Photo: Igor Igorevich (Shutterstock)
If you haven’t completely avoided the news in the past few months, you’ve likely heard about the wild ride in the cryptocurrency market. Experience Bitcoin and Ether enormous fluctuations in value daily, while Dogecoin – created in 2013 as a joke –has become a very real (albeit volatile) asset Thanks in part to Elon Musk’s Twitter feed and his recent SNL appearance.
Meanwhile, China is Combating cryptocurrency deals and the IRS is Chasing Investors Anyone who has not reported profits from cryptocurrency holdings – so if you’ve sold or exchanged coins, you might be on the lookout for capital gains or income taxes.
If the excitement of playing chair watcher or amateur investor isn’t enough for you, you may be wondering if it’s possible to get into the action by creating your own cryptocurrency. The short answer is yes, but there are a few different options to consider – and caveats to keep in mind – before diving in.
Know the difference between a coin and a token
First of all, it is important to understand the difference between coins and tokens. Both are cryptocurrenciesWhile a coin – Bitcoin, Litecoin, Dogecoin – works with its own blockchain, a token lives on an existing blockchain infrastructure such as Ethereum.
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In the simplest case, a blockchain is a Record of transactions made and secured by a network. While coins have their own independent transaction books, tokens rely on the technology of the underlying network to verify and secure transactions and property. In general, coins are used to transfer wealth, while tokens can represent a “contract” for almost anything from physical objects to event tickets to loyalty points.
Tokens are often released via a crowdsale known as an Initial Coin Offering (ICO) in exchange for existing coins, which in turn finance projects such as gaming platforms or digital wallets. Similar to purchasing coins, you can continue to receive publicly available tokens after an ICO ends by using the underlying currency for the purchase.
Anyone can create a token and crowdsale, but ICOs can be murky with developers taking investors’ money and running. Some ICOs are considered securities and are therefore regulated by the Securities and Exchange Commission, which warns investors to do their research before buying tokens introduced in an ICO. The SEC is increasingly taking action against fraudulent ICOs.
At the time of writing, CoinMarketCap is listing more than 5,200 coins and tokens available on public exchanges. Not all tokens made it to exchange, however – Etherscan, which provides Ethereum analytics, has more than 403,000 contracts in his archive. In April 2018 there were only 71,000.
The idea behind cryptocurrency is that the underlying code is available to everyone – but that doesn’t mean it’s easy to understand. Here are the ways to make your own coins and tokens.
Build your own blockchain – or share an existing one
Both methods require some technical knowledge or the help of an experienced developer. Since coins are on their own blockchains, you’ll either need to create a blockchain or change an existing one for your new coin.
The former requires serious programming skills, and that too Tutorials and Online courses exist They require a certain level of knowledge to guide you through the process, and you generally don’t end the process with a fully functional coin ready for public exchange.
Alternatively, you can Fork an existing blockchain by using the open source code found on Github, making some changes and starting a new blockchain with a new name (like garlicwhich is forked from Litecoin). Again, this assumes that you understand the code so that you know it what to change and why.
Start a coin or token on an existing blockchain
For the average person who doesn’t know the pros and cons of coding, a creation service that will do the technical work and return you your finished coin or token is an option. For example, WalletBuilders There is a free Coin Start Tool for those who just want to experiment with the process, as well as a paid package (0.0023 BTC at the time of this writing) that will create a working coin. rally is a pure invitation platform for creating coins based on the Ethereum blockchain.
You can also create a token – which is essentially a smart contract – with or without a public ICO. Since tokens can represent any asset, you can even create a token that has no real value or serious purpose other than sharing between friends.
It’s faster, easier, and cheaper than creating a coin because it doesn’t take the time and effort to create and maintain a new or forked blockchain. Instead, the technology that is already used for Bitcoin or Ethereum is used.
A common product is an ERC-20 token, the standard for those based on the Ethereum blockchain. The Code for these token contracts and Crowdsales is available even for the very ambitious, and there are user-friendly tutorials and YouTube videos as well Platforms to guide you through the process create a token with just a few clicks.
These Generator on GithubFor example, you just have to do this Install MetaMask (a blockchain utility to buy, exchange and store tokens) and fill in some details as described in this video tutorial about the token you start. There’s a free option if you’re not particularly interested in customization, and plans with more control costs up to 0.75 ETH as of now.
If you’re curious about crypto, there’s no penalty for experimenting with token contracts. Start with an ERC-20 token that you can hand out to your friends and then redeem to anyone who buys drinks at the bar. There is no financial value or obligation, but this will help you understand the technical aspect as well as how tokens work. An ICO is unlikely to be suitable for the casual observer due to SEC regulation and heavy misrepresentation penalties.
Not all cryptocurrencies are worth real money
The technical creation of a cryptocurrency isn’t the hardest part of starting a successful crypto project. The real work is adding value to your coin or token, building the infrastructure, maintaining it, and persuading others to buy, which requires a team of developers and staff. With the right support and promotion, even Memecoins can achieve real value (think Dogecoin here, too).
Even so, many cryptocurrencies are legally unsuccessful or even questionable, be it because the ICO was not created in good faith or the coin did not arouse lasting interest.
Before you go all-in on a possible one Shitcoin, research all the details of the project for yourself. Don’t just rely on what’s popular on the news or what your friends are saying. Crowdsourced Online forums are a decent place to find up-to-date information on what is real and trustworthy and what is not – though ultimately common sense is king.
This article was originally published in April 2018 and updated on May 24, 2021 with an updated context about the crypto market, updated statistics, additional links and more detailed information on the coin creation process.