All you need to know when you consider the creation of your own cryptocurrency

Blockchain, cryptocurrency, and dApps have gained in prominence. Starting from a number of popular cryptocurrencies such as Bitcoin and Ethereum ending with blockchain-based startups that sell ice cream – thousands of businesses consider the benefits of using crypto technologies. Let alone millions of people who are ready to invest in it.

There are multiple articles praising blockchain development advantages, but it’s hard to find consistent information revealing how to make a cryptocurrency.

This article focuses on planning a new cryptocurrency development process as well as demonstrates how to make the right decisions before the project is started.

Analysis

As well as in any other major project development the first step in cryptocurrency development is Business Analysis. Its main goal is to figure out if the cryptocurrency or its initial idea is unique and realizable.

Currently, there are more than 1,500 cryptocurrencies. Creators of each one have implemented some form of new functions and features. In this, approximately 80% of such projects are based on Bitcoin, Ethereum, or other cryptocurrency or constitute their forks*.

Fork is the use of software project code as a start for another one. In so doing, the core project can both continue or stop existing.

Fork is the use of software project code as a start for another one. In so doing, the core project can both continue or stop existing.

In the very beginning, it is required to clearly articulate the unique features of cryptocurrency and check is there any other one with the same characteristics.

However, the development of unique features don’t guarantee cryptocurrency success and is not a signal for starting your own cryptocurrency. The viability of future cryptocurrency is defined by the interest it would generate to ordinary users. Impractical specificities won’t bring popularity to the project.

To catch the attention of users and persuade them to abolish the use of existing cryptocurrencies in favor of a new one you need a non-standard algorithm, feature, or functionality.

Consensus, in general, is interpreted as a process of decision making by a group of people. In this, there is no traditional vote. The decision is made if most participants have no objections. In Blockchain, a consensus is a set of mathematical rules and functions regulating the work of the Network.

Consensus, in general, is interpreted as a process of decision making by a group of people. In this, there is no traditional vote. The decision is made if most participants have no objections. In Blockchain, a consensus is a set of mathematical rules and functions regulating the work of the Network.

At this stage, you should also think about the quantity of issued cryptocurrency and its business logic.

Thus, the first stage of work should aim to:

Identify the potential range of new cryptocurrency users – your target audience;

Specify the structure and amount of data used;

Create a cryptocurrency business model;

Develop a cryptocurrency pricing process.

Questions to ask yourself: Is my cryptocurrency idea unique? How to make it differ from existing cryptocurrencies? Who is my target audience? Will this cryptocurrency be useful and practical? What issues is it going to solve? What will the pricing process be like? Will cryptocurrency issuing be limited?

Questions to ask yourself: Is my cryptocurrency idea unique? How to make it differ from existing cryptocurrencies? Who is my target audience? Will this cryptocurrency be useful and practical? What issues is it going to solve? What will the pricing process be like? Will cryptocurrency issuing be limited?

The platform is a project foundation

Full and comprehensive business analysis helps to identify which development way is to choose. There are four basic options:

To fork Bitcoin or another cryptocurrency. In fact, the fork is a clone of the basic cryptocurrency with adding new functions or fixing bugs of the previous version. Nowadays there are more than 50 Bitcoin forks. The most popular is the Bitcoin Cash estimated at about $600. The second option is to create a cryptocurrency based on the so-called builder platform. The most popular solutions, in this case, are Ethereum, NEM, and Stellar. The advantage here is the relative simplicity of implementation and popularity of platform-fundament, which enhances the trust to project. This option is a way to create not cryptocurrency, but a token. Tokens serve as units of calculation as well as company shares (security tokens) or, for example, digital obligations on feat goods and services (utility tokens). When creating a token under a ready platform, the client pays a commission and faces all its disadvantages or restrictions, as well as entirely depends on its current technical platform condition. One of the most well-known tokens issued on Ethereum is Tron. Cryptocurrency development frameworks provide more freedom in idea implementation.

Exonum and Hyperledger Fabric can be identified as an example of such frameworks. By using it you can create your own cryptocurrency choosing and combining different offered modules. The framework provides the best ready-to-use practices for free. It would be inevitable in case of creating a cryptocurrency under another platform. This, in turn, gives space for modification and customization for specific goals. Finally, there is an option of building blockchain and cryptocurrency from scratch. However, it shouldn’t be considered a commercial project because of the high cost and a long timeline.

Framework is a set of ready-for-service modules simplifying the creating and support of technically complex or highload projects. The use of frameworks allows us to build an absolutely custom project instead of coding from scratch.

Framework is a set of ready-for-service modules simplifying the creating and support of technically complex or highload projects. The use of frameworks allows us to build an absolutely custom project instead of coding from scratch.

In view of the foregoing, it appears the creating a cryptocurrency based on the existing platform presents its set of complexities (for example, fees) and it is difficult to customize for specific tasks. That is why it would be a good solution only for quite simple tasks. Fork leads to problems of initial cryptocurrency and requires work with a big amount of hard-to-maintain code. You should also remember that other things being equal, a high-quality cryptocurrency fork with substantive changes in functional and consensus implemented, is more expensive than starting a completely new cryptocurrency.

The most appropriate choice for a really new and unique cryptocurrency is a framework. It allows developing a system according to project requirements in quite short terms.

Questions to ask yourself: Will my cryptocurrency is based on another one?

Are there enough resources to create your own cryptocurrency from scratch?

Questions to ask yourself: Will my cryptocurrency is based on another one?

Are there enough resources to create your own cryptocurrency from scratch?

Not a step without a cryptocurrency architecture

The next step after choosing basic system parameters is cryptocurrency architecture development.

It’s necessary to decide what consensus will be used, integrate it with the business logic of the project. It’s also needed to define if smart-contracts and multi-user wallets will be implemented in your cryptocurrency. That is, you need to get answers for a number of specific issues, usually, the one who can answer them is a software architect. The laid architecture will determine future cryptocurrency productivity and scalability.

You should carefully consider the consensus issue. This is one of the crucial tasks in making a cryptocurrency. And that is what defines transactions’ speed. Then, it is time to decide how to manage cryptocurrency wallets, what apps and technologies should be used.

Are You Looking for Blockchain Experts? “Take a look at Our Offer in Cryptocurrency Wallet Development Services.”

Are You Looking for Blockchain Experts? “Take a look at Our Offer in Cryptocurrency Wallet Development Services.”

You also need to choose if any commission will be withdrawn during the cryptocurrency transaction, charging rules which also influence architecture solutions. And finally, a cryptocurrency requires integration with external resources to ensure its resilience outside the platform (popular payment systems, other platforms, and apps).

You should remember that any changes in cryptocurrency architecture after the start of the development process would be quite expensive.

After future cryptocurrency analysis and architectural decision-making, it’s time to create project documentation and technical specification for the development of your own cryptocurrency. In fact, this documentation will represent Proof of Concept.

You should remember that any changes in cryptocurrency architecture after the development process is started would be quite expensive.

You should remember that any changes in cryptocurrency architecture after the development process is started would be quite expensive.

After analysis and architectural decision-making, it’s time for creating project documentation and technical specification. In fact, this documentation represents the Proof of Concept.

Questions to ask yourself: Which consensus fits the business logic of my cryptocurrency best?

Are smart contracts required for my cryptocurrency?

How will wallets be administered, through which apps and technologies? Are multisig wallets needed?

Is any commission will be withdrawn during the transaction? If yes, what will be the charging rules?

How will cryptocurrency be integrated with external resources?

Questions to ask yourself: Which consensus fits the business logic of my cryptocurrency best?

Are smart contracts required for my cryptocurrency?

How will wallets be administered, through which apps and technologies? Are multisig wallets needed?

Is any commission will be withdrawn during the transaction? If yes, what will be the charging rules?

How will cryptocurrency be integrated with external resources?

Private or Public Blockchain?

The most popular cryptocurrencies are based on blockchain technology, though it is not the only option. For example, IOTA is based on unique Tangle technology.

There are two basic blockchain types: private and public.

Public Private Open, anyone can join the network Restricted and permissioned Each node has an equal transmission power Only certain nodes can create new transactions Low speed of transaction accomplishment High speed of transaction accomplishment Low transaction approval frequency High transaction approval frequency The high cost of each transaction Comparatively low transaction cost Proof-of-Work, Proof-of-Stake consensus protocols Only pre-approved participants can initiate adding a new block Anonymous Not anonymous Requires no trust among members Members need to trust each other Large energy consumption Low energy consumption

The main difference between public and private blockchain lies in the fact that the first one doesn’t belong to anyone. A public blockchain is controlled by the community which makes decisions on cryptocurrency further development path.

In a private blockchain, one or several organizations have full control over all data centers and so make their decisions on strategic development or adding new functions.

The choice of blockchain type is defined by business requirements. If this is your first time creating a cryptocurrency it’s better to choose a solution based on a private blockchain. This option allows us to change the concept of the cryptocurrency, update it, and add new functions without hard forks.

A hard fork of public blockchain creates a risk of dividing users into two parts – nodes that continue to use the previous version and nodes updated to the new version. So in other words, you’ll have to create a “new blockchain” and persuade users to update in order to make changes.

If cryptocurrency is based on the private blockchain you can change the type of consensus at any time. This, in turn, allows changing the type of blockchain to public one without any undesired effects. But this process itself is quite time-consuming. It is one of the ways to create a cryptocurrency, test it on real users, and make necessary changes as it is fully controlled by its creator(s).

Also, one of private blockchain development advantages is that it allows high cryptocurrency transaction speed. Consensuses used in public blockchains (Proof-of-Work etc.) an order of magnitude less productive than for example Byzantium consensus which is used by Exonum.

Questions to ask yourself: What transaction speed is required for my cryptocurrency?

Will cryptocurrency be changed or upgraded over time?

Based on business requirements, which type of blockchain will work best?

Questions to ask yourself: What transaction speed is required for my cryptocurrency?

Will cryptocurrency be changed or upgraded over time?

Based on business requirements, which type of blockchain will work best?

Leave this field empty if you're human:

To mine, or not to mine: that is the question

Mining is directly related to consensus and type of blockchain. In most cases, if blockchain is public, the development task list contains the creation of software for mining. It is also necessary to implement mechanisms for miners to serve the network.

Most consensuses that imply mining are called Proof-of-Work which are rather slow. They will hardly fit a fast cryptocurrency. But yet they can recognize the cryptocurrency value through resources spent on mining.

Proof-of-Work is an algorithm for preventing distributed systems from malicious use. Its main points are: the necessity of solving a quite difficult and long-term task and ability to check the result quickly and easily.

Proof-of-Work is an algorithm for preventing distributed systems from malicious use. Its main points are: the necessity of solving a quite difficult and long-term task and ability to check the result quickly and easily.

Mining actually defines the way of blocks and transaction confirmation, which ensures the workability of cryptocurrency.

Questions to ask yourself: Is mining feasible for my project?

What is more important for my cryptocurrency: transaction speed or data security?

Questions to ask yourself: Is mining feasible for my project?

What is more important for my cryptocurrency: transaction speed or data security?

New cryptocurrency in the real world

Any cryptocurrency has three main functions which are crediting funds, withdrawals, and transactions.

The cryptocurrency ecosystem aims to provide and simplify access to main functions from any device while providing stable reliability and security. It is needed to make your own cryptocurrency management available in desktop, web-application, and mobile applications. Often these are separate processes that require several interface development and design for each version.

What cryptocurrency ecosystem includes?

Ready design and interfaces subsequently are applied to the software template. As a result, we get the main elements of the ecosystem.

Usually, the ecosystem includes:

Wallets: web, mobile, and desktop applications compatible with main operating systems.



Want to know more about cryptocurrency wallets? “Read Also: How to Build a Bitcoin Wallet”

Want to know more about cryptocurrency wallets? “Read Also: How to Build a Bitcoin Wallet”

Oracles, which are proxy servers playing the role of accurate data sources outside the system for smart-contracts implementing. They are required for blockchain-based systems to make contact with the outside world.

Third-party components, which are usually related to banks and exchanges where cryptocurrency converses into other ones of fiat assets. We also recommend reading our article about creating a cryptocurrency exchange and take a look at our offer in crypto exchange development services.

Every above-mentioned element should include functions and modules required for minimal use cases.

The list of such functions is the following: New user registration; Making purchases or withdrawal of coins; Administrator’s ability to manage the application; Transactions implementing; Gathering statistics about the system’s work. Then it is used by admins and partially introduced to users; Processing of a big amount of traffic; Receiving notifications on mobile devices; Interface localization for users from different countries and regions.

MVP or a working prototype

After making decisions on cryptocurrency architecture and the implementation of main cryptocurrency functions, it’s time to start creating the project’s MVP.

MVP (minimum viable product) is a working prototype. It allows us to demonstrate concept feasibility as well as find problems and bottlenecks you could have faced if you started developing the full-fledged project primarily.

MVP (minimum viable product) is a working prototype. It allows us to demonstrate concept feasibility as well as find problems and bottlenecks you could have faced if you started developing the full-fledged project primarily.

Establishing an MVP includes the development of the core system, checking of main functions and concepts, fixing bugs. This is an optimal approach as blockchain is a quite young technology that has not yet formed best practices. That is why unexpected problems happen often during the implementation of non-standard projects.

Sometimes, you would need to set aside initial solutions and start your own cryptocurrency from scratch because of the wrong preliminary analysis. So it is recommended to begin with primitive MVP development. This allows us to save time and resources for solving problems you could have avoided by bringing minor changes in architecture.

Depending on the cryptocurrency business model and the objective, MVP focuses on different aspects. If the task is ICO and attracting investors – it emphasizes its appearance and demonstrates the innovation and value of the project.

ICO (Initial Coin Offering) – during ICO the team sells digital tokens for cryptocurrency or fiat money. Later these tokens can be used on the project platform as domestic currency or traded on stock exchanges.

ICO (Initial Coin Offering) – during ICO the team sells digital tokens for cryptocurrency or fiat money. Later these tokens can be used on the project platform as domestic currency or traded on stock exchanges.

If MVP is the first stage of creating the business and gathering the community around cryptocurrency than primarily it is needed to implement necessary functions.

Questions to ask yourself: What my project’s MVP will aim to do?

Questions to ask yourself: What my project’s MVP will aim to do?

Stepping onto the stage

What is the best way to launch a cryptocurrency? It also depends on the blockchain type.

In the case of a public blockchain, the determined deployment of network nodes on your own servers is not needed. The open-source code of public blockchain is placed to repository. Here one can download a ready-to-use binary code or compile it by himself. To launch the blockchain network several users need to download and run a couple of nodes among themselves. Indeed after that, the cryptocurrency can be considered as a functioning one. New user which downloads the next node and start mining becomes apart of the system and supports it.

ICO (Node is any computer connected to the blockchain network. Nodes of the decentralized systems contact each other through P2P protocols for sharing data on blocks and transactions. Depending on its type, node stores all blockchain data or just a part of it.

ICO (Node is any computer connected to the blockchain network. Nodes of the decentralized systems contact each other through P2P protocols for sharing data on blocks and transactions. Depending on its type, node stores all blockchain data or just a part of it.

If blockchain is private, it is deployed on servers. Servers are responsible for the performance of core and third-party components. They are called cryptocurrency nodes. After configuration, they start to participate in consensus and sign blocks.

Nodes are deployed on one or several data centers (e.g. Google data centers situated in different countries for ensuring greater systems’ reliability). The team of developers sets up and configures all necessary software and checks its workability.

Also in the case of a private blockchain, you can create a repository where anyone can download a node storing the blockchain copy, but not having the right to sign blocks.

Vendor selection: eat a peck of salt together

One of the most important steps toward cryptocurrency creating is to choose a team of cryptocurrency software developers and the planning of necessary resources. Often one needs to hire his own staff of developers. But it leads to a list of organizational matters. Moreover, in some cases, one has to pay developers a profit share of the project. To avoid these problems it’s better to consider cooperation with a cryptocurrency development company.

It is a difficult task as there are fewer cryptocurrency developers on the market than it is needed and their services are quite expensive. Due to the high popularity of this field, there are a lot of unfair companies that aim to make money off clients who trusted them a project. Most of such pseudo-developers may not even know how to develop a new cryptocurrency. At best, they are able to program smart contracts on Ethereum and don’t understand the peculiarities of any consensus.

In most cases, by choosing a contractor a client concludes a “lifetime” agreement for its support as in future it will be easier, cheaper, and more reliable.

When you as a client choose a vendor you should pay attention to who you are going to hire. As there is a risk to trust your project to people who have a lack of coding culture. The program of such companies won’t be supported by other cryptocurrency developers.

But even if the cryptocurrency code and comments to it are high-quality it’s hard and expensive to change the cryptocurrency development company. It happens because of a number of reasons:

But even if the code and comments to it are high-quality it’s hard and expensive to change the development company. It happens because of a number of reasons:

A project has been already deployed on servers configured by the first contractor. It means the project needs to be deployed again on new servers. There is an option to get access to the initial servers, but you will still need to spend time in order to get into details of system configurations.

A project has been already deployed on servers configured by the first contractor. It means the project needs to be deployed again on new servers. There is an option to get access to the initial servers, but you will still need to spend time in order to get into details of system configurations. Off-site developers in most cases can’t make sense out of code. As even full documentation and comments don’t always allow us to understand quickly how a big project works. Moreover, often the company saves time on documentation to accelerate the development of functions.

New developers need time to understand thoroughly how the project works. Otherwise, they can make code ineffective and unsupportable.

A project could be built in the rare and expensive language.

In addition, don’t forget to discuss, on which conditions the contractor will support the project after launch.

In conclusion

To sum up, here is how the project of establishing new cryptocurrency looks like:

Processes described in this article might seem shocking and discouraging for a reader. But don’t jump into conclusions.

If you have an idea to build your own cryptocurrency and you are sure about its value, you need to find an expert team in blockchain app development. A team will be able to manage the whole task list starting from analysis and ending with project launch.

If it is a team of professionals who know how to implement your idea there won’t be any problem.