When you look at the complexities that go into making a physical dollar bill it’s plain to see why most people don’t start trying to print a new form of currency every day, but making a new digital currency is surprisingly easy for someone with even basic coding skills. But coding isn’t the only step to getting your digital currency off the ground. Here are the five steps you should follow according to the makers of three cryptocurrencies.
When you think about creating a new digital currency it's easy to assume the first step would be to begin coding your coin, but that’s the wrong place to start, according to Chris Ellis, a London entrepreneur and a community activist at Feathercoin.
“The first step is to find a community and build a currency around them rather than building a currency and expecting everyone to show up,” Ellis says. “It has to be sensitive to their needs and be relevant to their cultural heritage and background.”
Feathercoin was created by Peter Bushnell in April 2013. Bushnell left his job as head of IT at Oxford University’s Brasenose College because he wanted to start his own currency that put people at the center. This was in response to what he saw as a lack of community involvement and inclusiveness by the existing cryptocurrencies, such as Bitcoin, on the popular cryptocurrency site bitcointalk.org.
Though he had not met Bushnell at the time, Ellis, who had been actively promoting and educating people on cryptocurrencies since last March, shared the sense of alienation and seclusion found on Bitcoin forums.
“These forums were very tech focused and not very welcoming to newcomers or minority groups which are often served better by smaller teams,” Ellis says. “The forums did not make it easy for people to get involved in the development of the coin. Many people on these forums take a backseat and speculate on the price rather than actively getting involved.”
Ellis found the cryptocurrency community activism he was looking for in Feathercoin, whose technical development he says benefits greatly from its community activism approach.
“For Feathercoin we were a group of crypto enthusiasts, some of whom were new to the scene but who felt shut out from the rest of the space,” Ellis says. Everyone at Feathercoin feels it’s important to demonstrate how a devoted group of people can establish a stable currency, he says. By working together a community of dedicated crypto enthusiasts are much better able to find and address vulnerabilities and security threats, like the 51% attack, which the community of coders at Feathercoin have successfully built protections against.
Building such protections and nurturing the development of your currency give your coin legitimacy and trust in the eyes of the public, something that is hard to do if those involved in the currency are passive spectators looking out for their own interests.
Surprisingly, every single currency developer I spoke with said the same thing: Coding your cryptocurrency is usually the least time-intensive part of the process. That’s because virtually every cryptocurrency on the market today is based on the open source code of Bitcoin or Litecoin that is available on GitHub.
“The creation itself does not take long. It is maybe only a day,” says Peter Otterbach, one of the creators of Coino, which bills itself as the fastest cryptocurrency on the market with a maximum transaction time of only 50 seconds. “To start coding you just need to know about C++ to build your own features in it.”
The length of time could be a little longer than a day, however, according to Kolin Evans, developer of the Quark cryptocurrency. “In coding the most complex steps may be related to how complex you plan to have the individual parameters of the blockchain,” Evans says. “For example, many currencies just use the Litecoin code and copy it, but with Quark there was a whole new Hash algorithm–--that is to say, it’s separate from both Bitcoin and Litecoin–--so this aspect if you were to change it would certainly be the most difficult.” And time consuming. In this case coding a cryptocurrency could take months. However, Evans notes that if a developer is just reusing code from GitHub and changing some simple parameters, that’s something a competent coder could do in “literally 30 minutes."
But just because anyone with some C++ skills can make their own cryptocurrency doesn’t mean that there will be as many currencies as, say, iOS apps one day. “Feathercoin is in fact a fork of Litecoin,” says Ellis. “It began with the minimum number of parameter changes because we felt the most important feature of a currency was survivability.”
However, the Feathcoin team noticed that a few of the currencies that came before didn’t last very long because they included a novel feature set which would gain short-term speculative hype but then the team often weren’t able to follow through on the stewardship of the project longer term and the project would fail. In other words, the developers of those coins that failed probably wanted to make some cheddar on some quick coin creation and didn’t want to work at developing the currency for the long run--something which doomed them from the start.
“You have a duty of care at the development end in terms of bug fixing and ensuring the promise made at launch but you also have a duty to educate people of the risks and give them what they need to secure their wealth,” Ellis says. If you can’t do that, no one is going to stick around to use your coin, and the mining of it will drop off as quickly as downloads did of the first Doodle Jump knockoffs.
Once you’ve developed your coin you need to spread the word so people start mining it, which raises awareness of its existence and hopefully begins to gain some value in the eyes of its miners and users. This is where makers of cryptocurrencies need to stop thinking like coders and instead look into how human beings put trust (and value) in things.
“A good start is half the way there and so this involves building trust, expressing your vision and intentions to miners, who have the hardware you need, and getting them on board with the opportunity ahead,” Feathercoin’s Ellis explains. “You have to be honest and respect people’s expectations and their tolerance of risk, which many people overestimate.
“Overselling your coin will backfire. Including novel feature sets just to try and stand out will not work either. The market is there to test your grit and determination. You need a group of loyal miners committed to the cause who will process your payments even during slumps in price because they believe in the eventual outcome. It’s about good communication and team building.
“Many coins have failed because they undervalue the 'soft stuff.' They think that throwing technology at a problem will make it disappear. Central banks think throwing money at problems does the same; the world has never worked this way. You have to be good at knowing what work needs to be done and be prepared to do the jobs nobody else wants to do.”
Let’s says you’ve made it this far. You’ve conceptualized a good cryptocurrency and brought the right team together to code and nurture it along its way. You’ve spread the news around the cryptocurrency forums and there’s a healthy dose of miners actively working to grow your currency. The next step is marketing your currency so all the people mining it have a place to spend it. This is no small feat. After all, you need to convince individuals and merchants that these digital bits you’ve created hold value and can be traded for things, just like traditional, trusted money.
“It’s a process of confidence building,” Ellis says. “It takes good stewardship and time to work out what you really believe and stand for. People will buy in to your motives more than your actions, so once you feel confident you then have to start talking about your currency to friends, merchants, on Internet forums and on social media.”
The people behind Coino agree. “To start the marketing you need to find the exact target group,” Peter Otterbach says. “At first you can just start at the cryptocurrency market itself because the people there know about coins and you see the first reactions. After that it gets more difficult. You need to convince people who mostly don’t even know what a cryptocurrency is, so you have to get the currency accepted as a payment solution in online shops to get their attention.”
“I would add it’s not just about educating them with facts,” Ellis notes, “it’s about inspiring them to learn and discover the advantages for themselves. Money is a ledger, it is a tool that people will use as a way of achieving their goals and satisfying their needs. Understanding that will take you a long way in your marketing efforts.”
Ellis says that merchant adoption is similar to miner adoption, it’s just a matter of understanding their different outlooks. “Different stakeholder, same rules. The difference is that miners have a speculative sentiment and merchants are conservative.” He notes that merchants have three principal aims: to make money, to save money, and to increase their awareness. “If you can bring them customers and increase their sales while reducing their payment fees, the rest is a matter of persistence and making it as easy as possible to get them started.”
The last step in your cryptocurrency journey is, according to pundits and conventional wisdom, world domination by your coin. But given that in over 5,000 years no single currency has dominated the globe, it's very unlikely--no matter what Silicon Valley Bitcoin enthusiasts say--that any one cryptocurrency ever will.
Besides, global cryptocurrency domination “doesn’t have to be the goal,” Ellis says. “Currencies can be local, indeed we think of Feathercoin as a local currency that can serve a global market.”
And therein may lie the true market for the burgeoning field of cryptocurrency: hyper-local currencies for certain neighborhoods, cities, events, venues, and groups of people that are built around a community of like-minded consumers allowing them to trade freely, quickly, and securely for goods and services that are important in their lives instead of having to rely on the central banks and larger markets to tell them what arbitrary item, be it a copper coin or a plastic dollar, holds value.
Indeed, in a market where cryptocurrency use is defined by neighborhood boundaries or group memberships there is no need for any one cryptocurrency to “win.” There’s room for them all--except maybe the ones with memes.
[Image: Flickr user Kevin Dooley]