should look at. What is your cryptocurrency for? And how does your cryptocurrency do this better than other competing offers? These terms should be clearly outlined in your cryptocurrency’s whitepaper, such as the one for Bitcoin.
The use case will also dictate whether your blockchain is a permissionless one, where anyone can join and download a copy of the distributed ledger. Or will it take the form of a private, permissioned blockchain, such as US investment bank JP Morgan’s Onyx Coin?
What purpose your cryptocurrency will serve will also determine who controls the blockchain. Will your blockchain be centralized, as we see in most stablecoins, so that supply is controlled in order to match the underlying security to back up the value of the cryptocurrency, such as Tether Gold? Or will your crypto be completely decentralized and left up to the users of the network to vote and decide on changes to the blockchain, such as the Ethereum network?
The first thing to decide is how many coins or tokens to create. You also need to consider how they are released in order to control the amount in circulation. How are the coins to be initially distributed, and how much is owned by the creators and affiliated entities?
Another key to consider is if tokens can be created after the crypto is launched. And if so, are they mined or minted?
What is the incentive for others on your network to help maintain the decentralized ledger? Is it based on economic rewards like Bitcoin mining, or is it based on maintaining the integrity of the entire network, like we see in Ripple’s XRPL?
Lastly, you must decide how the coins are burned, such as gas, for transactions on the Ethereum network. You might also consider if your cryptocurrency buys back a certain portion of the outstanding supply on a predefined schedule in order to support the value (such as Binance’s autoburn of its BNB coin).
These factors comprise a token’s economics – also called “Tokenomics.”
All cryptocurrencies require some sort of cost to set up, such as paying a third party to design and build your blockchain or the gas that you will burn setting up your cryptocurrency token on an existing blockchain, such as Binance’s Smart Chain, which can be as low as USD5.
Thank you for reading CFI’s guide to How to Start your own Cryptocurrency. To keep learning and developing your knowledge base, please explore the additional relevant resources below: