Premining: Pro and Contra

Premining is a subjective topic. Let’s try to keep it technical.

There are three variants of premining I have observed in the wild: Zero-premine, small-premine, and 100%-premine. Afaik there is no coin with a premine above 10% but below 100%. The 100% premine variant means that there is no mining at all, like e.g. Nextcoin.

The zero-premine variant is usually considered the best, because it prevents any scammy dumping by the developers. However, even without premining the developers have a little advantage. For example Bitcoin, Satoshi Nakamoto owns more than a million BTC.

The 100% premine is a technical necessity for coins without mining (pure Proof of Stake usually). The advantage of those coins is that mining is ultimately a very wasteful activity. A lot of electricity is spent on mining various coins. Though all coins basically stop mining after enough halvings and I do not believe it is a significant environmental damage, it is definitely waste.

The small-premine group is the most controversial one. It means the developers have a big amount of coins in the beginning. For example a 3% premine means, when only 10% of the coins are mined in the beginning, the developers hold 30% of the market cap. There is a serious temptation to cash in the early success and crash the price of the coin with it.

Premining has advantages though. It gives the developers power to do good: They can use it for promotions like giveaways, which strengthens the coin. They can buy some reinforcements like hosting, graphics design, or tool developers.

Some premine developers try to make the usage more transparent. All transactions of crypto currencies are public, if an address is identified with a person all anonymity is gone. The premine addresses and their transactions can be reviewed by anybody.

Personally, I do not consider premining as negative. However, it gives more weight to the “trust into developers” aspect. 

(Thanks Poldi for suggesting this topic. Anybody else, who wants to suggest a topic?)

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6 comments

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  4. michla jihgu

    Premining can be made with proof of burn where users send a coin X to a place Y to at the end of the burning phase, receive the premined coin, this way developers dont get the money.
    There is also premining by mining the coins and only recieving the money after all coins are mined.
    There is also premining by mining something else and distributing the coins based at the amount you mined.
    You could also premine by giving every wallet with more than 0 bitcoins, X of the preemined coins (but this must be done without telling people first, to avoid people spliting their coins into multiple wallets. Another method is to give people coins based at the amount of coins they have but without the burning of coins..

    Not all premined is bad, actually premined if did with the right method (no ICO bullshit), because defation is good (actually essential to a coin mean something other than sht [yes all fiat coins means shit), and having all coins premined helps deflation.

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