How To Create a Cryptocurrency and How Long It Takes
Get Ahead by LinkedIn News
We talk about leveling up, about geting ahead in your career and about excelling where you are right now.
Creating a cryptocurrency coin or token is a long process that involves careful planning and investment of time and resources. If you’re interested in creating a cryptocurrency, you should research blockchain technologies and the underpinning theories.
How to Create a Cryptocurrency and How Long It Takes
Curious about investing in cryptocurrency? There are often more questions than answers. Some may want to explore how much it costs to purchase a blockchain-based asset. Others want to create a cryptocurrency of their own.
One thing is true about crypto: it is an exciting and constantly changing field. Through the market's highs and lows of volatile price swings, crypto enthusiasts sing the praises of their choice of coin.
How long does it take to create a cryptocurrency? And what kind of investment does it take to build one?
What Is a Cryptocurrency?
Cryptocurrency (crypto for short) is a form of currency that is:
Unlike the euro or the U.S. dollar, there is no particular standard for crypto. No central authority governs its value.
People can use crypto to pay for goods and services, but most enthusiasts instead invest in it as they would stocks or precious metals. Several types of cryptocurrency are available, but some of the most popular coins include Bitcoin (BTC) and Ethereum (ETH).
Because of its volatility, some financial advisors view crypto as a risky (if not lucrative) investment. To reap the benefits of investing in crypto, they recommend researching to make sure would-be investors understand the systems of each coin.
The backbone of cryptocurrency is the blockchain, and this open record encrypts all transactions in code. This distributed ledger builds “blocks” linking with previous cryptocurrency transactions, forming a chain.
With this system, everyone who uses crypto has access to a copy of the record. Because the blockchain updates simultaneously with each new transaction, every record is identical and shows the most recent information.
Crypto research analyst Ryan Rasmussen told Timothy Mably of LinkedIn News, “Blockchain is a technology that brings money into the internet era. It creates a decentralized database of transactions that is available anywhere in the world for anyone to see.”
Users who access and transact their cryptocurrency do so via a wallet. Each wallet has a unique identifier and personal details that do not appear on the blockchain.
Two Ways to Create a Cryptocurrency
Creating/minting a cryptocurrency is more difficult than it sounds. Technically, anyone can make their own cryptocurrency, but not everyone has the know-how or resources to do it correctly. There are two forms of cryptocurrency: Coins and tokens.
Coins — like Bitcoin or Ethereum — exist on their own blockchain. Coins function like a fiat currency; you would use them to store, build or transfer wealth from one person or company to another.
Tokens function atop an existing blockchain infrastructure. Tokens do not have uses outside the specific community or organization that mints them. Tokens take several forms, including unique artwork, passkeys for event entry and more.
Create a Coin
Creating a coin involves writing code to create a new blockchain. This blockchain supports your native cryptocurrency.
Those with extensive technical skills and training would do well with this option. It usually involves a good understanding of the underlying technology. This is the best option for 100 percent new or innovative currencies.
Create a Token
Creating a token usually involves hosting the token on a previously established blockchain. Tokens are typically not native to the blockchain on which they operate.
Most tokens are less customizable than coins, but creating a token is the faster (and cheaper) method. In addition, associating the token with a well-established blockchain platform can enhance the token’s value and credibility.
Cryptocurrency Creation Process
The involved process of developing a cryptocurrency can vary depending on your experience and preferences. However, most forms of crypto usually pass through the following steps on their way to reality.
Choose a Consensus Mechanism
The consensus mechanism determines if and how the network considers a transaction. All nodes must confirm the transaction for it to complete.
All cryptocurrencies require a mechanism to determine how nodes will process the transaction. There are several consensus mechanisms, including Proof of Work, Proof of Stake and more.
Decide on a Blockchain
Whether building your own blockchain or developing on another one, cryptocurrency developers must choose a place for the coin or token to live. The choice of blockchain depends on:
Technical skill and comfort level: For developers and crypto enthusiasts with a higher level of skill, they may be more comfortable with the idea of developing a whole new blockchain. The recommendation for novices is to build their platform on a pre-existing blockchain to gain more familiarity with the processes and develop experience with the technical side of things.
Project goals: If the platform's goal is the use of decentralized applications, it makes sense to build the platform on a unique proof-of-stake blockchain. A pre-built blockchain may make more sense if the project will offer incentives for a given platform. For example, you might build some tokens, such as FTT, on Ethereum (ERC-20 token) to offer discounted trading and transfer fees for those who hold and stake it on a specific exchange (FTX).
Create the Blockchain Nodes
Any distributed ledger technology — including blockchain — depends on nodes. Crypto creators must determine how these nodes will function. Details to consider include:
Understand Blockchain Permissions
Blockchain permissions determine who has access to the blockchain. Public blockchains allow anyone to join and participate in the core activities of the network. Private blockchains allow only selected, verified participants.
Permissioned blockchains have qualities of both private and public blockchains and are increasingly common thanks to the ability to admit or deny specific permissions to various users selectively.
Recommended by LinkedIn
Your choice of blockchain permissions will largely depend on your goals.
Do you want to incentivize the fast growth of your cryptocurrency? A public blockchain can make that easy. Do you want private participation from invited members? A private blockchain is the way to go.
Permissioned blockchains allow you to grant specific users access to different features or functions. They also allow vetting of users until you know you can trust them with particular functions.
Understand Blockchain Nodes
Blockchain nodes are electronic devices with IP addresses that connect to blockchain networks. Nodes are the communication endpoints to enable users to interact with the blockchain.
Nodes perform different functions based on what they need to do. They can:
Blockchain nodes enable access to the blockchain ledger and maintain it, which is why having distributed nodes — either physical hardware or virtual hardware — is essential. The distribution adds security.
There are different types of nodes that fulfill unique functions. Some nodes are responsible for maintaining the entire transaction records. These are full nodes. Light nodes, by comparison, store data and only provide the required information necessary for daily tasks or faster transactions.
Other types of nodes offer specific functionality, including super nodes and lighting nodes, to help facilitate faster transactions.
Nodes can take two different forms. Software nodes, also called "clients," download a copy of the blockchain and verify every block’s validity. Hardware nodes are average consumer-grade computers that can run the blockchain processes. Hardware nodes have specific requirements for RAM and hard drive space.
Write speeds will require solid state drives (SSDs). Wired internet connections are the best option due to their stability.
Build the Blockchain Architecture
Before your coin launches, developers need to ensure the blockchain has functionality. There is no going back after the mainnet launches. Most developers choose to test on a testnet. Common testing details include:
Integrate Any APIs
Without application programming interfaces (APIs), cryptocurrencies have a hard time standing out. Third-party API providers help ensure you have this functionality.
Design the Interface
Cryptocurrencies live and die by the ease of their interface design. Build easy-to-use and updated frontend and backend web and FTP servers. Do not forget about future developer updates.
Ensure the Cryptocurrency Is Legal
Some crypto developers in the past fell into the trap of not ensuring their coins met specific legal requirements. Before launching a coin, research the laws and regulations regarding securities and related topics.
Cryptocurrency is complex, but financial regulation is even more so. Finalizing these details before your initial coin offering (ICO) saves time and resources.
How Long Does It Take To Create a Cryptocurrency?
The process takes as long as 5 to 20 minutes for those who use automated tools. Outsourcing development work speeds the process along but adds to the overall costs.
Creating a new cryptocurrency from scratch takes anywhere from one to six months, but it depends on how complex the blockchain and coin are. In addition to development time, would-be cryptocurrency founders factor in other systems like auditing and launching an initial coin offering (ICO).
How Much Does It Cost To Create a Cryptocurrency?
The cost of creating cryptocurrency varies based on the coin's or token's complexity. Highly customized coins built on native blockchains are among the most expensive. Launching standardized tokens on Ethereum can be free.
According to Coinscreed.com, the cost of creating a new cryptocurrency usually falls between $15,000 and $35,000.
The Future of Cryptocurrency
People launch new cryptocurrencies and tokens every single day. These platforms' success depends on their founders' knowledge and processes.
Jalak Jobanputra, founding partner, Future Perfect Ventures told LinkedIn Editor-in-Chief, Caroline Fairchild, “This technology has the potential to be just as transformative as the internet.”
As the crypto market continues to explode in popularity, the creators of each form of currency must make decisions about marketing and proving value to would-be investors.
Building out a cryptocurrency is an involved process that you should not approach lightly.
Cryptocurrency is highly volatile, which makes it one of the riskiest investments. However, before building your own crypto, it may make sense to trade cryptocurrencies first to understand the processes and underpinning technologies better.
Top Takeaways
How To Create a Cryptocurrency and How Long It Takes
(Reporting by NPD and Timothy Mably)