How to create a cryptocurrency?

One of the most complex tasks in the crypto world is precisely to create a cryptocurrency, a job that is often underestimated, with disastrous results for the project.

MMany may think that the large number of cryptocurrencies and tokens that exist in the ecosystem are a clear demonstration that technology is available to everyone and creating a cryptocurrency is no longer complex. This is true to some extent, as the process has its own complexity. Below you will learn a little more about everything involved in the procedure of creating a cryptocurrency and all the necessary background for it.

Create a cryptocurrency: a technology available to everyone

First of all, creating a cryptocurrency is something that we can all do. To do this, it would be enough to simply fork the code of the cryptocurrency you want. With this, you could make a couple of modifications to its code and create unique addresses for this new cryptocurrency, modify the mining parameters (in case of Proof of Work) or validation (in case of Proof of Stake) and with that you would have a new cryptocurrency.

However, this was not always like that. Creating the first cryptocurrency was a job that was only possible thanks to the knowledge accumulated in more than 30 years of software development. Developments like eCash and Bitgold, iSatoshi Nakamoto was inspired to build Bitcoin, the world's first cryptocurrency and totally free software development from the start. It is from this point, when the technology to create a cryptocurrency was available to anyone with a computer, an Internet connection and the knowledge to make it a reality.

Now, creating a cryptocurrency is as simple as doing everything from scratch, creating a fork (using the code of a cryptocurrency that already exists) or using a platform to create it or directly generating a token (such as Ethereum and its ERC-20 ).

Points to consider

In any case, taking one or the other path requires that certain points be taken into account:

Point 1: the origin of the development of cryptocurrency

The first thing we must decide is what our development origin will be. This means that we must analyze whether we want to create a cryptocurrency from scratch, use an existing project and adapt it, or directly use the ability to generate tokens from other cryptocurrencies.

Step 2: Choose the consensus mechanism

Whether you have decided to create a coin from scratch or use an already created project, you will need to think about the consensus mechanism. Let's remember that the consensus mechanism is the protocol that determines whether or not the network will consider a particular transaction, allowing the creation of a unique and shared history that we call blockchain. To achieve this, a series of rules are used that are integrated into the node and that are reinforced by the Proof of Work protocols (in case we create a cryptocurrency with mining) or Proof of Stake (in case we use staking and validation ).

Step 3: Develop the Node Software

At this point, you should start developing the software for the nodes, which includes:

1. The cryptographic primitives that you will use in the node. Hash functions, built-in asymmetric cryptography for the functions needed to generate the addresses.
2. The communications protocol that will allow nodes to send and receive information between all nodes in the network.
3. Decide if you are going to use a Turing Incomplete programming model (such as Bitcoin) or Turing Complete (such as Ethereum and its EVM).
4. Develop the network data storage scheme and architecture. At this point you can generate a blockchain such as Bitcoin (using the UTXO model), like Ethereum's (using Account Model), like Cardano's (using EUTXO) or directly use DLT models like the one you can see in networks like IOTA ( in that case a DAG).
5. The APIs necessary to exchange information with other programs, enabling the generation of wallets or other functions by third parties.
6. Design a basic interface to control and manage the node.

You can design all this in one of the programming languages ​​that already exist in the world. For example, you can use Python to create a testing blockchain to learn how your model works and then port it to more powerful languages ​​(like C/C++ or Rust).

Step 4: create a community that contributes to the development of cryptocurrency

With the development of the software, a community must be generated that uses the cryptocurrency, that helps its development and contributes the most important point: a network of functional nodes for the cryptocurrency to work. This is an important point because it depends on this that the network works, that the cryptocurrency circulates and is widely accepted.

Conclusions

At this point it is clear that generating a cryptocurrency is something that is within everyone's reach, but that there are elements that we must recognize in advance in order to overcome them. The decisions that are made at the time a project begins to develop will have a strong impact on how our currency will work and how it will evolve over time.

You will like to know that most cryptocurrencies use technologies that other projects have created, improving aspects of it or adapting them to their needs, in order to take the best of each world and build something new with a different vision.