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Do you know how to start a cryptocurrency business? The cryptocurrency market has gone from a lot of hype around a pipe dream to a booming success story in just a few years.
Where once there was just Bitcoin, there are now thousands of crypto assets. And the industry shows no sign of slowing down anytime soon.
As of early April 2022, there are more than 18,000 cryptocurrencies, with new ones added every day. And some cryptocurrencies have market capitalizations above $1 billion.
What’s more, the cryptocurrency market cap hit $3 trillion in November 2021.
The excitement surrounding cryptocurrencies has led to many businesses wanting to get in on the action and create their own cryptocurrency. How to start a cryptocurrency business and is it possible?
The short answer is yes, but it takes quite a bit of planning.
If you’re looking to get off the sidelines and join the cryptocurrency action, there are some things to keep in mind to help ensure your crypto attracts interest. Here’s a look at what you need to know.
Difference Between Coins and Tokens
Before we get into how to create a cryptocurrency, it’s important to clear the air on something, which is that not all cryptocurrencies work the same way.
There are two categories of cryptocurrencies: coins and tokens. When it comes to creating a cryptocurrency, you’ll hear a lot about coins and tokens, and it’s crucial to know the difference between the two.
For starters, a coin runs on its own blockchain. Bitcoin, Litecoin, and Binance Coin are examples of coins, and each operates on a different blockchain platform.
So, if it’s a coin you have your heart set on creating, then you’ll have to build your own blockchain.
However, tokens are built on top of existing blockchain infrastructure, which is used to verify the security of transactions.
Companies often release tokens as part of an ICO, or initial coin offering, as a way to raise capital in the crypto realm.
Coins, which have broad usage, are digital replacements for traditional money. But tokens, specifically utility tokens, are limited to a particular project or organization and represent access to specific products, services, or discounts.
Think of tokens as the loyalty points to your favorite clothing store and coins as traditional money.
Sure, you can use both to make a purchase, but with the loyalty points, you can only use them at that particular store. While with the actual money, you can shop anywhere.
Another difference to keep in mind is that coins can buy tokens, but tokens can’t buy coins.
What to Consider When Creating Your Cryptocurrency
Creating a cryptocurrency – especially a successful one – takes a lot of work. We can’t downplay the investment of time and money that goes into creating valuable crypto assets.
Of course, anyone can start a cryptocurrency, which is why there are so many popping up on a regular basis. But just because anyone can create a cryptocurrency doesn’t mean it’s right for everyone.
The truth is that creating a cryptocurrency is the easy part of the process; the real challenge comes with maintaining and growing your asset over time to give it value.
Creating and launching a cryptocurrency doesn’t automatically give it value. In fact, there are many cryptocurrencies that are now worthless.
So before you go all-in on creating a cryptocurrency, define the features of your token or coin, what makes it different, and what you want to achieve.
On top of that, if you’re thinking of creating a token to generate capital through an ICO (initial coin offering), you’ll need to be diligent to make sure you don’t land in hot water with the U.S. Securities and Exchange Commission (SEC).
The SEC has also been cracking down on fraudulent ICOs, so hiring a securities lawyer is a good idea to help ensure you don’t accidentally violate any federal laws.
Options for Starting a Cryptocurrency
Once you’ve decided that you want to start a cryptocurrency, there are four main ways to create a digital asset. Which one you select comes down to whether you want to start a coin or a token.
Build a New Blockchain
We might as well deal with the most challenging option first: building a new blockchain. Writing your own code to create a new blockchain for your cryptocurrency is one possible option. It’s possible, but it’s far from easy.
One benefit of creating a new blockchain is that it affords you the most freedom for designing your coin.
But taking this route requires some serious advanced technical skills and a thorough understanding of how blockchain technology works.
There are online courses that can help to create a new blockchain, but even those require more than just basic technical know-how.
If you can’t explain to someone how blockchain technology works, this isn’t the option for you.
Forking an Existing Blockchain
If you’re interested in creating a native cryptocurrency but don’t want to go through the hassle of starting a blockchain from scratch, forking an existing blockchain is an option that’s faster and less complicated.
This process involves using the source code of an existing blockchain to create a new blockchain for your cryptocurrency.
For example, to fork an existing blockchain, you would take an open source code, which can be found on GitHub, alter it, and then launch a new coin.
Blockchain forks have helped create many well-known cryptocurrencies, such as Litecoin and Bitcoin Cash.
While forking an established blockchain isn’t as complicated as creating one from scratch, it still requires in-depth knowledge of modifying existing code.
Use an Established Blockchain
If the fork process still sounds like too much for you to take on, an easier option is to create your cryptocurrency on an existing blockchain platform, like Ethereum.
Using an existing blockchain platform to start a cryptocurrency means your asset will be classified as a token.
While creating a token has more limitations than a coin, it is the simplest and most affordable way to start a cryptocurrency on your own.
Plus, being associated with an established and reputable blockchain platform can benefit your token’s value and validity.
If creating a coin or token is beyond your technical skills, or you just don’t have the time to dedicate to it, a final option is to hire a blockchain-as-a-service (BaaS) company.
BaaS companies, such as IBM Blockchain Platform, Amazon Managed Blockchain, Kaleido, and ChainZilla, will build and maintain blockchain networks and cryptocurrencies.
Using a BaaS company allows for lots of customization with your cryptocurrency, with some offering to develop a blockchain from scratch and others using their blockchain platform.
Think of BaaS companies as the blockchain equivalent of web hosting providers.
Key Business Steps of Starting a Cryptocurrency
When you’re ready to get going on creating a cryptocurrency, it’s crucial to think about the process from start to finish. Here are some of the key business processes involved with starting a cryptocurrency:
- Define Your idea: The success of your cryptocurrency hinges on clearly establishing your objectives right from the beginning. Start the process by thinking about what you want to achieve and who is your target audience. Remember that you’ll need to establish a value proposition to create interest in your crypto.
- Create a White Paper: Want to get investors on board with your new cryptocurrency? Then you need a detailed white paper. A white paper can make all the difference between a profitable cryptocurrency and one that fails. A white paper will also give credibility to your cryptocurrency by detailing its purpose and the technology behind it.
- Hire a Crypto Audit Company: Credibility and legitimacy are crucial for any successful crypto. That’s where auditing companies can help. Crypto auditing companies, such as Hacken, will check the code of your blockchain and detect any vulnerabilities. Using a crypto audit company will go a long way in providing assurances to prospective investors.
- Verify Legal Aspects: Remember how we mentioned earlier that the SEC is cracking down on fraudulent ICOs? Skipping this step is one way to quickly find out what it’s like to deal with the SEC. Even with the best and most lawful intentions, ensuring you’re not inadvertently breaking federal laws is essential. And there are some gray areas with crypto, so it’s a good idea to hire a lawyer with experience dealing with securities.
- Promotion: Starting a cryptocurrency is one thing. Growing it is another. It isn’t like “The Field of Dreams” – there’s no “If you build it, (they) will come.” Instead, you have to work at promoting your new crypto, and that means crafting a marketing plan that reflects your asset’s value proposition. Don’t forget to highlight what makes your cryptocurrency unique from the thousands of other assets out there.
Costs of Starting a Cryptocurrency
When it comes to the cost of starting a cryptocurrency, the expense will depend on what process you select.
Launching a standardized token on an existing platform is the cheapest option. There are loads of online tutorials that will walk you through the process of building a free crypto token in just a few minutes.
But remember that the initial creation is just one step in a lengthy process to give your asset value.
However, if you’re looking to create a native coin with a new blockchain, the price tag will be significantly more than ‘free.’
Protecting Your Investment
While the crypto realm comes with many unique possibilities and opportunities, it’s also rife with volatility. And that translates into risk for businesses in the crypto space.
The soaring crypto space has seen no shortage of cyberattacks on crypto businesses. The fact that cryptocurrencies are largely unregulated has made them a prime target for cybercriminals.
In recent years, cryptojacking, account takeovers, mining fraud, and scams involving ICOs have all become more common.
Launching a cryptocurrency is an investment for your business. And just like any investment, you’ll want to take measures to protect it from potential risks. So a custom-made crypto insurance policy should be part of any business plan for starting a cryptocurrency.
The volatility of the crypto market means that not all insurers are willing to cover crypto-based businesses. Fortunately, some insurers, including Embroker, recognize the importance of providing coverage for this booming market. After all, as a business owner, you already have a lot to deal with, and crypto insurance coverage will provide peace of mind that your business is protected from unexpected risks.
This article has been provided by Tom Lambotte, founder and CEO of BobaGuard, a partner of Embroker. Tom advises law firms on cybersecurity and helps protect them from cyber attacks, including cybercriminals. In this article, Tom explains that law firms, particularly small and solo, need to understand who and what cybercriminals target. – There’s a […]