Did you know there are now thousands of different cryptocurrencies on the market? Some of them are alive and well as active monetary systems while others exist just as blockchain with no active coins in circulation.
The fact is, anyone can create a new digital currency by using one of the dozens of different open source blockchains as a starting point. The real trick is successfully introducing a new cryptocurrency to the world.
A new cryptocurrency would not have any intrinsic value if people did not want it. And before people can want it, they have to know about it. So cryptocurrency developers have to get the word out about their coins one way or another. The more successfully they do that, the more likely it is that investors and consumers will want their coins.
Being the first commercially viable cryptocurrency on the market, Bitcoin is a great example of how this works. Bitcoin's developer built into his code a couple of tools that would naturally work to spread the word about Bitcoin rapidly. Once the word got out, others jumped in with their own means of incentivizing adoption. The rest, as they say, is history.
The remainder of this post will cover five ways to introduce a new cryptocurrency to the world. They do not absolutely guarantee success - no formula ever does - but employing these five things greatly increases the chances of a new digital currency taking off.
1. Rewarding coin miners
One of the tools built into the Bitcoin code was a means of rewarding miners for the work they do. For the record, miners are individuals or companies that use computers to decrypt transaction data, verify it, and then add the date to the end of the blockchain. The entire process they go through is known in computer circles as proof-of-work (PoW).
The PoW involved in mining a single Bitcoin is quite intense. It also requires a tremendous amount of raw computing power. Computer nodes, the machines on the network that actually do the work, must first decrypt transaction data sent over the Bitcoin network. Then they must read both the public and private keys, all the hashes, and the rest of the data in order to complete a complex mathematical equation.
Completion of the equation provides a result that is then compared against the results received by every other node on the network. Mind you, there's only one correct answer to the mathematical equation. As long as all of the nodes come up with that answer, there is consensus. The transaction is verified and made a permanent part of the blockchain.
So, how does any of this help get the word out? By rewarding miners for the work they do. Miners earn coins through PoW. That gives them an incentive to do the work AND encourage others to buy and sell with bitcoins. More activity means more mining, right? Furthermore, it provides an incentive for new miners to join the network.
An alternative to PoW is something known as proof-of-stake (PoS). However, this method of verifying transactions and adding them to the blockchain does not have the same kind of incentive power is PoW. Hence, we won't discuss it any further.
2. Low or no fees
If you have ever investigated the possibility of playing games such as the MegaMoolah.com using your stash of bitcoins, you've probably read about the fact that you can make bitcoin deposits with little or no fees involved. This is not by accident. The original concept of cryptocurrency was to create a monetary system outside the reach of central banks. As such, facilitating direct transactions between buyers and sellers would eliminate expensive bank fees.
The goal of limiting fees has been achieved, for the most part. There still are some fees involved for certain transactions due to the use of exchanges. But even when fees are charged, they pale in comparison to bank and credit card fees.
Low or no-fee transactions are a great incentive to pay with crypto. If all other things were equal, almost every one of us would prefer a no-fee crypto transaction over a credit card transaction that could incur interest charges of 10% or more. The same goes for electronic bank transfers.
Let's say you're a business owner in the UK having to pay a contractor who lives in the States. Transferring money to an overseas bank account is going to incur a fee on both ends. You will pay a fee to send the money while your contractor will pay a fee to receive it. Both fees can be quite substantial.
Drastically reduce or eliminate fees and people suddenly want to use your payment system. And guess what? They tell others about it too. It doesn't take long before everyone in their circles knows about the new payment system.
3. Bonus offers for customers
Another way to promote a cryptocurrency at the consumer level is to offer bonuses for actually using it. The ability to make such bonuses attractive is a direct result of not having to pay high transaction fees. In other words, merchants take some of the savings they enjoy from not having to pay fees and use them to offer bonuses to customers.
Check out any online casino that accepts cryptocurrency and you'll see what we mean. Many of those casinos are listed here at Coinbet.com. Compare their Bitcoin bonuses against the bonuses they offer to fiat depositors and you'll notice a drastic difference. It is all due to the fee structure.
Usage bonuses are good for cryptocurrency because they help spread the word even further. One online gambler might hit up a Bitcoin casino just to take advantage of the huge welcome bonus. He tells a friend who goes on to do the same thing. Then she tells a friend, who tells another friend, and so forth.
4. Cryptocurrency loyalty programs
As long as were talking about getting the word out at the retail level, let us also talk about loyalty programs. Note that loyalty programs are not unique to crypto transactions; they have been used as marketing tools for decades. What's most important to understand is that they work.
Loyalty programs make consumers feel like they are part of an exclusive club. And to a certain extent, they are. More importantly though, loyalty programs do just what their name suggests: build loyalty to a particular name or brand. This is critical in the cryptocurrency arena.
With so many digital coins to choose from, platforms are aggressively competing for market share. They know that it is unlikely a consumer will dabble in a dozen different coins just to make electronic payments. To the contrary, the average consumer prefers to stick with just two or three at most.
A loyalty program tied to a cryptocurrency generally works by rewarding loyal customers with tokens when they use crypto to make payments. The tokens are not new coins, they are separate tokens that can be spent with other merchants that have signed up to be part of the network. The system encourages customers to use crypto and to shop with participating merchants.
5. Creating utility
The fifth and final means of promoting a new cryptocurrency is really what separates those platforms with active tokens from those just sitting in cyberspace gathering dust. What is it? It is creating utility. In other words, creating some sort of use for your coins that would encourage people to buy them.
It is entirely possible to create a cryptocurrency that exists only as an investment platform. But it wouldn't last very long. Why? Because investors want to see utility. If there is no point in owning digital coins beyond their investment value, the demand for those coins will eventually dry up. Investors know that, and they will not put their money into a coin with no utility.
Creating utility puts purpose behind a cryptocurrency. That is one of the reasons Bitcoin continues to be so wildly successful. Among all the merchants worldwide that accept cryptocurrency tokens, nearly all of them accept Bitcoin. Other popular cryptocurrencies include Bitcoin Cash, Litecoin, Ether, and Monero.
We started this post by saying there are thousands of cryptocurrencies currently on the market. Some 90% of them are virtually unknown for the simple fact that they have zero utility behind them. Merchants are not accepting them, consumers are not buying them, and investors are not putting their money into them.
One of the hardest things for people to understand is how value is created within the ecosystem of a digital currency. Value is created through utility and supported through supply and demand. This suggests that the success of any new cryptocurrency relies heavily on how well it is promoted. If you cannot convince people to use it, a new coin will have little worth.
Cryptocurrency developers with every intent of succeeding use the five methods described in this post to get the word out. They use these five things to get people excited about their coins as either miners, consumers, investors, or merchants. And those that do it most successfully tend to have the highest market capitalization, the highest value, and the brightest future.