How to make your own cryptocurrency

• Anyone can create a cryptocurrency by building a new blockchain, forking an existing one, or launching a token on an existing blockchain.

• Key steps typically involve defining objectives, choosing a blockchain platform, and selecting a token standard.

• Risks associated with creating a cryptocurrency can include potential code vulnerabilities and violations of laws and regulations in certain jurisdictions.

Creating your own cryptocurrency is a process that has become increasingly accessible, allowing virtually anyone with the requisite technical skills to dive into the world of digital assets.

Whether you choose to build a new blockchain from the ground up, fork an existing one, or launch a token on a well-established blockchain, each approach offers unique challenges and benefits.

This guide delves into the essential steps and considerations for creating a cryptocurrency, highlighting the critical decisions you'll need to make along the way.

Can anybody create their own cryptocurrency or crypto asset?

Yes — and they can do so with relative ease. Of course, difficulty varies based on many factors, such as the consensus mechanism chosen, the complexity of the blockchain, and other technical considerations.

How much does it cost to create a cryptocurrency?

It depends. Building a feature-rich blockchain, complete with powerful smart contracts, a robust currency, carefully thought-out economics and incentives can take years and involve significant costs.

Conversely, launching a digital currency on an existing blockchain (or, more correctly, launching a token) can be more cost-effective — as the existing blockchain infrastructure has already laid the foundations (security, rules, etc.), the barriers to entry are much lower.

Why create a new cryptocurrency?

Cryptocurrencies and blockchain-based tokens can provide a range of use cases. Bitcoin, for instance, seeks to enforce an “electronic cash” system without reliance on financial institutions, while Ethereum aims to provide a decentralized ecosystem of self-executing applications.

People can create blockchain-based tokens to unlock certain services or benefits for their users, enable them to participate in decentralized governance, or help secure the network via staking — to provide just a few examples.

Broadly speaking, a strong tokenomics model can also greatly complement a decentralized platform by incentivizing participation.

As we touched on above, there are multiple approaches a person can take when launching a new digital asset.

Each method varies greatly in terms of its technical difficulty, cost, and time invested.

Create a new blockchain and native cryptocurrency

The first option (and the most challenging) is to design a cryptocurrency from scratch.

Many would consider this avenue unsuitable for beginners due to its complexity. Not only is it likely to be costly, but it requires a deep technical knowledge of topics such as cryptography, monetary theory and distributed systems.

Crucially, it involves building a robust, secure blockchain network with the right incentives to encourage participants to behave honestly in the absence of a central bank or other third party.

Of course, with so many existing solutions, a new blockchain would also need a strong unique selling point that makes it stand out — is it faster? Cheaper? Greener? More scalable than what’s available currently?

If it isn’t any of those, new users may not choose to adopt it in favor of other more established options, such as Solana or Polygon.

Modify or fork an existing blockchain

“Forking” offers an easier route for creating cryptocurrencies. The process allows people to develop a spin-off crypto project from a tried-and-tested platform built by other blockchain developers.

Leveraging this option can significantly reduce the workload by adapting an open-source, battle-tested codebase. If the underlying blockchain has been live for years and has an active developer community, certain vulnerabilities and security issues may have already been addressed.

Note that this is far from guaranteed: those going down this route should be capable of understanding and vetting their prospective blockchain holistically, and be aware that undiscovered vulnerabilities can still exist.

If you’re satisfied with the blockchain you’d like to fork, you can begin to make your desired changes to the code. Perhaps you want to switch from a Proof-of-Work (PoW) consensus algorithm to a Proof-of Stake (PoS) one, or you’d like to increase/decrease block times or block sizes.

Forking an open-source blockchain allows anyone to modify its features as they see fit, provided they have the technical prowess and understand the limitations of the system.

It’s worth mentioning, however, that a newly forked project cannot piggyback off the original blockchain’s security network. It must build its own network of nodes and miners/validators.

Popular examples of forked blockchains include Litecoin (forked from the Bitcoin codebase by Charlie Lee) and Bitcoin Cash (a hard fork of the Bitcoin protocol led by a collective of developers).

Create a new cryptocurrency on an existing blockchain

The easiest of the three options, launching a cryptocurrency on an existing blockchain (known as a Layer 1 blockchain) means that you create a digital asset within an existing ecosystem.

If building a blockchain from scratch is like building the entire TCP/IP stack, launching a token on said blockchain is analogous to launching on the application layer: developers do not need to worry about the low-level architecture.

Note the use of the word token here. Should you choose to go down this route, your asset isn’t a “cryptocurrency” in the true sense: it isn’t the native unit of the blockchain protocol, and exists alongside other assets. It may also be referred to as a cryptocurrency, crypto coin, crypto, crypto asset, etc., but it’s worth keeping this distinction in mind.

For example, Ethereum is home to thousands of ERC-20 tokens (e.g., USDC, LINK, UNI) — however, ETH remains its base currency. Similarly, Solana has many SPL tokens (e.g., WIF, BONK, PYTH), but only one cryptocurrency: SOL.

For more information, check out our Kraken Learn Center guide, Crypto coins and tokens: What’s the difference?

This isn’t necessarily a bad thing. A token launched on a top blockchain platform inherits its security and its entire ecosystem of users, developers and resources. By using a recognized format, the token will automatically be compatible with a range of decentralized applications, trading platforms and wallets on the network.

Such a token can be launched cheaply and quickly using pre-built tools, but this often comes at the expense of value leakage.

All blockchain-based activities, from transferring funds to interacting with smart contracts, require users to pay a blockchain transaction fee. This payment covers the network's computing costs to process and record each function on the blockchain.

For projects boasting their own blockchains, fees are often paid in a native cryptocurrency, allowing them to capture revenue from their network user activity.

Projects built on top of Layer 1 (L1) blockchains, however, give up this value to the underlying blockchain.

Additionally, for those seeking increased functionality and flexibility, manual creation is often recommended.

Given the difficulty and the variables involved with building a blockchain from scratch, we’ll opt here to outline the process for launching a token on top of an existing L1 network.

1. Define your objectives

Cryptocurrencies may function similarly, but their purposes can vary drastically. Let’s revisit our example from earlier: BTC and ETH.

Bitcoin aims to primarily serve as a decentralized monetary system. Its hallmarks include a capped maximum supply and a transparent issuance schedule. These tenets align well with its objective: BTC supply is not prone to dilution by endless inflation, and its simple architecture reduces potential attack surfaces.

Ethereum, conversely, aims to be a world computer. The project’s native ETH cryptocurrency is seen more as a “fuel” than a medium of exchange — it’s used to pay for all network computations executed within its ecosystem.

Ethereum’s flexible infrastructure allows for users to easily launch all types of tokens and decentralized applications (DEXs, yield farms, etc.).

In short — outlining your objectives is important. Are you creating a decentralized asset for transferring value, or a token with a more specific role?

Blockchain-based tokens can potentially serve a myriad of purposes:

• A payment medium for services or apps within an ecosystem.

• “Voting power” in protocol governance.

• A staking unit to secure protocols.

Whichever you decide, it’s worth codifying the token's utility in a whitepaper, along with other important details:

• The currency’s total number of units. Is the supply fixed, or infinite?

• The distribution and issuance schedule. Will you make units available via an airdrop, initial DEX offering, or allow users to earn them via staking or completing tasks?

2. Select your blockchain platform

For your underlying network, you’ll want to consider the pros and cons of each available option.

Ethereum is perhaps the most expensive candidate, but that price is reflective of the strength of its ecosystem. It has the greatest number of users and a large developer community. Launching your token on Ethereum means a wide repository of dev resources, immediate compatibility with wallets and dApps, and a huge audience.

Solana prides itself on rapid, cheap transactions. Similarly, Solana has a large user base and an environment ideal for developing Web3 applications, though it has a smaller user/dev community than Ethereum.

You don’t necessarily need to launch directly on a blockchain, either. A layer 2 solution (L2) is anchored to an underlying blockchain, but generally enables faster, cheaper transactions thanks to off-chain transaction processing. Examples include Polygon, Optimism, and Arbitrum.

There are many more options out there — too many to explore here. When reviewing them, it’s advisable to consider who your ideal users are, how easily you can work with the platform’s programming language, and the platform's technical intricacies.

3. Pick your token standard

Fortunately, most blockchains offer widely-accepted blueprints for creating crypto tokens (such as the aforementioned ERC-20 and SPL standards), so you don’t need to reinvent the wheel.

It’s strongly recommended that you stick to well-known token standards — these generally have rich documentation that can guide you through the process. Doing so will reduce the chances of exposing your token to security vulnerabilities.

You may also want to spend some time dissecting the code for your desired format. Look at similar implementations, and understand the purpose of its various standardized functions.

Pro tip: to get to know the ERC-20 contract architecture, locate top tokens on Etherscan and hit the Contract tab to view their contracts. For instance, here’s SHIBA INU’s code.

4. Create your token

At this stage of the process, you should be deeply familiar with your desired token format and its various components. Feeling confident? Time to apply the finishing touches.

For an ERC-20 token, you would use an IDE like Remix to import a token contract (in this case, we’d recommend OpenZepplin’s ERC-20 contract). Then, it’s just a case of naming your token and its ticker, and configuring the supply. Finally, ensure that you’ve integrated any other functionality you want before deploying it to a testnet environment like Goerli or Rinkeby.

Testnets allow developers to review their token’s functionality in an identical blockchain environment. This stage can prove vitally important for identifying early issues that could cause serious problems down the line.

5. Launch and distribute

When you’re confident that your token is ready for mainnet (launching on the L1 blockchain), it’s time to deploy and distribute it in your preferred manner.

You may want to educate yourself on local laws and regulations before proceeding. While cryptocurrency is legal in many countries, regulations in certain jurisdictions may require that you register with relevant institutions before listing tokens for sale.

Seeking professional legal advice ahead of launching your cryptocurrency may prove helpful to better understand the regulatory landscape and avoid potential lawsuits.

Advantages:

• Using an existing blockchain platform to create a cryptocurrency circumvents the time-consuming process of launching your own blockchain.

• Due to the popularity of this method, you’ll find plenty of support should you need it, as other developers have likely encountered the same issues that arise during the process.

• Your token will be compatible with a range of applications on the same blockchain from the get-go, from decentralized apps to centralized cryptocurrency trading platforms.

Disadvantages:

• You are tied into a very specific blockchain ecosystem.

• Your token will need to conform to predefined rules, which you cannot modify to suit your use case.

• Outages, hacks, and other issues that occur within a blockchain’s ecosystem can also negatively impact your project.

Security risks

Remember that, once launched, cryptocurrencies exist across a decentralized, distributed network of nodes. The creator isn’t able to exercise control in the way that a bank might, meaning that transactions cannot be reversed and code cannot be patched on-the-go.

This is important to understand before creating your crypto asset. Cryptocurrencies are attractive to hackers and other malicious actors, due to the above properties and the inherent pseudonymity of blockchains. The smallest oversight in your code could spell disaster — allowing such an actor to double-spend funds, duplicate tokens, or drain your contract of its tokens.

Indeed, if launching a cryptocurrency or token that you intend to distribute, you have a responsibility towards the recipients to ensure strong security. Engaging a reputable auditor may help mitigate this risk, but it’s not guaranteed.

Legal and regulatory risks

Cryptocurrency creators need to be aware of the regulations and laws pertaining to crypto assets in their jurisdiction. Offering a token for sale can sometimes constitute a securities offering — meaning that the creator needs to seek approval or register their business with the relevant government agency prior to distribution. Failure to do so may result in punitive action.

Again, seeking professional legal advice is often recommended.

In summary, we’ve outlined the various ways to launch your own digital assets, and provided a high-level guide to creating a fungible token on an existing blockchain.

Getting into the weeds with smart contract code can be a fantastic way to learn about crypto tokens, even if you have no intention of building an actual product or making them available to the public.

Should you wish to deploy and distribute your own coin, remember to prioritize its security and legal compliance.

Not ready to create your own cryptocurrency, and prefer to stick with existing assets?

We’ve got you covered. With over 210 digital assets available to buy, sell and trade, Kraken is your portal into the exciting worlds of crypto and Web3.