How to Create a Cryptocurrency, and Who the Hell Needs It

29.10.2015

Having known about bitcoin and other cryptocurrencies some may think: why not creating mny own fork? Bitcoin community is abundant with experimentation fans, so ForkLog decided to cover the issue in details.

All questions concerning creation of cryptocurrencies, ASICs, cryptomarket prospects, and differences between forks and altcoins are answered by Serge and Eugene from Bitfork Develop, an outsourcing company.

For starters, how often do people wish to make their own fork?
Serge: Pretty often. Many dream of succeeding like Bitcoin, though they do not expend any effort for that purpose. In most cases people mistake cause for consequence as they think that just launching a cryptocurrency is enough for it to find users, enter exchanges, and soar to the moon on its exchange rate. However, creating a cryptocurrency requires the following steps:

1. Find out everything about bitcoin as a technology, and why is it still alive despite government pressure, exchange rates, and other difficulties. It might take more than a year.
2. Invent a fundamental improvement for bitcoin. A new cryptocurrency will hardly be interesting to anyone without improvements.
3. Get ready for hiring a staff for the project. They shall not be just performers. It should be technically / theoretically savvy and committed people.
4. Expect that launching of the project will take a year, and development thereof will take several years more.
5. Having that all in mind, think what the community will be interested in after a year or two.

What encryption algorithm is preferrable for contemporary cryptocurrency?
Eugene: Curious to relate, there’s no difference at all. It depends exclusively on the creator’s preferences. Say, you might choose SHA256 or Scrypt, and then ASIC owners will be the first to note you. If you choose X11,13,15 then GPU owners will be your miners. I may just add that the market currently shifts towards pre-mined cryptocurrencies – mainly, its Crypto 2.0 projects’ coins.

ASICs and protection from them: is that a burning question nowadays?
Eugene: ASICs emerged not because someone was defending against them, but because of explosive increase of cryptocurrency’s cost. Manufacturers don’t give a damn about encryption algorith. They make an ASIC if it seems profitable, i.e. if there’s a demand for such devices. Currently no increase is on the table, so ‘ASIC-proof’ is but a marketing stuff now.

Alternative cryptocurrencies are mostly called forks or altcoins. Could you distinguish those concepts for our readers?
Serge: ‘Fork’ should not be used without mentioning the source project. For instance, litecoin is ‘bitcoin fork’, while dogecoin is ‘litecoin fork’. As for the ‘altcoin’ term, it’s complicated. First of all, all forks are altcoins. Altcoin may stand for ant cryptocurrency based on the same technology with bitcoin. However, there are next generation crypto-projects having close resemblance with bitcoin, but also having as many novelties and differences – for instance, it’s Ethereum, Counterparty, NXT, Ripple. Should we dub them ‘altcoins’? I don’t think so. For me, altcoin is a cryptocurrency containing the same components with bitcoin, i.e. blockchain, proof of work, and preprogrammed emission.

Eugene: I should add that mainly it all sources at BTC. For instance, LTC is a BTC fork, DOGE is a LTC fork. However, Monero is an altcoin but not a fork, as it was written from the scratch. Or, say, Counterparty: it’s a Crypto 2.0 platform hosting an XRP altcoin.

Has anybody contacted you on the matters of launching a key-ready cryptocurrency?
Serge: They have, but we were not interested. Autumn 2014, we analyzed 35 to 40 applications, 13 to 15 project discussions, and 9 to 10 secondary negotiations following the project plan compilation. The findings were not too optimistic. All of those projects suffered from under-budgeting. People wanted to create everything, including a mining platform, a main site, a re-worked and improved wallet for various OS, and even iOS / Android apps – and without even considering how much it costs. Moreover, Russian customers were not even serious about their own projects. Mostly they wanted ‘something’ to be done in several months, and then earn money from their currency’s exchange rate.

We worked with many cryptoprojects, but not those involving creation of a cryptocurrency. We created bitcoin forks only for research purposes, and that’s it. As of autumn 2014 we delved into researching and Crypto 2.0 technologies. Key-ready cryptocurrency projects, as far as we use the term ‘key-ready’ in Russia, were not interesting for us either back then and now. Certainly, we could assist in a project development, but complete outsourcinbg of such projects is not possible.

What are the projects you’re involved in now?
Serge: We’re in the process of researching Ethereum, Counterparty, and Codius. Also there are projects using Sidechain and Smart contracts. You should keep track of those projects, they’re very promising.

The community is often negative about altcoins. Indeed, there are too many of them, and quite often nobody knows the purpose of their existance. What do you think about it?
Serge: Bitcoin forks establish a competition at digital value market. Due to demand and competing supply, quality of new crypto-projects improves pretty quickly. They all inspire gradual improvement of bitcon itself.

Eugene: As for me, most forks exist because of people’s aspiration for easy money. People saw some cryptocurrencies growing almost instantly, and the only thing they could think about was creating something similar and make a fortune. Of course, there are technical forks whose creators wanted to improve bitcoin in the first place. These are the forks to stay, while others will gradually vanish. I mean technologies that solve problems inherent in bitcoin. For instance, transaction time, network anonymity increase (DASH), more flexible mechanism of complexity alteration (KGW, DGW), other emission patterns, etc. It resulted in emergence of sidechains and Crypto 2.0 projects, but that is another story.

What alternate cryptocurrency do you, as a developer, deem really interesting and demanded?
Eugene: As for the first wave, it’s Dash (DRK). Just take a look at Coinmarketcao.com: the first ten positions include BTC, LTC acting as BTC’s sidekick, Dash, and Doge. The rest is occupied by pre-mined currencies, and it’s too early to make any conclusion in their regard. Mainly it’s Crypto 2.0 projects, and in fact most of them are platforms, not currencies. As for Doge, I think it has no chance to survive. Originally it was a joke, it does not evolve, and eventually it will become yet another meme, and nothing more.

ForkLog still hopes that Doge will survive just out of spite. Otherwise, ForkLog, using the knowledge it obtained from Bitfork Develop, will have to create its own Catcoin represented by the editorial board’s common cat.

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Tags: Bitcoin, cryptocurrencies, development