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How To Create Your Own Cryptocurrency
mspohr writes "Since the code for Bitcoin is open source, we have seen the creation of various Bitcoin clones and enhancements (Litecoin, Dogecoin or Coinye West, anyone?... There are about 70 listed on this site.) This article explains the process of making your own. Thanks to Matt Corallo, a veteran Bitcoin developer, you can easily create your own at coingen.io. He has automated the process of modifying the source code to create custom currencies. Just enter in the name for your new currency, a logo image and set a few parameters (or accept the defaults), and you can have your own cryptocurrency. Source code and some customizations cost a bit extra. Once you have your own 'coin,' you just need to convince people that it is worth something."
> Mining seems to just waste energy,
No, mining is "proof-of-work" to enable reaching consensus on the order of transactions. This is necessary to prevent spending a balance multiple times. Only the first spending event counts. It is done by searching for hard to find hashes for a block of transactions + the hash of the previous block + a random number you insert until you meet the hard-to-meet condition (a low hash value). Using the hash of the previous block as part of the data for the current block puts the blocks in sequence, so you can know the order of transaction events. Attempting to change any block contents, such as altering transaction values or adding another transaction will change the hash, so it no longer matches the value stored in the next block. If you attempt to find a matching hash for your altered block, now the second block will no longer match the value in the third block. You end up having to find hashes for every block after the altered one up to the last one.
By making finding hashes so hard that the entire mining network can only succeed every ten minutes, you force everyone to collaborate on the search, leaving no computing power to generate an alternate history of transactions. The longest chain of blocks had the most work put into it, and thus represents the consensus of events.
If you can figure out another way to ensure digital transaction data isn't altered, great, you can become famous. Nakamoto's big invention is chaining hashes + requiring work to find the hashes, so that altering the data would require even more work. As long as a majority of the network is honest, a hacker can never catch up.