Creation of cryptocurrencies is a rather complicated process involving many steps and requiring substantial knowledge in cryptography, computer science, and economics. I will break down this process into major components for better understanding of how the creation of cryptocurrencies is performed.
First, let’s begin with the very basics. Cryptocurrencies are digital or virtual currencies that use cryptography for security, and they are decentralized-not controlled by any government or financial institution. They are built on top of a blockchain, which in simple terms is a public ledger recording every transaction one makes in a given cryptocurrency. Probably the best example of a cryptocurrency is Bitcoin, although there are more than 5,000 cryptocurrencies in existence.
Lots of thoughts the developer needs to put in, what does a person really want to achieve with such a project. Describe the goals and features of your cryptocurrency, describe the nature, count the name, symbol, total supply, block time, and consensus algorithm. That is very important, as within its frame, it will determine how additional blocks will be added to the blockchain, by which it reaches mutual agreement from all participants in the network about its state.
At this time, you will get an idea about what to create, so you will decide on the methodology of development. There are various ways in which cryptocurrencies are developed: it can be completely from scratch, by forking an already existing cryptocurrency, or by using a cryptocurrency creation platform. Creating a cryptocurrency from scratch requires heavy knowledge in settings such as C++, Java, and Python programming languages and should also possess an overall idea about cryptography and blockchain architecture.
Apart from this, if you don’t have the resources or expertise, there’s always the option to fork an already-existing cryptocurrency. This includes adjusting the source code of any other cryptocurrency by taking the open-source code and releasing a new version of that. Most cryptocurrencies are based on open source, with the most popular one being Bitcoin. However, this option requires immense knowledge in programming and takes a great amount of time.
The easiest way to create a cryptocurrency would be by using any cryptocurrency creation website. These have interfaces intuitive enough for one to tailor the many parameters of his or her virtual currency without requiring deep knowledge of programming. Other popular examples include Ethereum’s ERC-20 token standard, Binance Smart Chain, and Polkadot.
Having decided on developing the cryptocurrency from scratch or forked from any other, in comes designing the blockchain architecture. This will involve the type of blockchain you want to implement, the consensus methodology, block size, and block time. This will greatly impact the security, scalability, and decentralization of your cryptocurrency based on the kind of consensus algorithm chosen.
Once designed, the architecture of the blockchain will need to be developed into an underlying protocol. You should, in essence, write codes that define how transactions are verified, validated to go onto the blockchain, in addition to adding new units and different kinds of cryptography to make the transactions on the network secure.
The second most important thing is the wallet software. Wallets are applications through which one can store, send, and receive digital currencies. You would then have to develop the wallet compatible with your cryptocurrency for desktop, mobile, and web usages.
The time will be launched when these cases shall have developed the underlying protocol and wallet software. This means bootstrapping the blockchain by creating a genesis block and dispersing that throughout the nodes of the network, besides establishing mining or the consensus which secures the network and verifies transactions.
Finally, after the network is launched, you will have to start spreading the word about your new cryptocurrency to future users. This could involve various sorts of marketing, including social media promotion, community building, and partnerships with other projects.
In a nutshell, to create a cryptocurrency, deep knowledge in cryptography, computer science, and economics is required on how to define the goals and features of your project; to choose a means of development; design the architecture of the blockchain; implement the original protocol; develop wallet software; to launch the network, and to promote your cryptocurrency before potential users.
It does, however, have to underline that besides purely technical issues, success will depend on community building for your project, on partnerships with other organizations, and on knowing how to be in jurisdictions with sometimes difficult regulations. Other than this, a number of factors come into play for the success of a cryptocurrency: market conditions, competition, and global events.
It’s a lot of work, but it is also a super-incredibly exciting time to be building really new things. As the development in this space moves forward, way more innovative projects are going to come out with claims that are almost out of the box in traditional notions of money and finance.
