Is it possible to create your own cryptocurrency?
Updated on 3 September 2023
Is it possible to create your own cryptocurrency?
Since the Bitcoin white paper was published in 2008 by the mysterious character known as Satoshi Nakamoto, crypto has literally taken the meaning of ‘currency’ to a whole new level. Until today, almost no one knows the real identity of this person. Nonetheless, he revolutionized the way we can transfer funds, as the white paper for Bitcoin initiated a movement that allows people all over the globe to transfer funds without the involvement of a third trusted party, such as a bank. Since then, thousands of new cryptocurrencies have been launched by various individuals everywhere. Some were also very successful, such as Ethereum and even Dogecoin: a cryptocurrency that essentially started as a joke. Although it takes some time and research to truly understand the workings of cryptocurrencies, this new form of currency enables everyone to buy and sell products without the interference of a third party, but also to create their own currency. That is something truly groundbreaking, as generally only governments were able to create and print currency.
Essentially, this means that you can also create a crypto coin. By creating a digital token, you can fund any project when you launch an Initial Coin Offering (ICO). If people invest in your coin, you don’t only gain investors, but your coin could actually become a valid coin that can be used and traded. Cryptocurrencies have grown in popularity tremendously during the past years. Since you can raise quite a bit of money with an ICO, more and more companies and individuals are developing their own cryptocurrency. Is this difficult to do? Not always. Anyone with some technical knowledge can create a cryptocurrency themselves. In this article, we will explain the process, and provide you with some insight regarding the best way to list your new coin on an exchange. You will also see, how Intercompany Solutions can assist you in making this process less costly, and also much faster and easier.
What is crypto?
Crypto, fully known as cryptocurrency, is a form of currency that only exists digitally. It doesn’t exist in any solid form whatsoever. When you buy and own crypto, you store this in a digital wallet, that you can protect by a seed phrase and various forms of security. Crypto is a general collective term used to describe various crypto coins, of which Bitcoin is by far the most famous cryptocurrency. This is similar with traditional currency, since most countries have their own currency like the Dollar, Yen, Pound and also the Euro. Although the Euro is somewhat special, since it's a currency issued by a collaboration of various nations, as you probably know already. In any case, just like there are plenty of traditional currencies, there are also plenty of different cryptocurrencies. All cryptocurrencies run on blockchain technology. Blockchain technology is the technique through which crypto exists, which controls and stores everything in data traffic. So, if you send one crypto coin to your neighbor, it is checked and stored in the blockchain on multiple computers in the network. By being monitored and stored on multiple computers in the network, it increases security and reliability. Some cryptocurrencies went even further and added technology to the blockchain, such as Ethereum with its so-called ‘smart contracts’. This technology allows people to create contracts between parties, that don’t need a third party to enforce or legitimize the contract, since it does all this by itself. It is essentially a piece of code written, which becomes active once a contract is settled. When you study blockchain technology, you can see how banks, for example, can completely be surpassed when buying or selling goods or services in cryptocurrency. This is exactly what makes crypto so interesting for ‘regular people’.
But it’s not just free trade between people that is facilitated with crypto. Crypto, as an investment, has a lot of potential. Some experts even speculate that it may take over our current money system. No one knows for sure and there are supporters and opponents of these developments, but it is certainly the right time to immerse yourself in the world of crypto. A large difference between cryptocurrency and 'normal' currency is that regular currencies are semi-regulated in value, whilst crypto prices change and fluctuate continuously due to supply and demand. If, for example, your Euro suddenly becomes less valuable, the Dutch Central Bank tries to step in to ensure that the value stabilizes. The same applies if the coin becomes more valuable.
Thus, with the exception of inflation, consumers do not regularly notice the changes in value that the Euro undergoes on a daily basis. You only really know the value of a currency, when you try to exchange it for another currency. This often happens when you travel. Also, when you go to the store, you always pay the price mentioned for any products you buy. You don’t end up at the cashier’s desk and find, that the amount you have to pay at checkout is different from the price mentioned next to the product. This is different with Bitcoin and all other cryptocurrencies, sincethe value of any cryptocurrency is influenced by supply and demand. This means that the increase in value and the decrease in value alternate continuously and are determined by the purchases and sales in the market. The alternation of an increase in value and a decrease in value is called volatility. Knowing what these terms mean will help you better understand the crypto world. So, when you want to invest in crypto or create your own coin, be sure that you understand that its value is definitely not set in stone beforehand. A flexible approach works best.
More about blockchain technology
All cryptocurrencies are virtual assets, which are used as payment in transactions that are done online/digitally. As explained above, cryptocurrencies are not managed by banks and other (centralized) financial institutions, which means there is no third party that keeps records of the transactions that are made. As a general rule, all centralized institutions and systems record transactions. These recorded transactions are then managed by using a ledger. This ledger is normally only accessible by a very limited amount of third parties. With crypto, this is entirely different, since the system itself is completely decentralized and therefore has no need whatsoever for institutions or organizations to manage transactions. This is where the blockchain comes in: it is actually a database, that contains all transaction data as well as information about created coins, and ownership records. So it’s a ledger in itself, which is secured by mathematical cryptographic functions. The open-source part ensures, that any person can access this ledger, view all data and also become part of this system. All the transactions are ‘chained together’, which forms the blocks on the blockchain. These are added to the distributed ledger continually. Thus,; it eliminates the need for any third party to control and oversee transactions, as the blockchain itself is already doing this.
Who can create a new cryptocurrency?
In essence, anyone can decide to make a cryptocurrency, whether you are very serious about a particular project, or simply for fun and possible financial gains. Just keep in mind, that you will need to invest quite a bit of time, money and also other resources if you want to succeed, such as advanced technical knowledge, or the help of a team of experts. The creation process of the coin or token is actually the easy part, whilst maintaining the cryptocurrency and growing it often proves to be more challenging. If you are someone who is simply curious about cryptocurrency, creating one can be a very interesting side project. You are definitely not the only one, as there are plenty of coins and tokens being issued on a monthly basis. We suggest that you browse around first and read a lot of white papers, to ensure that someone else hasn’t already implemented your idea. If this is the case, try to come up with something new and exciting, as this will provide a solid basis for possible future success. The easiest way to create a new token, is by using an already existing blockchain. If you want to create something entirely new, you will have to build your own blockchain with a native crypto, but this requires highly advanced technical expertise. Launching a token on an existing blockchain platform, however, can already be done with relatively little technical knowledge. We will discuss this later in detail.
The difference between a coin and a token
There is some confusion sometimes regarding the words ‘coin’ and ‘token’. These two terms are often used interchangeably, but are different nonetheless. A crypto coin is mostly native to a particular blockchain, its main purpose is generally to store value and usage as a medium of exchange, whereas a token is built on an already existing blockchain for some decentralized project. Tokens generally represent certain assets, or it can also offer the one who is holding it specific features. Tokens also offer several distinct functions, such as security, governance and utility. Coins can be mined and earned via proof of work and proof of stake. Both coins and tokens use blockchain technology, which is sometimes also explained as distributed ledger technology. But, as we explained, tokens are built on top of existing blockchains, whilst coins are often created simultaneously with the creation of a new blockchain. You should definitely consider which option works best for you, before you start working on your project. It might also be helpful to ask for advice from an expert, he or she can tell you in more detail which possibility would suit your ideas best. The amount of knowledge you already have also plays a big part.
What are the average costs of creating a cryptocurrency?
It’s very hard to tell, beforehand, how much money you will have to invest when creating a new token or coin. The degree of customization is a huge factor. A standardized token on an already existing blockchain, such as Ethereum or Bitcoin, will generally be easier to create and therefore the least costly. If you want to modify a blockchain however, or create a new one, you should take into account that this will require much more expertise, time and therefore also money. Some platforms offer their services for free, when you want to create a standardized token. Nonetheless, if you have a very ingenious idea, creating your own blockchain and native cryptocurrency might be worth the investment.
Benefits and pitfalls when making your own cryptocurrency
There are some pros and cons regarding creating your own cryptocurrency. Because this technology is considered quite new, not everyone has the correct knowledge to know what they are getting themselves into. It’s much different from, for example, asking an investor for financial support, or trading on a regular exchange. Still, the fact that it is so new is actually also a big chance to achieve something valuable and original. Some of the benefits of creating a cryptocurrency involve the fact that you can customize the crypto in many ways, almost without limits. So you can make something truly unique that represents your ambitions well. Also, it provides you with a fantastic opportunity to expand your knowledge about cryptocurrencies and blockchain technology in general. Next to that, there’s also the fact that your token or coin can actually gain value, which can create financial independence for you. Some hurdles might be the lack of proper technical knowledge, which can potentially make it very hard for you to realize a new coin. The process itself is also very time-consuming and sometimes expensive, as we mentioned previously. It also requires ongoing maintenance, if you want your project to succeed. But if you already have a successful business and money to spend, you can negate this by hiring experts who do all the hard work for you. Make sure you have a decent planning and know what you want to do yourself, and what you can possibly outsource. This will make the process much easier and manageable.
The basic equipment you will need
One of the main benefits of creating a cryptocurrency, is the fact that you don’t need to invest in heavy machinery, expensive appliances or any kind of high-end gadgets. All you need is a working internet connection and a computer or laptop with sufficient specs. This will provide you with all the things you need. We strongly discourage you to try to create a cryptocurrency with your smartphone or tablet, however, since it’s almost impossible. If you aren’t very knowledgeable in the field of computing science or technology in general, you will surely also need some expert assistance. So this means, you will need to hire a team of experts who can assist you. If you know your way around, this won’t be necessary and the initial investment will not be very high. We will now outline the four different methods you can apply, to create a coin or token with blockchain technology.
1. Hire a(n) (team of) expert(s) to create a cryptocurrency for you
One of the easiest ways to create a cryptocurrency is by hiring a blockchain development team of experts. This is especially necessary, when you want the coin to be highly customized. There are very specific companies and enterprises that focus on creating and also maintaining new cryptocurrencies and blockchain networks, which are known as blockchain-as-a-service (BaaS) companies. Some of these companies can create and develop entirely customized blockchains for you, whilst others already have an existing blockchain infrastructure they use for your project. You can also decide to hire a BaaS company to create a highly customized token that runs on an existing blockchain. If you don’t have a lot of technical knowledge, or you simply want the job to be done correctly, this might be the best option for you, provided you have the funds to pay for their services. Otherwise, we suggest you try to create your own token on an already existing blockchain.
2. Create a new token on an already existing blockchain
The simplest option when you go DIY and don’t hire others to help you out, is to create a token on an existing blockchain. This makes it possible to make a new crypto without modifying or creating a new blockchain. Some platforms, such as Ethereum and its smart contracts, are actually created specifically to this end: to make it possible for many different developers to create a token that Ethereum hosts. This token is hosted by the blockchain, but not native to the blockchain, since the ETH coin already is the native coin. Even though it is relatively easy to create a token on a blockchain that already exists, you should take into account that you will need an average degree of technical knowledge. There are multiple apps nowadays that make the process much easier, so you can use one of those. We outlined some basic steps you will have to take, when creating your own token on an existing blockchain.
i. Pick the blockchain platform you want to host your token
The first step obviously encompasses choosing the blockchain platform you want to use to host your new token. There are many options, since every blockchain is open-source and therefore, viewable, usable and editable. The most popular blockchains to consider are the Ethereum platform, Bitcoin’s blockchain and the Binance Smart Chain. If you want to use the existing blockchain of Bitcoin, for example, you need to firstly download the software of the cryptocurrency. Once you have done this, you make a copy, which you then name yourself: this will be the name of your token. Since the codes are open-source as we mentioned just now, this is all allowed. Everyone can use the software, that’s the whole point of cryptocurrencies. The main goal to keep in mind, is that the new coin should offer something new and, possibly, also better, than Bitcoin itself. Also, be aware of so-called ‘cryptojacking’, this is when a malicious third party infiltrates your computer and tries to mine your coin or token. They essentially use their computing power to undo transactions in the past, which will make your token worthless. Read a bit about it, so you know how to protect yourself from such happenings.
The process of creating a token differs a bit with each blockchain and native coin. If you want to use the Ethereum blockchain to create your token, for example, you need to find the standard codes on the internet and download these. The special feature of the Ethereum blockchain is its smart contracts, which revolutionized the way we can settle contracts between tow or multiple parties, and make sure all obligations are met. The contract is added to the blockchain, with all relevant provisions and conditions, and is carried out automatically. This basically eradicates the need for third parties, such as lawyers, notaries and even judges. Also, bets can be made this way to ensure everyone keeps their promises. In any case, if you like to and have the knowledge to do so, you can add extra functions on top of the existing blockchain and thus, create your own token. Keep in mind, that, with the Ethereum blockchain, you pay for every transaction. The value of the new currency must therefore certainly be higher than the cost per transaction.
ii. The creation process of the token
Once you have decided on the blockchain you want to use, you can start the actual creation process of the token. The difficulty level highly depends on the level of customization you wish to apply to the token. The more customized, the more technical knowledge is required to realize the token. There are some online apps and tools, however, that take you through the process step by step. Some apps even facilitate the process in a few clicks, but this doesn’t generally create a very unique token. You can browse on the internet and look at the apps and tools, to see whether this might help you.
iii. Minting your new crypto token
When the token itself has been created, it’s time for the next step: minting the token. Minting is actually a very old concept, which goes back as far as the 7th century BC. It was essentially an industrial facility, where precious metals such as gold, silver and electrum were manufactured into actual coins. Since this period, minting is an integral part of economics, since this is literally how money is made. Every modern day society that has a central authority that creates currency, mints (prints) regular fiat money. With crypto, the minting process is obviously a bit different, since cryptocurrencies aren’t physical or even comparable to fiat money. The process itself involves validating transactions made with the token, which will then be added as new blocks on the blockchain. As you can see, this is where the previously mentioned ‘cryptojackers’ come in, since they undo the transactions you just validated. Best be on the lookout for such malignant interferences, if you want your token to succeed. Minting also supports the validation of transactions in so-called proof-of-stake (PoS) blockchain networks.
Please also note, that minting and staking are somewhat alike, since these two concepts both support blockchain networks. However, where minting involves validating transactions, creating new blocks on the blockchain and recording data on-chain, staking is the process where you buy cryptocurrency and lock them on an exchange or in a wallet for a specific amount of time, which in turn is favorable for the security of the network. When you use a well-known blockchain such as Ethereum, chances are that you won’t have to invest in a lawyer or auditor to issue your tokens. Keep in mind that tokens generally benefit from the safety of the security that an established blockchain offers, even though they are less customizable than coins. If you are a starting crypto creator, creating a token is the safest way to begin and build experience. Also, the blockchain you are operating on might offer some interesting and innovative options for everyone who creates a token on this particular blockchain. In general, it helps to be associated with a well-established blockchain platform, since this can help immensely to enhance the value and credibility of your token.
3. Modifying the code of an existing blockchain
A third and interesting option involves the modification of an existing blockchain, which is simpler than creating an entirely new blockchain, but then also more difficult than using an existing blockchain to create a token. What you basically do is copy the source code again, just like you do when you create a token on a blockchain that exists. Only this time, you start by modifying the source code itself, to make changes that might somehow be beneficial to the blockchain. If you modify the source code, you can create a coin instead of a token, which will be native to the new blockchain you just created. This option does require more advanced technical knowledge, since you might need to modify quite a bit if you want to reach your objectives exactly, so a lot of customization might be involved. Note, that you will need to hire a lawyer or blockchain auditor, once you finish modifying the code and creating the coin. You need to figure out where you stand legally, since this varies enormously per country. For example, it’s illegal to create crypto in China. Make sure you meet all legal requirements, before you start minting your cryptocurrency.
4. Making your own blockchain and native cryptocurrency
Creating your own blockchain is the hardest way to create crypto, but it also allows for the largest amount of customization and originality. It’s very complicated to create an entirely new blockchain, meaning that you will need a very high level of expertise and probably also a degree in programming and coding. Generally, only top-notch programmers are able to create a new blockchain, so don’t try this if you are inexperienced. We strongly advise that you look for a solid course, if you want to be able to do this by yourself in the future. Then, you will be able to write your own unique code to support a new native cryptocurrency. If you would like to create a crypto that is completely new or innovative in some way, this is principally the best way to do it. You have the freedom to design your coin exactly how you like, and the upside is that you don’t have a token, but a real coin, which is considered to be slightly superior to a token. Building your own blockchain involves a few standard steps, which we will explain below.
i. Selecting a consensus mechanism
A blockchain has a certain operating protocol, which is also referred to as the consensus mechanism. This is the term for all incentives, ideas and protocols that make it possible for a network of nodes to be able to agree on the state of a blockchain. Consensus mechanism is often referring to either proof-of-work (PoW), proof-of-authority (PoA) or the previously mentioned proof-of-stake (PoS) protocols. Keep in mind, though, that these are actually particular components of consensus mechanisms that protect against certain attacks, such as Sybil attacks. The most used consensus mechanisms are PoS and PoW.
ii. The architecture of the blockchain
You also need to think about the design of your blockchain. This is actually where you can put all your unique ideas to work. How do you want your blockchain to differ from already existing blockchains? What do you want to offer and achieve with your self-made blockchain? What kind of functions or options would you like to design? Do you want your blockchain to be public, or private? Permissionless, or permissioned? You get the chance to design every bit of it, which makes this process so interesting if you know what you are doing, since you can now showcase the reason you want to make a crypto coin. Your blockchain is literally the building block of your crypto, so design wisely and put a lot of effort and thinking into your project and white paper. Also, make sure you can explain your idea well, you will need to be able to pitch if you want to attract investors in a later stage.
iii. Audit and legal compliance advice
After you have designed the blockchain itself, you need to hire an auditor or lawyer to audit the blockchain you created, including the code. Most independent developers hire a professional to sort this out, mostly because an expert will also be able to pinpoint any flaws or vulnerabilities that you can correct before you start minting. It is also very important that you verify that you comply with all laws and regulations. Without the verification of legal compliance, you don’t know whether what you are doing is even legal, so make sure you never miss this step to protect yourself. A legal professional can confirm your cryptocurrency is in line with all national and, if relevant, international laws and regulations.
iv. Minting your new crypto token
As already explained in the part about creating a token on an existing blockchain, this is the time you are ready to mint your crypto. You are completely free to decide the amount of coins you want to issue, as well as whether you mint them all in one go, or if you decide to increase your supply over time gradually when new blocks are added to your blockchain. You should definitely ask for advice from an expert, if you want to maintain everything the best way you can. You can now proceed with listing your coin on an exchange, or start an ICO.
How Intercompany Solutions can help you
With many years of experience with the establishment of Dutch companies and offering advice with ICO’s and listing your coin or token on an exchange, we can assist you with a wide variety of services. If you would like to start a new crypto project, for example, we can help you with listing the crypto on (de-)centralized exchanges, please take a look at this article for more information. We can also help you with any business plan or white paper you might need to write, or provide you with information regarding Dutch compliance regulations. If you would also like to establish a Dutch business, adjacent to your crypto aspirations, we can take care of the entire registration process in just a few business days. Feel free to contact us with any pending questions you might have, or if you would like to receive a personalized quote.