O bitcoin it is currently the most traded and known cryptocurrency on the planet, but it is far from being the only one. Surveys vary, but indicate the existence of 10 thousand to 15 thousand cryptocurrencies in circulation.
The number is considered high by experts, but it also reflects an increasing ease of creating a cryptocurrency. The process, today, can take a few hours and requires few resources.
This was not always the case, and the original cryptocurrencies, such as bitcoin, took longer to be built, with a technology created from scratch.
Today, however, this same technology is the basis for the expansion of these assets, at the same time that it facilitates the execution of scams and demands attention from investors.
The creation methods
According to Gabriel Aleixo, Hathor’s new business developer, in general, the methods of creating cryptocurrencies can be divided into three.
The first, and oldest, involves creating a technology for blockchain own, from scratch and with its own network, which demands more time, knowledge and resources. It was this path that most older cryptocurrencies such as bitcoin and ethereum, They took.
However, one of the foundations of the cryptoactive industry is the idea of open technology. In other words, the creators of these cryptocurrencies left their operating codes with free access. And that gave rise to the second method.
In it, there is its own blockchain network, responsible for processing transactions, but the cryptocurrency code is a copy of another one, with few changes. The most famous cases are litecoin, created from bitcoin code, and one of the first cryptocurrencies “memes”, the dogecoin. Aleixo summarizes this process as a “remix” of original codes.
The most used, however, is the most recent, considered by many as the easiest, simplest and one that requires less time and resources. Through it, it is possible to create a token, a definition used for cryptoactives that arise from other blockchain networks, the most common being Ethereum.
“It arises from the functionality of existing platforms, with a degree of technology that varies from case to case. The advantage is that it does not require creating a new network, and it does so using an intelligent contract, a program that defines how it will work, the quantity and distribution”, says Aleixo.
The smart contract allows you to define all the characteristics of the cryptocurrency. The most common is that they don’t need to be mined, like bitcoin, but they already come up with a maximum amount available, which is being negotiated.
Thanks to this new form, the creation of cryptocurrencies took on an exponential character. Today, creating a cryptocurrency requires “just a good idea”, says Fabricio Tota, director of new business at Mercado Bitcoin.
“They differ a lot from a technological point of view, they can be more complex, and even unique, as bitcoin was at the beginning, or it can be very simple, for example, created on top of another platform designed to simplify this process.”
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Edemilson Paraná, professor at UFC, says that the creation process is simple, but it is the post-creation process that demands more effort and resources to guarantee that a cryptocurrency will be a success.
“Whoever manages to get this creation right earns a lot of money with relatively few resources, it doesn’t require a factory and hundreds of workers”, he says.
In general, the most common ways to leverage a cryptocurrency involve attributing a clear utility to it, linking it to an event or technology, getting statements of support from famous people, or else presenting it as a satire in the case of cryptocurrencies memes .
Even so, it takes a certain dedication to ensure that people seek out and form a community sufficiently interested in the asset and its trading. “Today there is a technological ecosystem, with ideas, to have a function, and even angel investors. The idea is to create and scale this cryptocurrency. That’s what’s difficult.”
According to the professor, most cryptocurrencies today cannot achieve this leverage, and those that do are more restricted to a regional level, far from the reach of more established ones, such as bitcoin, ethereum and litecoin.
Aleixo says that it is important for the creators of cryptocurrencies to think about how they want to attract investors. There is the speculative perspective, of investment, which, according to Paraná, often involves exaggerated promises of large gains in a short time.
But there is also the utilitarian sphere. “It’s something very individual. For some it may be useful, for others it may not. Some buy bitcoin as a store of value in countries with high inflation to preserve purchasing power, for example. You have to understand the type of use and the period”, says Aleixo. One use that has grown involving cryptocurrencies, for example, is in metaversos of games, as currency for purchases.
care when investing
On November 2nd, investors who put money into the SQUID cryptocurrency, inspired by the “Round 6” series, were victims of a coup. The entire amount invested, around US$ 2 million, was withdrawn by the creators of the cryptocurrency.
At the time, it was worth $2,861, but the cryptocurrency had a catch in its code: you couldn’t sell it. The scam serves as a warning to those interested in investing in lesser-known cryptocurrencies.
“It’s a market with a lot of appreciation, and very fast, and it’s easy to deceive people, to make unrealistic promises”, states Paraná.
For Tota, it is important that investors interested in the cryptocurrency sector remember one of his maxims. “Do your own research. Don’t buy based on recommendations or praise. Know who created the cryptocurrency, and don’t easily believe in promises.”
Aleixo also highlights the importance of understanding what is being invested in, and whether the use will be for investment or if it will be utilitarian. Ultimately, he says that “if you don’t know what you’re investing in and have no use, study before proceeding with the purchase, and start buying a little to understand how it works.”
“You have to know that it is a highly speculative and volatile type of investment, unregulated and without the active presence of authorities. Therefore, there is no guarantee in case of fraud”, states Paraná. The complex market demands, for him, a high knowledge as well as care.
Another tip from the teacher is to always try to diversify the investments, offsetting investments in volatile assets with safer assets. Also, he recommends not putting more than 5% or 10% of equity into investments like this.
Gabriel Aleixo refers to the current moment of cryptocurrencies as a “Cambrian explosion”, a period in prehistory when most organisms appeared, relatively quickly.
A more recent comparison is with the so-called “dot com bubble”. “Millions of companies have emerged in the United States .with raising a lot of money with investments. It’s healthy? Yes and no. Ninety percent of them broke. It was a bubble, with overinvestment, but the 5% that survived are Amazon, Apple, Google. They are the giants of today”, he says.
For him, the movement in the cryptocurrency sector should be similar, with many projects that exist today ceasing to exist, but some large ones that last. The problem, according to Aleixo, is that along the way “many people will inevitably lose money, but many people will earn a lot of money with the projects that succeed”.
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Paraná states that “as long as there are people willing to put money, attracted by the speculative nature, it is possible to expect that the size of this market will increase and attract more investors and creators”.
According to the professor, it is still difficult to believe that the sector will experience an explosion, and it still does not have the size of more speculative markets, such as pensions, derivatives and bonds.
Reference: CNN Brasil