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Tokens for your startup - create your own cryptocurrency

The issuance of crypto tokens (cryptocurrency)

Issuing crypto tokens (cryptocurrency) could be an innovative and beneficial solution to fund your venture, encourage community participation and create a sustainable economic structure. But what exactly is cryptocurrency and how can they help your project? In this article, we will explain in detail all the necessary steps and concepts to help you understand how to successfully develop and manage tokens for your project.

Introduction to token development

If you have a project or a startup, then the publication of Cryptocurrencies can be an innovative and beneficial solution to fund your project, encourage community participation and create a sustainable economic structure. But what exactly are cryptocurrencies and how can they help your project? In this article, we will explain in detail all the necessary steps and concepts to help you understand how to successfully develop and manage cryptocurrencies for your project.

Advantages of issuing cryptocurrencies

Issuing cryptocurrencies can help your project in several areas:

Financing: Cryptocurrencies can be used as a means of raising capital. By selling cryptocurrencies, you can raise funds from investors without having to rely on traditional financing methods.

Community participation: Cryptocurrencies can incentivize the community to actively participate in and support your project. Users can be rewarded with cryptocurrencies if they contribute to the growth and success of the project.

Governance: Cryptocurrencies can be used to give holders voting rights in important decisions, which promotes decentralization and democratization of the project.

Internal economy: Cryptocurrencies can create an internal economy within your project where users can exchange services, products and other incentives for cryptocurrencies.

What are cryptocurrencies?

Cryptocurrencies are digital assets that exist on a blockchain platform. But what exactly does that mean?

What is a blockchain network?

A Blockchain network is a decentralized and distributed digital database that records transactions and stores them in blocks. These blocks are cryptographically interlinked, making it virtually impossible to manipulate the data. Each transaction is checked and confirmed by a network of computers (nodes).

Practical this means that every transaction is transparent and can be viewed by all participants in the network without the need for a central authority. This creates trust and security.

Examples of blockchain networks:

Ethereum blockchain: The best-known platform for smart contracts and the creation of cryptocurrencies. Ethereum uses the Solidity programming language and enables the development of decentralized applications (DApps).

Binance Smart Chain (BSC): A platform that is Ethereum-compatible but offers faster transaction times and lower fees.

Solana: Known for its high speed and low transaction costs, Solana is particularly suitable for applications that require many transactions per second.

Polygon (formerly Matic): A layer 2 solution for Ethereum that enables faster and cheaper transactions.

Avalanche: A platform that offers high speed and interoperability with other blockchains.

Similarity to shares

In a way, cryptocurrencies are similar to shares that a company issues on the stock exchange. Both represent a value and can be traded. The main difference is that cryptocurrencies are often project-based and do not necessarily represent a share in the company as a whole. While shares usually offer voting rights and dividends, cryptocurrencies can have more diverse roles and use cases.

Advantages of cryptocurrencies over shares

Cryptocurrencies and shares are both instruments that companies can use to raise capital and sell investments. However, there are some key differences between the two that can make cryptocurrencies more attractive in many cases, especially for startups and innovative projects. Here are the main advantages of cryptocurrencies over stocks:

Lower minimum investment and greater flexibility

Cryptocurrencies:

  • Pro rata purchases: Cryptocurrencies can be bought in very small quantities, often down to a fraction of a token. This makes them more accessible to retail investors who may not have enough capital to buy an entire share.
  • Low minimum investment: There are often no or only very low minimum amounts for buying cryptocurrencies, which lowers the barrier to entry.

Shares:

  • Fixed prices: Shares are usually sold at a fixed price and investors must buy at least one whole share, which can be more expensive.
  • Minimum investment: Many exchanges and platforms require minimum investments, which can be a hindrance for small investors.

Less regulation and bureaucracy

Cryptocurrencies:

  • Less regulation: The issuance of cryptocurrencies is often subject to less stringent regulation than shares. For example, cryptocurrencies can be issued through initial coin offerings (crypto IPOs) or other methods that have fewer regulatory hurdles.
  • KYC/AML: Some platforms require KYC (Know Your Customer) and AML (Anti-Money Laundering), but the general regulatory requirements are less stringent.

Shares:

  • Strict regulation: The issuance of shares is highly regulated. Companies must meet extensive legal requirements in order to go public or offer shares, including compliance with regulations by regulatory authorities such as the SEC (Securities and Exchange Commission) in the USA or the BaFin (Federal Financial Supervisory Authority) in Germany.
  • Listing: The listing process is lengthy and expensive, often involving extensive audits and disclosure requirements.

Speed and cost efficiency

Cryptocurrencies:

  • Quick issue: Cryptocurrencies can be issued relatively quickly and inexpensively. Cryptocurrencies can be created and made available on a blockchain platform in a matter of days or weeks.
  • Low costs: The costs for issuing cryptocurrencies are generally lower than for shares, as there are fewer regulatory hurdles and requirements.

Shares:

  • Long process: The issue of shares requires extensive preparation, including legal advice, preparation of a prospectus, approvals and audits. This process can take several months to years.
  • High costs: The initial public offering (IPO) or public offering of shares is costly as it involves legal fees, auditor fees and other advisory fees.

Decentralization and democratization

Cryptocurrencies:

  • Decentralized platforms: Cryptocurrencies are often issued and traded on decentralized platforms, which means that they are independent of traditional financial institutions and exchanges. This promotes the democratization of access to investments.
  • Global reach: Cryptocurrencies can be bought by anyone with Internet access worldwide, which significantly increases the potential number of investors.

Shares:

  • Traditional financial markets: Shares are traded via centralized exchanges, which often have access restrictions and higher entry barriers.
  • Regional restrictions: The trading and issuance of shares is often subject to regional restrictions and is not always globally accessible.

Additional usage options and functions

Cryptocurrencies:

  • Versatility: Cryptocurrencies can be used for a variety of purposes, such as access to services, governance rights, rewards or the use of cryptocurrencies (staking).
  • Smart contracts: Cryptocurrencies can be integrated into smart contracts to execute automatic transactions and actions based on certain conditions.

Shares:

  • Limited use: Shares mainly represent ownership rights and potential dividend payments. As a rule, they do not offer any additional functions or potential uses.
  • Limited flexibility: Shares are less flexible in terms of integration into new technologies or innovative business models.

Introduction to smart contracts

An important building block for the creation and management of cryptocurrencies is the smart contract.

What is a smart contract?

A smart contract is a self-executing contract with the terms of the agreement directly in the code. It runs on a blockchain and automatically executes certain actions when the predefined conditions are met.

Development of a smart contract

To develop a smart contract, you need knowledge of a special programming language such as Solidity, which is mainly used for the Ethereum blockchain. Here are the steps to develop a smart contract:

  1. Set up the development environment: Use a browser-based development environment such as Remix (https://remix.ethereum.org).
  2. Writing the smart contract: Here is a simple example of a smart contract that stores and retrieves data:

  • Compilation and deployment: The code is compiled in Remix and then made available on a blockchain. To do this, you need a wallet such as MetaMask, which serves as a bridge between your browser and the blockchain.

Cryptoeconomics (tokenomics)

Now that you understand the basics of smart contracts, you need to develop cryptoeconomics or tokenomics to ensure that your crypto system is sustainable and attractive.

What is cryptoeconomics?

Cryptoeconomics describes the economic models and principles that determine the creation, distribution, use and value of cryptocurrencies within a project. A well-developed crypto-economy creates incentives, controls the behavior of participants and ensures long-term sustainability.

Development of a crypto economy

Here are the steps to developing a crypto economy:

  1. Define goals and use cases: Define the goals and use cases of your cryptocurrencies, such as means of payment, access to services or governance.
  2. Plan the distribution of cryptocurrencies: Plan the distribution of cryptocurrencies, including initial supply, distribution to founders, team, investors, community and marketing. Consider vesting and lockup periods.
  3. Define incentives and mechanisms: Implement incentives such as reward systems for user activity and mechanisms to increase value (e.g. token burn, staking rewards).
  4. Develop a governance structure: Develop a governance structure that allows cryptocurrency holders to vote on important decisions.

Issue of cryptocurrencies

After the crypto economy is defined, you need to decide how you want to spend the cryptocurrencies. There are three main methods:

Initial Coin Offering (ICO)

A Initial Coin Offering (ICO) is a method of financing a project by selling cryptocurrencies directly to investors.

  1. Create a whitepaper: Describe the project, the technology, the business model and the crypto-economy.
  2. Smart contract development: Create a smart contract on a blockchain platform like Ethereum.
  3. Marketing and community building: Promote the ICO and build a community.
  4. Cryptocurrencies sale: Sell cryptocurrencies directly to investors.

Security Token Offering (STO)

A Security Token Offering (STO) offers cryptocurrencies that are classified as securities and are therefore subject to regulatory requirements.

  1. Obtain legal advice: Ensure that the cryptocurrency complies with regulatory requirements.
  2. Create documentation: Create technical and regulatory documentation.
  3. Platform selection: Choose a platform such as Polymath or Securitize.
  4. KYC/AML procedure: Perform KYC and AML procedures for investors.
  5. Cryptocurrencies sale: Sell cryptocurrencies via the regulated platform.

Initial issue of cryptocurrencies via exchanges (Initial Exchange Offering, IEO)

A Initial Exchange Offering (IEO) is processed via a cryptocurrency exchange.

  1. Partnership with a stock exchange: Work with an exchange that hosts the IEO.
  2. Due diligence and listing process: The stock exchange carries out a due diligence review.
  3. Marketing through the stock exchange: The stock exchange advertises the IEO.
  4. Cryptocurrency sales: Sell cryptocurrencies directly via the exchange.

Listing on stock exchanges

After issuing cryptocurrencies, the next step is to list them on an exchange to enable trading. Here are the steps for centralized and decentralized exchanges:

Listing on a central exchange (CEX)

  1. Application: Submit a listing application to the stock exchange.
  2. Due diligence: The exchange is examining the project technically and legally.
  3. Contract negotiations: Negotiate the listing conditions.
  4. Integration and testing: Integrate cryptocurrencies into the exchange's systems.
  5. Announcement and marketing: Start a marketing campaign.
  6. Listing and trading: The cryptocurrency is listed on the exchange and trading begins.

Common central exchanges (CEX):

  1. Binance
    One of the world's largest and most popular cryptocurrency exchanges with a wide range of trading pairs and services.
  2. Bybit
    A leading crypto derivatives exchange known for its advanced trading tools and ease of use.
  3. BingX
    A platform that enables spot and derivatives trading as well as social trading.
  4. Bitget
    A crypto derivatives exchange known for its high liquidity and advanced trading tools.
  5. Coinbase
    One of the most user-friendly exchanges, ideal for beginners, with comprehensive security measures.
  6. Octopus
    An established exchange with extensive functions for advanced traders and high security standards.
  7. KuCoin
    A versatile exchange that offers a wide range of cryptocurrencies and innovative products such as trading bots.
  8. OKX
    A leading global crypto exchange that offers spot and derivatives trading with high security standards.

Listing on a decentralized exchange (DEX)

  1. Create liquidity pool: Create a liquidity pool on a DEX such as Uniswap.
  2. Provide cryptocurrencies and base currency: Add equal amounts of the cryptocurrencies and the base currency.
  3. Offer incentives for liquidity providers: Offer rewards for providing liquidity.
  4. Start of trading: Trading begins as soon as the liquidity pool is filled.

Common decentralized exchanges (DEX):

  1. Uniswap
    One of the best-known DEXs based on the Ethereum network and using automatic market-making protocols.
  2. SushiSwap
    A community-driven DEX that is also based on Ethereum and offers a variety of liquidity pools.
  3. PancakeSwap
    The leading DEX on the Binance Smart Chain, known for its low fees and fast transactions.
  4. Curve Finance
    A DEX that specializes in trading stable assets and offers low slippage.
  5. Balancer
    A flexible and expandable DEX that supports multiple tokens in a pool and offers dynamic fees.
  6. 1inch
    A DEX aggregator that brings together the best prices from different DEXs and thus offers the best trading prices.
  7. QuickSwap
    A fast and cost-effective DEX on the Polygon platform, ideal for trading with low fees.
  8. Bancor
    A DEX that specializes in liquidity adjustments and automated market making.

Building up liquidity

Liquidity is crucial for the trading ease and price stability of your cryptocurrency. There are two main ways to build liquidity: on decentralized exchanges (DEX) and on centralized exchanges (CEX).

Building up liquidity on a DEX

  1. Creation of cryptocurrencies: Develop and deploy the cryptocurrency on a blockchain such as Ethereum, Binance Smart Chain or Solana.
  2. Choice of DEX: Choose a suitable decentralized exchange, e.g. Uniswap, SushiSwap or PancakeSwap.
  3. Creation of a liquidity pool: Create a liquidity pool by contributing equal amounts of your cryptocurrencies and a base currency (e.g. ETH or BNB) to the pool.
  4. Offer incentives for liquidity providers: Offer rewards such as additional cryptocurrencies or a share of transaction fees to encourage users to provide liquidity.
  5. Marketing and community building: Inform your community about the benefits of providing liquidity and launch marketing campaigns to attract more users.

Building up liquidity on a CEX

  1. Listing application: Submit an application to the desired centralized exchange, e.g. Binance, Coinbase or Kraken.
  2. Partnership with market makers: Work with professional market makers who are willing to place buy and sell orders on an ongoing basis to increase liquidity.
  3. Implement liquidity programs: Initiate liquidity programs such as trading contests or liquidity promotion programs that encourage traders to trade your cryptocurrency.
  4. Marketing and incentives: Promote trading through targeted marketing campaigns and additional incentives for traders, such as reduced trading fees or rewards in the form of cryptocurrencies.

Summary

Issuing cryptocurrencies can be a powerful way to fund your project, engage the community and build a sustainable economic structure. By understanding the basics of cryptocurrencies, smart contracts and cryptoeconomics, you can develop a well-thought-out token strategy that works. Carefully plan the distribution of cryptocurrencies, create incentives and mechanisms to increase value, and develop a robust governance structure. Use different methods to issue cryptocurrencies such as ICOs, STOs and IEOs and ensure proper listing on centralized and decentralized exchanges. Building liquidity is crucial to ensure ease of trading and price stability of your cryptocurrency.

With this comprehensive understanding, you are now ready to successfully develop and manage the cryptocurrencies for your project. This will not only help you fund your project, but also build an engaged community and ensure long-term success.


FAQs

How can cryptocurrencies help finance a project?

Cryptocurrencies can be used as a means of raising capital. By selling cryptocurrencies, funds can be raised from investors without having to rely on traditional financing methods.

What are the benefits of community participation through cryptocurrencies?

Cryptocurrencies can incentivize the community to actively participate in and support a project. Users can be rewarded with cryptocurrencies if they contribute to the growth and success of the project.

How can cryptocurrencies promote the governance of a project?

Cryptocurrencies can be used to give holders voting rights in important decisions, which promotes decentralization and democratization of the project.

What is the difference between cryptocurrencies and shares?

Cryptocurrencies are often project-based and do not necessarily represent a stake in the company as a whole, whereas shares usually offer voting rights and dividends.

How does a smart contract work?

A smart contract is a self-executing contract with the terms of the agreement directly in the code. It runs on a blockchain and automatically executes certain actions when the predefined conditions are met.

Which blockchain platforms are suitable for creating cryptocurrencies?

Popular platforms include Ethereum, Binance Smart Chain, Solana, Polygon and Avalanche.

Further information:

 

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Disclaimer: Please note that the above dates, tax rates and regulations may change over time. Do not make any independent decisions without first consulting an expert for your individual situation. It is in your interest to always receive individual information from an experienced expert who knows your situation. This information is for informational purposes only and does not promote illegal activities, including tax evasion.

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