Limiting your financial options by getting into crypto solely for the purpose of converting it back into fiat currency is missing out on the deeper truth behind the success of Bitcoin, Ether, and other altcoins. These digital currencies have shown us a new way of expressing value in our lives.
While it’s true that you could use Bitcoin to buy Subway sandwiches, this is not the true value that I’m referring to. The cryptocurrency market goes far beyond simple trading on crypto exchanges.
The real value of cryptocurrency lies in the opportunity it provides for savvy individuals to create their own store of value and present it to the world as something useful. With tools that are readily available to the average person, you can create your own cryptocurrency, which in turn allows you to develop your own financial system and philosophy of value. Digital assets, therefore, can become much more than just the money spent on them, as they can transcend their original purpose.
So, how do you create a virtual currency that has true meaning?
The process of creating a cryptocurrency that can compete with Bitcoin or Ether would require significant financial resources and manpower, and is beyond the scope of this text. However, you can begin by following these steps to create a simple cryptocurrency:
- Define your objective: The reason for creating your cryptocurrency, known as your “use case,” will determine many aspects of your coin, such as how transactions are verified, how users can earn your coin, and how you market your coin.
- Agree on a consensus protocol: A blockchain is necessary for your coin to function properly. Blockchains rely on a consensus protocol, which is an agreement between users on how coins are mined and transactions verified.
- Choose a blockchain: Rather than creating a blockchain from scratch, you can choose from reputable platforms that specialize in blockchain technology. Here is a list of popular blockchain platforms, each with their own unique features.
- Decide on a node design: Your nodes are the online devices that will connect and support your cryptocurrency. You will need to decide whether your nodes will be private or public, hosted on-site or in the cloud, how powerful they need to be, and the base operating system they will run on.
- Create your blockchain architecture: Your architecture should include defining permissions and block signatures, addressing address and key formats, establishing rules for issuing assets, developing key management security, connecting your nodes, enabling atomic swaps, and estimating parameters for transactions.
- Choose an API provider: Your chosen blockchain application programming interface (API) will connect your blockchain nodes with exchanges. Different APIs have different advantages, so choose your provider based on your original objective.
- Design a user interface: The interface you design is the first impression of your cryptocurrency to the world. You will need to decide on mail and web services, external databases, and the front-end programming language.
Market Your Currency
Many crypto traders hold coins in their portfolio that lack utility or value, often due to a stagnant idea or poor marketing campaign. However, a well-formed network and progressive idea mean nothing if others are not excited about it.
While there are no strict rules for marketing crypto, certain strategies have proven effective. Successful cryptocurrencies begin with a use case outlined in a whitepaper, which explains the philosophy behind the currency to a non-technical audience. A roadmap then outlines the technical plan.
A crypto’s use case must address a market need to be successful, rather than copying an established coin with fewer resources. Building a community of technically and financially savvy individuals around authenticity and knowledge of the space is crucial, and platforms like Telegram and Discord are popular for this purpose.
Reaching out to influencers through positive reviews and podcast performances can also draw attention to a crypto, as can user-generated content that inspires others to build. Ultimately, crypto is about both the coin produced and the people it serves, as digital wallets can only hold assets if the token is built properly and the public is aware of its existence.
More Money, More Problems
The established history of cryptocurrencies provides valuable insights into the potential problems that new cryptocurrencies may encounter.
Regulation is a major challenge as governments are still figuring out how to define and regulate cryptocurrencies. The lack of consensus among regulatory bodies can make it difficult for new currencies to develop and expand. As regulations increase over time, it can become even more challenging.
Another problem is the presence of malicious actors, who target cryptocurrencies due to their potential for high returns. Inadequate security and structural weaknesses can make new currencies vulnerable to theft. To protect themselves and their investors, new cryptocurrencies must invest in updated security measures as they grow.
Technical disagreements among node operators can also pose challenges. Cryptocurrency relies on consensus, and as a currency grows, disagreements may arise about how to move forward. These disagreements can result in forks or software updates, but they can also represent differences of opinion about how a network should be run. Successful forks like Litecoin, Bitcoin Gold, and Bitcoin Cash have emerged from such disagreements.
How Much Does it Cost to Mine Cryptocurrency?
The soaring prices of bitcoin and other cryptocurrencies in 2020 have attracted investors who are willing to pay exorbitant prices to acquire these coins. Meanwhile, cryptocurrency miners aim to acquire them for free.
However, any astute investor knows that investing is never truly free, and cryptocurrency mining can be a costly venture. Without specialized bitcoin mining hardware, attempting to mine bitcoin on a computer would only yield around 1 cent worth of bitcoin per month, according to Buy Bitcoin Worldwide. The specialized equipment, such as the Antminer S7 or the Antminer S9, can range from a few hundred dollars to tens of thousands of dollars in cost.
After investing a significant amount of money in mining hardware, miners must also account for the cost of electricity required to operate these devices. According to CryptoCompare, mining bitcoin at a rate of 4,730 GH/s and a power cost of 12 cents per KW/h would result in a monthly electricity cost of $111.72, or $1,359.20 per year.
Bitcoin is the most expensive cryptocurrency to mine, with an average mining cost of $11,161 per bitcoin, according to estimates from Crescent Electric.
As bitcoin mining becomes more challenging and costly, the difficulty automatically adjusts to maintain a rate of one block every 10 minutes. With numerous industrial-grade miners competing for a limited amount of bitcoin, it can be daunting for an individual miner without professional resources to make any significant progress.
The True Value of Cryptocurrency
Cryptocurrencies have been a topic of intense discussion and speculation over the past few years. While some people view cryptocurrencies as a revolutionary new technology that has the potential to transform the way we transact, others see them as a speculative bubble that will eventually burst.
The true value of cryptocurrency depends on a variety of factors, including its underlying technology, its adoption rate, and the overall sentiment of the market.
One of the most significant benefits of cryptocurrencies is that they are decentralized and operate independently of traditional banking systems. This means that users can transact without the need for a middleman, such as a bank or financial institution. Cryptocurrencies also offer increased security and anonymity compared to traditional payment methods, making them attractive to individuals who value privacy and security.
However, there are also some challenges associated with cryptocurrencies, including their volatility and lack of widespread adoption. Many cryptocurrencies have experienced significant price fluctuations, which can make them difficult to use as a reliable store of value. Additionally, while the number of merchants accepting cryptocurrencies is growing, they are still not widely accepted as a form of payment.
Despite these challenges, the potential benefits of cryptocurrencies have led many investors to view them as a valuable asset. As more people become interested in cryptocurrencies, their adoption rate is likely to continue to grow. Additionally, the underlying blockchain technology that powers many cryptocurrencies has the potential to transform a wide range of industries beyond just finance, including supply chain management, healthcare, and more.
Ultimately, the true value of cryptocurrency is still up for debate and will depend on a variety of factors. However, as the technology continues to evolve and mature, it is clear that cryptocurrencies have the potential to play a significant role in the future of finance and commerce.
Bitcoin, the first widely used cryptocurrency, gained popularity during the 2008 banking crisis as a rebellion against the flaws of central banking. Ethereum, the most popular blockchain and currency today, is gaining momentum due to its trustless system of smart contracts. While these coins can be used to purchase trinkets, their true value lies in the underlying conviction.
If you decide to create your own cryptocurrency, it is crucial to do so for the right reasons. Success may attract regulators, hackers, and competitors who seek to diminish its value. To tackle these challenges, you will need a conviction that goes beyond monetary gain. If you understand this profound truth, the money will follow.