Cryptocurrencies can be created by anyone with technical computer programming knowledge.
As the world comes out of lockdown, cryptocurrencies like Bitcoin, Ether, Dogecoin, and many others are attracting more and more attention.
The past year’s shift to digital has accelerated businesses’ digitization efforts, leading to the growing popularity of blockchain technology development.
This has led some to question whether creating a cryptocurrency is profitable.
The cryptocurrency market is projected to reach $4.2 billion by 2026, driven by the demand for transparency and distributed ledger technology.
If you’re considering creating your own cryptocurrency, it’s essential to understand what you’re getting into.
At AlphaCorp, we provide insight into what cryptocurrencies are, how they work, and the process of creating them.
We also weigh the pros and cons of cryptocurrency software development and estimate the associated cost.
What is a Cryptocurrency?
Cryptocurrency: What It Is and How It Works
The definition of cryptocurrency varies from person to person. Some see it as a new digital form of currency, while others see it as just another passing trend fueled by media attention. Regardless, we’ll give you the facts so you can make an informed decision.
In essence, cryptocurrencies are digital assets that can be traded for goods and services. These assets rely on blockchain technology, with ownership records stored in a secure ledger that uses cryptography to secure transactions.
It’s important to note that there are two types of cryptocurrencies: coins and tokens. Both can be considered cryptocurrencies, but there is a key difference between them.
Coins operate on their own blockchain, while tokens operate on top of an existing blockchain, like Ethereum.
For instance, Bitcoin and Litecoin are examples of coins, while Ether and Uniswap are tokens on the Ethereum network.
Tokens are often more popular among companies as they can function like smart contracts and provide funding through a crowd sale.
They are also easier and more cost-effective to create, which we’ll explore in more detail later.
How Cryptocurrencies Work
The consensus algorithms regulating the addition of new blocks to the blockchain in cryptocurrency operations are key to their success. These mechanisms ensure transaction confirmation without third parties, requiring all network participants to accept a block for it to be registered. The two best-known consensus algorithms are Proof of Work (PoW) and Proof of Stake (PoS).
PoW requires a member to prove to others that a significant amount of computational effort has been expended, which has been criticized due to its high energy consumption and waste implications. Computers consume a lot of electricity to perform computations with this algorithm.
PoS, on the other hand, requires validators to stake their own Ethereum tokens to perform mining work, thus reducing the risk of fraudulent activity on the network. It results in much less computational power being used, as validators are selected randomly and don’t compete with each other.
Each time a new block is created, cryptocurrencies are issued and the blockchain participant is rewarded for validating the transaction through mining.
Pros and Cons of Cryptocurrency Development
Despite the hype around cryptocurrencies in the financial world, the topic of creating digital assets for business purposes is often overlooked.
Business leaders may wonder why they should consider it. Therefore, our goal is to shed light on the advantages and potential disadvantages of cryptocurrency development for businesses.
Cryptocurrency Advantages
Advantages of Cryptocurrency Transactions:
- Affordable Fees: Eliminating intermediaries with cryptocurrencies results in significantly lower transaction fees compared to fiat currencies. While some fees are still necessary, they are typically lower than those charged for fiat transactions.
- Quick Payments: The reduced number of intermediaries involved in cryptocurrency transactions leads to quicker processing times. Payments can be made almost instantly to anyone with a crypto wallet, without the wait of several days often associated with fiat transactions.
- Anonymity: Crypto purchases are confidential and not tied to a user’s personal information. This is similar to the privacy offered by cash transactions, making it harder to trace the funds back to the user. Though not completely anonymous, cryptocurrency transactions offer more privacy than traditional payment methods.
- Enhanced Security: Cryptocurrency transactions are backed by advanced coding and encrypted for added security. The underlying blockchain technology verifies and secures the entire process, making it harder for hackers to compromise the transaction.
Cryptocurrency Disadvantages
- High volatility. Cryptocurrency markets are highly volatile, as seen with Bitcoin’s drastic value fluctuations.
- Regulatory uncertainty. Cryptocurrency adoption varies globally and even in countries where it’s legal, it faces limited regulatory oversight. The technology is still developing, and regulators have yet to fully catch up, presenting potential risks and obstacles to starting a cryptocurrency.
- Permanent transactions. Cryptocurrency transactions, recorded on the blockchain, are irreversible. Any mistake in inputting information, such as an incorrect address, may result in permanently lost funds.
How To Make Your Own Cryptocurrency
Creating a cryptocurrency can be a complex process, but it all starts with defining your goals. What are your goals for creating a cryptocurrency, and how will it benefit your business? These questions should be answered before proceeding.
To ensure a successful outcome, it is recommended to develop a comprehensive white paper that outlines your concept and all the project details.
To help you get started, here are the main steps in creating a cryptocurrency.
1. Decide if You’re Making a Coin or a Token
Decide between creating a cryptocurrency coin or token. Coins require a team of experts and more resources, while tokens can be built on top of established blockchains, making them a more manageable option for businesses. Tokens are usually the first step for companies starting their crypto journey.
2. Pick a Blockchain Platform
With the decision to create a token, the next step is to choose the blockchain platform that will serve as its foundation.
The choice of platform depends on the desired consensus mechanism.
Ethereum is a common option due to its support for smart contracts and ability to facilitate DApp development.
However, there are other well-known blockchain platforms available for consideration, such as NEO, EOS, Waves, and Hyperledger Fabric.
3. Code a Smart Contract and Create Your Token
After selecting Ethereum, your next step is deploying a smart contract. ERC-20 is the most widely used Ethereum token and applies to all smart contracts on the network.
Decide on token quantity, name, symbol, and decimal places. Then create a transfer event to notify wallets of token transfers. Test and verify your token, then launch.
The cryptocurrency creation process depends on factors like choosing a coin or token, the need for an ICO, and more.
Tech-savvy business leaders may want to create a cryptocurrency, but there are many technicalities involved. Hence, it’s advisable to consult and find a solution that fits your business needs.
We offer blockchain development solutions that can help you with your project.
Cryptocurrency Development Costs
When creating your own cryptocurrency, it’s crucial to consider the budget for development. While we have outlined the general steps of creating a cryptocurrency, such as token production, smart contract development, and more, these blockchain activities require expertise in AI and blockchain technology.
Hiring an in-house team of blockchain developers is an option, with an average salary of $107,000/year in the US, but finding highly skilled developers can be challenging and time-consuming, with headhunting expenses to consider.
For custom development services, developer hourly rates vary based on experience and location, with a common rate of $100/hour, but potentially higher for those with a successful track record in blockchain projects.
The cost of custom software development can range widely, from $5,000 to $1,000,000, making it challenging to provide a precise estimate. A rough approximation can be obtained by multiplying the number of developers needed by their hourly or yearly rate.
Now that you’re ready to start your cryptocurrency creation journey, you need to be aware of the complexity involved.
The cryptocurrency development process requires numerous decisions and technical challenges can arise at any time.
Additionally, the industry you’re in can impact the development process, for example, insurance blockchain development may differ from that of healthcare. Hence, having an experienced team to support you is crucial for a successful outcome.
At AlphaCorpConsulting, we offer a personalized approach to our clients and are dedicated to helping your company reach new heights in cryptocurrency development.
Our team will guide you through the entire process and provide a free blockchain consultation to discuss your innovative project. Don’t hesitate to reach out to us for expert support.