Never marry for money, but marry where money is.
—Alfred Tennyson
Tsar Peter the Great was a remarkable person not just because he was a powerful emperor. Peter was a great tyrant. Trying to bring Western civilization to Russia, he oppressed millions of people and forced them to change their habitual lifestyles, for better or worse.
Peter the Great founded St. Petersburg – the biggest city in the world north of the 60th parallel, which also goes through Greenland and Alaska – not necessarily the most comfortable place to live a normal, healthy life. Many people (some sources say as many as 30,000) died while building the new capital on swampy terrain. Another example of tsar cruelty is related to Streltsy1 regiments, which were analogous to the national guard under Peter, who revolted in 1698. The uprising was brutally suppressed by the tsar and ended with the execution of 2000 soldiers.
So why do many Russians still remember and admire Peter the Great? Maybe because he also was a visionary. The first museum, science library, public theater, public newspaper, regular army, and navy are a concise list of the novelties he brought from Europe. The great tyrant also was Bill Gates, Steve Jobs, and Elon Musk of his time, and that’s the part that amuses people with imperial ambitions, who ignore, unfortunately, the grim details behind his deeds.
Like many innovators, however, Peter was not an inventor. The invention is often a surprisingly small part of the innovation process. Bill Gates did not invent computers. Steve Jobs did not invent smartphones. Elon Musk did not invent electric cars. They made a product desirable to many consumers, taking the idea through the steep and thorny way of design and implementation to the actual result.
All cryptos are innovative, some more, some less. But only a few of them are also inventions. The mix of these two ingredients usually determines how successful the project is. The success of crypto is mainly measured by one parameter: market capitalization. It’s similar to the stock market – the market capitalization of companies traded publicly. The higher the market capitalization, the better the price of the shares. Think about it: right after the crypto is created, it has a zero value. Then, it’s listed on the exchange, and trading starts. People start to buy. Crypto becomes money. But why do they buy? That’s the million-dollar question.
Finding the Niche
Each (successful) crypto has its niche. Bitcoin, for example, became a digital equivalent of gold. People buy bitcoin for the same reason they buy gold. Ethereum became the go-to platform for smart contracts, custom fungible tokens, and NFTs. People buy it because they believe there will be more and more use cases for smart contracts and tokens, and demand will continue to grow. There are other, more unique yet essential niches.
Monero is the leader in privacy-centric transactions. If you are a ransomware hacker, drug cartel member, or merely care about the privacy of your finances, the first thing you think about is Monero. I guess you can see the trend. The most popular cryptos are the “go-to” ones. If I need to do X, I use crypto Y. Creating Y is not a problem – you have already seen how easily it can be done. Finding the right X and making your crypto the go-to for X, or at least one of the go-to for X (it does not necessarily need to be unique as there is a competition for virtually anything these days) – that’s the real problem the crypto creator must solve.
Projects win if they make sense and have a practical application. Elon Musk’s Tesla wins because the transition from fossil fuel to electric power makes sense for many people who want to use clean energy. Bitcoin wins because a decentralized currency makes sense for many people who need access to an unregulated financial system. But let’s face it – blockchain will not replace all relational and NoSQL databases, and decentralization is unnecessary for every type of business. Use common sense and look for practical applications.
In previous chapters, we already spent some time reviewing Bitcoin, Ethereum, and Monero. Now let’s look at other crypto niches as these three seem well known and too crowded already. One of the most exciting and, in my opinion, promising niches, although very preoccupied already, is stable coins. Tether and USDC are the boldest examples. The idea behind a stable coin is simple. Bitcoin and similar crypto coins have very volatile prices. What if you like the concept of crypto (decentralization, etc.) but don’t like the possibility of losing 30% of your assets one day after buying it? No problem, here comes the stable coin.
The team behind the stable coin tech “guarantees” that its price is tethered to US dollar price. Meaning 1 USDT will always equal (more or less) 1 USD. This is great not just for investors (it’s bad for investors because of dollar inflation), but this is also good, for example, for merchants who do their business mainly in dollars and want to receive their payouts (proceeds from purchases made in crypto) in dollars or the crypto equivalent of dollars. So how do stable coin creators make money? They do it similar to banks: on fees, loans, and investments. In fact, they are banks. They are centralized organizations as only centralized companies can back tether currency.
The Project Steps
How to Start the Crypto Project – Quick Guide
Step/Action | Description |
|---|---|
Generating the idea | This is the very first step for obvious reasons. You need to decide what you do. Your options are Creating a token using one of the token platforms, such as Ethereum Forking an existing crypto project Designing a new blockchain and network from scratch I already discussed this step in the previous chapter and other chapters throughout the book |
Assembling the team | Find the co-founder. Find other core team members to lead software development, marketing, etc. Don’t forget to invite advisors |
Writing the white paper | Put your ideas on paper. This is an essential step because the white paper will form the perception of your project by the public. You can create a technical white paper, a business white paper, or both, depending on your project type. If you create a token, you need to focus on the business. If you write the code from scratch, you must write a very detailed technical document |
Creating the website | The website is the face of your project. It can be as simple as a one-pager, with links to other sources of information such as GitHub, doc site, social media, etc. |
Announcing the project | Start telling the world about your project in the very early stages. Create Bitcointalk announcement thread and social media channels |
Building the community | Create a main Telegram user group for English speakers, but don’t forget that crypto is a worldwide thing, and there are many people who don’t speak English, so add local community groups in different languages |
Incorporating your business | If you have an appetite to create a serious business, you will need to incorporate, i.e., create a company. Many exchanges require to provide info about incorporation as part of the listing process |
Select the financing strategy | Decide on how you are going to fund your project – using your own savings, by selling your tokens on an exchange or over the counter, or conducting an initial coin offering, initial exchange offering, or something else |
Using this quick guide, you can find things you are not familiar with yet and research them in greater detail. Important note: Most of the actions described in this chapter can be done for free or with a minimum expense that does not require an extraordinary investment. It means, therefore, that virtually anyone can start their crypto project, which is excellent. However, once you are done with the initial steps, you get to the point when you need to decide how to continue running your project, meaning you need to find the sources to fund the software development and the marketing. That’s why the last step in this guide is determining the funding method. Beyond this point, the activities described in the next chapter will depend upon more significant expenses.
If you read this sentence, you are interested in getting a little more detail on the steps listed in the quick guide. Let me walk through the quick guide items and add some specifics as the devil is in the details, as they say.
Generating the Idea
I don’t have much to add to what we have discussed previously. You can read again the “Finding the Niche” section earlier and the “Token or Coin?” section in the previous chapter. The idea, of course, is much bigger than just a simple choice between generating a new token or designing a new blockchain. But still, it eventually comes to that selection, no matter how brilliant your idea is.
There is one more thing that I would like to add: don’t be embarrassed even if you feel that your idea is not very original or not technically super cool. Fortunately for some people, and unfortunately for many folks, there are stupid ideas that became very successful projects, and vice versa – there are sophisticated inventions that could not find proper support and acceptance. Most importantly, you must be confident that your idea is the best.
Assembling the Team
The first thing you must do after you have a brilliant idea, or even before, is finding a co-founder. Yes, there are many examples of successful solo entrepreneurs, but working alone in this business is challenging. There is nothing terrible in sharing your triumph with other people who have the same motivation to make your project a champion. With the co-founder, you can divide your responsibilities based on personal preferences and skills, and it’s easy to keep up with thousands of things going on 24/7.
You may not need that many team members in the initial stage because you have nothing to pay them. But if you do a significant development, you will need serious developers as a co-founder or a member of the core team. Also, you’d need the head of marketing unless you or your co-founder will manage it by yourself.
Finally, do not underestimate the importance of advisors. You may need people who have deep expertise in crypto, payments, software engineering, business development, or other areas closely related to your project. Advisors do not participate in the project directly; therefore, they can take a more sober and unbiased look at the state of affairs. On the other hand, since advisors are usually compensated for their participation in the form of token or coin stake, they have enough motivation to give you the right advice .
Another critical function of advisors is marketing. A single famous person on the advisory board can significantly influence the community, attract many new followers, and convert them to believers in the idea of your project. If you cannot secure a public figure as an advisor, at least make sure your advisors have a significant social media presence; a solid, impressive resume on LinkedIn; or some unique achievements – in other words, something that would stand out and inspire confidence.
Writing the White Paper
After you have the idea and the initial core team, you next must write the project white paper . If you or your co-founder have never written anything like this before, it won’t be easy to launch a project. You don’t have to be the writer or published author, however. If you can write good technical documentation, in many cases, that’s what is necessary for a successful tech-centric project.
There are various white paper formats, and which one is suitable for you depends on your project and taste. While some founders prefer geek-oriented GitHub-like markup documents, others create more business-oriented, pitch deck–like, illustrated brochures. By the way, creating both is another option. You can write a humble but detailed technical specification and post it on GitHub and, in addition, create a rich document in an investor pitch deck format and publish it on your website.
Many crypto projects translate white papers into multiple languages to reach a larger global audience. Many crypto enthusiasts worldwide don’t speak English fluently and can easily skip your project just because the next one offers more materials in their native language.
Creating the Website
Websites are an essential element of every business, not just crypto projects, for obvious reasons: all the information about the project is concentrated on the website. However, it’s not necessarily located on the website. Many projects create a blog where they post announcements and updates on development progress. The blog posts are typically duplicated on other media platforms like Twitter and Telegram channels. The website also must have links to the white paper (and its translations), the GitHub (where the project’s source code and documentation are located), and the social media channels.
Including the project development road map to show the previous achievements and plans is essential. The document site can be separate from the main project website. You can use third-party tools for rapid document site design such as GitHub Wiki2 or GitBook,3 which is a very easy-to-use and, at the same time, powerful documentation tool. Both tools are free.
There are many ways to create a website these days, from fully codeless WYSIWYG (What You See Is What You Get) website builders such as Square’s Weebly4 to more professional tools such as WordPress.5 I used both, and I can tell you that both methods are worthwhile, depending on your goals, budget, and skills. Weebly allows you to build the website with no or very minimum coding, but you are somewhat limited in design options and functionality . If you want a low-maintenance, free, rapidly created website, go this route. But if you want something that looks more professional, with state-of-the-art design, go for WordPress, with self-hosting in the cloud.
WordPress can host your website as a service, but it is not free and still somewhat limited. With a self-hosted website, you get complete control over the website and WordPress features. If your project is token based and you don’t need to host anything in the cloud, you can use a free tier from AWS or Azure sufficient to cover the cost of a virtual machine to host a lite WordPress website for a while. However, you or your co-founder should have some technical expertise to do that.
For the same reasons the white paper should be translated into multiple languages, it is recommended to offer the website transactions. It will help build an international community .
Announcing the Project
So, you have written the white paper and designed the website. Now you are ready to tell the world about your intentions. Once you make the announcement, the communication becomes a two-way road. People will start reaching out to you, offering their services, looking for work, or asking questions about your project to see if there is an investment opportunity.
One of the most important ways to announce the crypto project remains to create a Bitcointalk announcement thread. You create a Bitcointalk account (use the project name as the username) and create a new thread in Bitcoin Forum ➤ Alternate cryptocurrencies ➤ Announcements (Altcoins) . The subject of the thread should have a prefix [ANN], for example, [ANN][BMR] BitMonero - a new coin based on CryptoNote technology - LAUNCHED. By the way, this is the Monero announcement thread (BitMonero was Monero’s original name). You can duplicate your blog posts in that thread to keep it on top of the forum. The latest post or reply in Bitcointalk pushes the thread to the top of the forum, immediately grabbing the visitors’ attention when they visit the website. Thus, simplistically, the more posts and replies you and your readers publish in the thread, the more attention (and potential followers) you get. The frequent posts and replies work like an excellent free promotion.
Telegram Channels and Groups
Suppose you are unfamiliar with Telegram6 like many people unrelated to crypto or political opposition movements. In that case, you will be interested to learn about the history of this social media platform. Telegram was created by Pavel Durov, who was previously famous for creating VK, or VKontakte,7 a Russian copycat of Facebook. VK was so successful that it pulled over most Russian Facebook users.8 Of course, such a platform could not be left without the attention of the authoritarian state. The Putin regime’s special services could not miss the easy opportunity to control the local media giant and eliminate all opposition voices. Durov resisted but lost the battle and was forced to leave Russia in 2014, saying “the country is incompatible with Internet business.”9 In 2013, Durov founded a new social communication platform called Telegram, which became popular among political opposition groups and crypto communities.
These days, almost every crypto project has some Telegram presence in the form of channels or groups – the two styles of Telegram media. A channel resembles a Twitter feed, with the posts composed by the channel owner and reactions such as likes and replies made by the followers. The project typically has a single channel for making announcements. Unlike channels, groups are more like online forums where any participant can express their opinion in the form of conversation with other participants. Crypto projects typically have multiple groups, for example, local groups in different languages for supporting communities speaking a particular language or located in a specific county. Also, many Telegram groups are not associated with a particular crypto project but promote (for a fee) various coins and tokens.
You won’t be able to moderate all your channels and groups, especially local groups in different languages, by yourself, so you will need to find moderators and community managers. While you build your community, some of your supporters might offer you help to moderate the forums or manage the community groups. Usually, they receive rewards in the form of a project’s token or coin.
Incorporating Your Business
Incorporation is another step in the project launch, which initially seems optional but may be required if you want to get VC (venture capital) investment or list your token or coin on solid exchanges. Before incorporation, the first decision you need to make is jurisdiction, meaning creating a local business vs. an offshore company. While local companies are easier to set up and intuitively make more sense, offshore registration might provide some legal benefits as there are countries10 that are more supportive of crypto than others, but it is more complex and expensive. Every founder has different circumstances, and I am not a lawyer, and this book is not legal advice, so I want to tell you that you have other options.
If you are located in the United States and decide to create a US company, one of the favorable options for the US entrepreneurs is incorporation in Delaware. According to common opinion, Delaware has very fair laws for businesses. Many startups register their corporation in Delaware, which can be done quickly and does not cost too much.11
You can hire a law firm to register your corporation or do it yourself if you want to pay a fraction of what lawyers will charge you. There are also online agencies that can do the registration for a decent fee if you are looking for a compromise between the law firm and DIY .
Selecting the Financing Strategy
So, you are all set with the preparation steps and ready to move forward. One of the most important decisions you need to make is how you fund your project. In general, there are four options and their combinations available to you, besides the apparent self-funding option:
Presale
IXO
Exchange listing
VC investment
Almost all of them require premining, which most crypto projects do in some form. The original meaning of premining comes from the PoW coins, where you can premine some number of coins at the time of the mainnet launch.
Let’s say you are launching a new PoW blockchain XYZ with the total maximum supply of 21 million coins. XYZ is PoW and therefore is minable, meaning that the coins are gradually created with each new block as the reward for mining node operators. But instead of starting with zero circulation, you decide to generate 20% of the coins (4.2M) in advance and transfer them to a wallet that belongs to your development team. So, the remaining 80% of the total supply will be mined during the following years. However, 4.2M will be available immediately after the launch and can be used for the project funding and the rewards for developers and other contributors. The same concept can be applied to PoS coins and tokens, even though they are technically not minable. Such coins and tokens can be fully premined, that is, their entire total supply is generated up front.
Presale
Presale is usually done directly by the project team, without listing on the exchange. This is the easiest way because listing on the exchange is costly, and the founders might not have enough funds to cover such an initial cost. The problem with presales is the limited audience, as with an absence of the broad exchange userbase, the project can advertise only using its social media or paid ads (which also require funding).
Note that the price of the coin or token being presale is artificial and set by the founders rather than defined by the market, which means that it can go in any direction once the coin or token is listed on the exchanges. This attracts buyers because they hope the price will rise significantly (sometimes multiple times) once the crypto is listed and open for trading.
IXO
IXO stands for multiple forms of initial offerings such as ICO, IEO, etc., which we briefly reviewed in Chapter 11 about investment and trading. The founders should find an exchange that offers ICO or IXO services and the exclusive sale of the coin or token on that exchange. During the ICO or IEO, the coin or token is usually only available on one exchange, making it difficult to sell and stimulating the buying. Also, similar to the presale, the price is generally fixed rather than defined by the market (because the market for the coin or token does not exist yet).
Note that most IXOs have to avoid US buyers because of the SEC (Securities and Exchange Commission) view of crypto being sold through IXO as security, with all the possible consequences associated with this fact. You can try to run the Howey test on your crypto to determine whether it will be classified as a security by SEC.12 But no matter what result you get, it does not guarantee their outcome will be the same.
Exchange Listing
Exchange listing is the way to get some funding without the complex and uncertain process of presale and IXO. The coin or token is listed on an exchange and traded like any other crypto. This way, the market determines the price; therefore, this method seems more honest than presale or IXO, where the valuation can be artificially overpriced. I will provide more details on the exchange listing process in the next chapter.
VC Investment
VC (venture capital) investment is traditional startup financing through angel investors and other venture capitalists. Unlike other forms of crypto funding, the conventional investment gives the investors the company share. Such investment requires incorporation so the investors can get their shares in the form of the company stock. It isn’t easy to get VC investment for crypto projects for various reasons, but you can still try, and, who knows, maybe you will be lucky.
What’s Next?
So, your crypto project is set up and ready to go and move to the next, active phase. In the next and last chapter of this book, we will talk about development, tokenomics (a portmanteau of “token” and “economics,” the discipline that is focused on supply, demand, and emission policy of cryptocurrency), and marketing.