How Anyone Can Make Their Own Digital Currency
Bitcoin, and the many altcoins which have followed in its wak,e have opened up a new era in finance – one in which the power of money creation is no longer held exclusively by central banking monopolies.
This is money made by the people, for the people. Or by a club, for its members. Or by you, for your mates. Today anybody can make their own digital currency, either in an attempt to take over the world with the next Global Reserve Currency, as a niche community coin, or just as a laugh. One of the most popular altcoins (Dogecoin), with a total market capitalization today of over $15 million, was started as a joke. Even a cursory look at the hundred of coins available today will show you that there are almost as many reasons to create your own coin as there are people in the world.
And its not as hard as you might think either. Anybody can do it, regardless of whether you have any programming knowledge or technical expertise. In fact, it can be as simple as filling out a form. In this article I will walk you by the hand through how to make your own digital currency, including all of the most important options and services.
The first question you must ask yourself is – do you need your own blockchain?
Most digital currencies today use the ‘blockchain’ technology pioneered by Bitcoin. In layman’s terms, the blockchain is a shared public ledger of every transaction which has ever taken place. This blockchain is stored by every full node on the network so that they can tell whether a person who is trying to send coins really is the rightful owner of those coins.
As you will see below, some established cryptocurrencies allow new coin issuers to use their blockchain to record transactions. So you have a choice whether you want to launch your own blockchain or use an existing one.
If you want to have full control over the code which runs your coin, and unlimited ability to set all its parameters however you wish, then you will need to start the network from scratch with your own blockchain. Likewise, if you would like to be able to build new and unique features (or hire somebody to do it for you) then you will need to go down this route.
There are a lot of different options to customize your coin in order to make it unique and to best fit your purposes. You can set the block reward and choose whether you want to have miners using one of the various ‘Proof of Work’ algorithms to secure your network, or minters earning ‘Proof of Stake’ rewards. You can choose how much data to allow in each transaction, the block size, the maximum coin supply, the difficulty and how it will change over time to control the rate at which new coins are issued, the level of fees and whether they are destroyed or ‘recycled’ to the miners / minters, and so on.
Most of the services which allow you to create a coin secured by an established blockchain will allow you to control some of these parameters within certain limits, but none of them will give you full and flexible control over everything. On the other hand, there are some distinct advantages to using an established blockchain.
The security of any digital currency is dependent on the number of miners and full nodes who secure its blockchain. When you first start off with your own cryptocurrency you are unlikely to attract as many miners or to have as many nodes as, for example, Bitcoin. This means that it will be proportionally less expensive for somebody to attack your network and potentially steal coins from its users through double spending attacks. Launching your coin on an established and secure blockchain means that you do not have to worry about this problem.
In addition to taking advantage of the security provided by a large and established network, you may also be able to take advantage of some of the advanced features of the blockchain you are using – such as built-in decentralized exchanges for people to buy and sell your coin for other cryptocurrencies and digital assets.
Another consideration is the ecosystem of services which must be built up around a coin in order for it to thrive. This can include things like block explorers, through which users can access network information and check on the status of transactions or on wallet balances, or even things like payment processors and APIs through which online shops can accept your coin as payment. If you decide to launch your own blockchain then you will need to think about getting all of these things built yourself, but if you use an existing chain then you may be able to access the ecosystem of third party services which have already been built up around it.
Launching Your Own Blockchain
If you have no particular technical skills, but would still like to go it alone with your own blockchain, then there are two main options available to you.
Using a Coin Creation Service
The easiest way to get start your own digital currency with its own blockchain is to use an off-the-shelf coin creation service like CryptoLife or CoinCreator.net. For a very reasonable price (0.075 BTC right now, but obviously this is subject to change) you can create a proof of work cryptocurrency using X11, Scrypt or SHA256 algorithm and customized parameters, and you even get your own logo and Windows Qt wallet along with 1 month hosting.
For an extra fee you can also get them to build you a block explorer.
Cloning or Forking an Open Source Coin
Many cryptocurrency projects are ‘open source’. This means that the source code which runs them is available for anybody to view and even use themselves for free.
If you just want to create a straight copy of an open source coin with no changes at all, known as ‘cloning’, then this is relatively straight forward. You will not need to have any programming knowledge, but you will need to have a certain amount of technical ability and a hosting account in order to do things like setting up seed nodes to get the ball rolling. Hiring somebody to do this for you would be fairly inexpensive – the services board of the Bitcointalk forum is one place where you can hire a freelancer for this kind of work.
In order to create a unique coin it is common practice to start off by copying the codebase of whichever coin is closest to what you want, before making whatever alterations you need. This saves a hell of a lot of time and effort compared to starting from scratch, and is called ‘forking’. Obviously some programming experience is going to be a big help in doing this, but depending on the size of the job you may still be able to hire a programmer to do it for you at a reasonable price.
Creating a Digital Currency Secured by an Established Blockchain
There is a growing list of service which let you make your own coin over an existing network. Here are three of the most interesting (imho):
NXT Monetary System
NXT is currently the only alt coin with its own built-in service which is specifically geared towards making digital currencies. As a proof of stake crypto with a market capitalization well into the $millions, it offers strong security as well as being easy to use, even for beginners. You can access the monetary system to view all of the available coins and build your own from the NXT wallet.
Key features include:
- Your coin can be traded on the NXT decentralized asset exchange
- Make coins which can be earned using the SHA256, SHA3, Scrypt, or Keccak25 (CPU mining) algorithms, with the difficulty set by you. This proof of work system does not secure the network – that’s done by NXT itself – but can be used to let miners earn your coins.
- Costs from just 40NXT, although the fee is higher if you want a short three or four letter ticker symbol.
- You can set both the initial coin supply and maximum total supply
- For crowdfunding you can create ‘reservable’ coins, which are only issued once a certain amount of money has been pledged to the issuer (otherwise prospective buyers are refunded).
- Reservable coins can also be ‘claimable’, meaning that holders can always reclaim the NXT coins paid by buyers in the original sale. This effectively maintains a minimum guaranteed value.
- You can choose to make your coin ‘controllable’, meaning that peer-to-peer trading is disabled and users can only buy and sell with the issuing account which you control.
You can learn more about the Monetary System on the NXT Wiki.
Counterparty is one of a number of protocols which let anybody issue their own token over the Bitcoin blockchain. Because Bitcoin is the most popular digital currency, its network is also the most secure – a big advantage for protocols like this.
It is generally used for issuing digital assets, rather than currencies, and includes features such as a dividend payment mechanism. But there is one big reason why I decided to include it here: merged folding.
Foldingcoin is itself a digital currency issued using the Counterparty protocol. Users can earn this coin by contributing their computing power to medical science through Stanford University’s Folding@Home distributed computing initiative (see How to Earn Digital Currency Through Citizen Science). This provides an ethical alternative to mining for users wishing to earn digital currency. Merged folding is a service offered by Foldingcoin which enables any other Counterparty asset issuer to let users earn their coin by contributing to science.
Ripple doesn’t actually have a blockchain, it has a different kind of distributed ledger, but it can be used to create your own digital currency.
The Ripple system is based around IOUs (‘I owe you’ notes) and gateways. A gateway issues and redeems IOUs over the the Ripple protocol, and will generally process deposits and withdrawals. For example, a gateway may accept 1 ounce of gold from a customer and issue 1 GOLD IOU. The customer can then transfer and trade that IOU with other users who trust the same issuer. At some point a customer may send the IOU back to the gateway and receive 1 ounce of real gold in return.
This is actually how money used to work, before the ‘gold standard’ was brought to an end. Bank notes themselves were originally a kind of deposit certificate for gold and represented a promise by the bank which issued them to ‘pay the bearer’ of the note a certain amount of gold.
Creating Ripple IOUs and issuing them over the network as currency is actually very easy, and you can do it all from the Ripple wallet. You can then set yourself up as a manual gateway, processing deposits and withdrawals by hand. The tricky part is getting enough people who trust that you will make good on whatever promise your IOUs are supposed to represent; you will almost certainly need a website of some kind, this will probably need to allow people to register and provide personal details, and would ideally be able to process deposits and withdrawals automatically.
Coming Soon – Start a Price Stable Digital Currency
Bitshares is famous for its ‘price stable digital currencies’. These are digital currencies whose value is tied to an external asset using a trustless market-based system. This means you don’t need to trust the issuer to be able to redeem the coin in order for its price to be stable, like you do with Ripple, and as an issuer you would not need to keep stockpiles of the asset in question or process deposits and withdrawals.
Currently these price stable coins can only be created by elected ‘delegates’, but in the soon to be launched ‘Bitshares 2.0’ anybody will be able to make them and tie their value to almost anything you can think of!