Pre-Mining
Pre-mining is the process of mining a cryptocurrency before its launch to the general public. It involves miners using their computing power to generate new blocks and verifying transactions on the network. This helps secure the network, as well as allows for a certain percentage of coins or tokens to be allocated in advance to early adopters and developers.
How Pre-Mining Works
Before launching a cryptocurrency, developers will usually first pre-mine a set number of coins or tokens for themselves and any other people that have contributed resources towards developing the project such as advisors, team members etc. The amount premined can range from 1% up to 100%, depending on how much is needed by those who are working on it. Generally speaking, when more than 10% is premined this should be disclosed in order for investors to make an informed decision about whether they want participate in investing in that particular coin/token sale.
Benefits of Pre-Mining
One major benefit of pre-mining is that it allows developers and early adopters time to test out features without having too many people interacting with them at once which could lead problems during testing phases due to higher numbers of users accessing them simultaneously. Additionally, it allows these individuals some control over pricing so they can help ensure there’s enough liquidity available when trading commences after launch day while also providing incentive rewards via discounts given off token sales prior release date if someone agrees not only invest but also help promote the project itself through social media channels like Twitter etc; something which has become increasingly popular recently amongst ICOs (Initial Coin Offerings).
Disadvantages Of Pre Mining
The main disadvantage associated with pre mining is that if too much was done beforehand then this could devalue prices quickly once trading begins since all those tokens are already released into circulation meaning buyers most likely won’t get good returns later down line as market saturation increases leading lower demand levels compared what would otherwise been seen had no pre mine taken place at all initially thus making investment riskier overall especially considering longer term investments where values may change drastically over time due solely oversupply issue created by large amounts being mined before even going live online officially .
