With so many services proclaiming that cryptocurrency creation is easier than ever, we asked ourselves: how hard would it be to re-create something like Bitcoin?
I think we can all agree; Bitcoin has been having a moment in recent months.
Originally, the interest in Bitcoins – and cryptocurrency in general – were primarily from those who preferred institutions to stay out of monetary policy; specifically in this case, government entities. It’s no surprise that individuals championing limited government involvement (ie Libertarians) and those wanting to stay out of the purview of government authorities (ie people buying illicit services or materials online) would be most attracted to the idea of Bitcoins (and cryptocurrency in general). Yet with the dizzying highs – and let’s be honest, the spiraling lows – that Bitcoin has been valued over the past couple of weeks, more prominent financial institutions have started to take notice. Firms, such as, JP Morgan and Goldman Sachs, who had initially dismissed the idea of cryptocurrency outright, have started to embrace Bitcoins by significantly expanding their investment opportunities in them (like setting up a cryptocurrency trading desk).
Now Bitcoin garnering interest in the financial world shouldn’t be a surprise, the rise in value alone should spur at least some curiosity in the venture. The after effects of it however are, weird…
The @KodakOne platform & Kodak branded #cryptocurrency #KodakCoin give photographers a new revenue stream and a secure platform for protecting their work. #KodakCES2018 #CES2018 https://t.co/cRP6SJR1YB pic.twitter.com/MiLgRTZx7G
— Kodak (@Kodak) January 9, 2018
While it’s only natural that other groups would try to capitalize on Bitcoin’s current popularity, yet the number of cryptocurrencies that have sprouted up in the last year is staggering! This cryptocurrency craze has not only pushed struggling brands to put words like “blockchain” in their names to generate interest (which FYI, totally worked!!), but has also persuaded established names (like Kodak Film) to create their own cryptocurrencies! In essence, Bitcoin’s legacy thus far hasn’t just been about how they created an alternative to traditional government backed currency, but that their success has given a rise to other cryptocurrencies in general. Which even more surprising, these other cryptocurrencies are also holding their value!
Cryptocurrencies like Ethereum and Ripple, while not reaching the dizzying highs of Bitcoin, have had impressive market caps reaching in the multi-billions. Even Doge Coin – which originated as a parody of the popular Internet meme – has risen in price, with the market cap having been $1.1 billion(!?!?!) earlier this year. For many groups, creating “the new Bitcoin” looks to be the new digital gold rush at the moment. With so many cryptocurrencies currently having a market cap in the hundreds-of-millions, that got us thinking: how hard would it be to create our own cryptocurrency?
The Birth of the Turtle Coin… Almost
After a very half-assed conversation on whether creating our cryptocurrency was a smart idea or not, we decided to go to our “money guy” to see if we could get a little capital to make this thing really get off the ground. The initial pitch went like this:
TPT Writer: “Hey, I’m thinking of creating a cryptocurrency under The Post Turtle name.”
Money Guy: “No I’m not giving you money to do something that useless.”
TPT Writer: “Hear me out. This could be a great way of describing cryptocurrency to a wider audience.”
Money Guy: “No, I’m not giving you money for this.”
TPT Writer: “Alright, let’s pivot for a moment and talk about how you can be on the ground floor for the future of currency!”
Money Guy: “I’m going to stop you right there and say hard pass.”
TPT Writer: “Ok, I’m hearing what you’re saying, but…”
And it went on like this for a while.
Needless to say, we didn’t get the initial financial investment for Turtle Coin. Luckily there were a few sites out there that allowed us to create a blockchain for free to test out their initial service. Oh, what is a “blockchain” you ask?
Blockchains: The Backbone of All Cryptocurrencies
Blockchains act as a public ledger for various cryptocurrencies. The basic idea of a blockchain is to create public accountability, within a particular cryptocurrency, by adding the most recent transactions (or aka “blocks”) to the ledger in chronological order. This helps people keep track of the digital currency’s transactions without having a central body monitoring it. In larger cryptocurrencies, like Bitcoin, a new “block” gets added to the “chain” every 10 minutes. When people talk about “mining” in terms of cryptocurrencies, they’re talking about the verification of this process.
Over the last few weeks, you may have heard about people “mining for Bitcoins.” What they are actually doing is verifying the new transactions within the Bitcoin blockchain. For popular cryptocurrencies, this “verification” process takes significant amount of computational power and most cryptocurrencies incentivize mining by giving the verifier the transaction fees associated with the process and a newly minted denomination of the digital currency.
Essentially, the blockchain ends up being the very backbone of any cryptocurrency. The question is, how do you get people to buy into a new digital currency?
Getting People to Buy In
This ironically gets back to our original problem that we had ran into with our “money guy”, getting people to buy into your cryptocurrency. For your currency to grow more people have to use it, which in this case means more people have to “mine the blockchain.” That weirdly enough, is the “chicken or the egg” situation that all new forms of cryptocurrency run into. While it’s easier to entice more people in getting on the ground floor of “the next Bitcoin”, it’s almost impossible to guarantee if that type of success will actually happen.
While it’s natural for most cryptocurrency companies to focus on “coding your coin”, but as Chris Ellis – who’s a community activist at Feathercoin – pointed out to Fast Company, “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.” Yet, he isn’t alone when dispensing this advice. Most articles online and message boards regarding cryptocurrency creation talk about creating communities, similar to how people talk about when creating “a brand”, in that there should be emphasis on creating a culture around a certain product.
This actually explains a lot about some of the more questionable cryptocurrencies that have sprung up as of late. While most companies’ intentions for creating these cryptocurrencies are economically advantageous in nature, they had stumbled onto a solution to a problem that all new forms of currency run into; trust and recognition. In the context of modern branding practices, established (but struggling) companies like Kodak and Atari creating their own digital currencies have already done some of the legwork needed when creating a new form of currency. As we said earlier, digital currencies don’t have the same advantages as traditional currencies have, by being a government backed system. While the absence of government intervention is looked as a benefit for those interested in dealing with cryptocurrencies, they also become more susceptible to instances like fraud without protections from any central authority. In terms of Bitcoins, it has happened before and sure to happen again.
Trust is the biggest mitigating factor for all currencies, digital or otherwise. For any cryptocurrency wanting to be the “next Bitcoin”, if people don’t believe in the currency itself, how will it ever take off? Even though Turtle Coin remains just a fever dream with most of our staff, for the newer cryptocurrencies popping-up, they’re finding out that getting people to buy-in is a lot harder than it looks.
(Photo Credits: Pixabay.com, Google Images)