Pre-Mine Definition
Pre-mining is the digital mining process in which a developer, or group of developers, mine coins for a cryptocurrency before it becomes publicly available or announced. These pre-mined coins then typically become a part of the Initial Coin Offering (ICO), which serves as the starting circulation supply for the cryptocurrency.
Pre-Mine Key Points
- Pre-mining is the process of mining a cryptocurrency before its public launch.
- It is commonly carried out by developers or the founding team of the cryptocurrency.
- Pre-mined coins often make up the initial circulation supply of the coin.
- The practice of pre-mining is frequently criticized due to the potential of market manipulation.
What is Pre-Mining?
When a new cryptocurrency is created, the total supply of the coin is either minted all at once or generated over time through a process called mining. When the developers or initiators of a new coin decide to mine a portion of the total supply before the coin’s public launch, they are pre-mining.
Why does Pre-Mining happen?
Pre-mining is often done to generate funds for further development and promotion of the cryptocurrency. The pre-mined coins may be used to raise funds through an ICO, to pay early investors, or to provide liquidity once the coin starts trading on exchanges.
When is Pre-Mining Performed?
Pre-mining is usually performed in the developmental stages of a coin. This happens before it is made public and available to the other miners. It is usually completed before an ICO or the launch of a new cryptocurrency.
Where does Pre-Mining take place?
Pre-mining takes place in the blockchain of the particular cryptocurrency. The developers of the cryptocurrency make adjustments to the innovation’s source code, enabling them to mine coins before other users.
How is Pre-Mining done?
Pre-mining requires the cryptocurrency’s source code to allow for the creation (or mining) of coins. The developers use their access to the code to mine coins for themselves. Since they are the only ones with access to the code at this point, they have a monopoly on the coins being mined.
What are the benefits and criticisms of Pre-Mining?
Pre-mining has its benefits, such as providing initial funds for project development and promotion, compensating early investors, and contributing to liquidity in the early stages of trading. However, it also has its criticisms since it gives a huge advantage to developers and early investors. Critics of pre-mining view it as potentially harmful to the egalitarian spirit of cryptocurrency, and fear it could enable market manipulation by concentrating a large portion of coins in a few hands.
