The crypto market keeps expanding, and step by step, it’s being supported by legislation in different countries. Therefore, it may seem like now is a good time to develop your own cryptocurrency.
Yet many startups doubt whether they should create another cryptocurrency, and they have reasons for their concern.
According to Coinopsy, there are over 2,000 dead cryptocurrencies so far. Many projects were abandoned by their creators because of regulatory issues, exploited vulnerabilities and lack of community support.
So if you decide to develop your own cryptocurrency, it’s vital to keep others’ experiences in mind to avoid the same pitfalls.
Since blockchain development and assessing the security of crypto projects is a big part of my company’s experience, I know some unobvious issues that may arise when working on cryptocurrency projects — along with ways to solve them. In this post, I’d like to discuss some key nuances you should think about before launching your own cryptocurrency.
Come Up With A Strong Project Idea
With more than 7,000 cryptocurrencies in the world, your project should have something special to stand out. For instance, the Basic Attention Token secures a user’s privacy when interacting with digital ads. Golem allows users to rent their computing power for a fee paid in GNT tokens.
Once you define the main purpose of your project, research similar projects (if any exist). Evaluate what competitive advantage your cryptocurrency can bring to the market.
Decide On A Blockchain Platform
The blockchain platform you choose defines the programming languages and project components you can use. You need to decide whether to create your own platform or fork an existing one like Bitcoin or Ethereum.
Forking an existing blockchain platform is a sure way to save time and money. However, you’ll have to pay a fee for each transaction, which can be pretty expensive in the long run. For example, in May 2021, the average transaction fee on Ethereum-based platforms reached $71. And the more transactions a solution requires, the higher the expenses for transaction fees will be.
Building your own blockchain platform is quite time-consuming and expensive. It involves thorough architecture planning, long-term development and testing and monthly expenditures for environment administration. On the bright side, you won’t have to pay transaction fees once your platform is all set up.
Find The Right Skills
Pick developers who have experience working with the platform you want to use and deep involvement in the blockchain industry. They will be able to offer helpful ideas, detect unobvious drawbacks and come up with out-of-the-box solutions.
Apart from technical skills, check how well your team understands the economic part of the project. Specialists who regularly monitor the crypto market can help to evaluate the growth of your crypto project and consult on the most cost-efficient way to implement it.
Plan Coin Distribution Among Investors
Most blockchain projects are financed by investors who expect to receive an agreed number of coins or tokens once the cryptocurrency is released. Think beforehand about how you will distribute their rewards.
With a small group of investors, you can send coins manually from your wallet. But if there are hundreds of investors, consider using a tool that will automatically deliver the rewards in a secure manner. For example, you can use the airdrop technology to send them coins.
Fix All Security Issues Before The Release
Keep in mind that no one can change smart contracts after deployment. Without a proper security check, you risk ending up with vulnerable smart contracts that could be hacked at any time. So it’s a must to audit the security of all parts of your crypto project: wallets, smart contracts, voting processes and the platform itself.
In my experience, security audits can help you detect unencrypted private keys stored in a wallet’s memory, platform vulnerabilities to MiTM attacks, extensive admin rights in DeFi smart contracts, etc. Identifying such dangerous threats during security assessment will help you improve your crypto project’s efficiency and cybersecurity before release.
Decide Which Crypto Exchanges You Want To Be Listed On
Picking the right cryptocurrency exchange isn’t as easy as it may seem. Start choosing exchanges at the early development stages since the most popular exchanges tend to:
• Have strict requirements, both technical and legal, for new cryptocurrencies.
• Demand large listing fees that you’ll need to take into account when forming a budget.
• Take their time exploring projects and request additional information, meaning you should be ready to wait.
Usually, exchanges require basic information about the project: name, idea, technologies and documentation. Some exchanges may request documents on an independent smart contract code review or legal memos.
Promote Your Crypto
Start marketing activities long before you release your cryptocurrency, especially if you want to attract investors and form a community beforehand. Two proven ways to do that are ICO bounty programs and airdropping coins.
Apart from participating in blockchain and crypto conferences, invest in creating high-quality content. A clear description of your idea and your project’s specifics will help you build trust around your project.
Comply With Applicable Legislation
The lack of clear and comprehensive legislation governing cryptocurrency projects is a painful topic. And some countries ban crypto trading altogether.
In the U.S., cryptocurrency can be recognized as a security, so you have to cooperate with the Securities and Exchange Commission. And since legal requirements related to cryptocurrencies aren’t finalized yet, keep an eye on official statements and upcoming regulations.
If you plan to provide an opportunity to exchange your cryptocurrency for fiat money, do your research on obtaining licenses in each country. It’s also a must to consult lawyers experienced in cryptocurrency and blockchain legislation.
Some crypto investors say they tend to have a buy-first-do-research-later mentality. But when it comes to crypto development, research is key. Creating your own cryptocurrency requires thinking of marketing, legal, technical and security specifics beforehand. Pay attention to the nuances described in this article to launch a secure and viable cryptocurrency project.
Read full story on Forbes