What is Pre-mining?
Pre-mining is a process in the world of cryptocurrency where a certain number of coins are mined before a blockchain project is made public. This means that some coins are already in existence when the public has access to the new cryptocurrency. Pre-mining can influence the total supply of a coin from its very beginning.
Why is Pre-mining Important?
In cryptocurrency projects, pre-mining has both supporters and critics. It allows the developers of the crypto project to hold a part of the total coin supply. This can be used to fund project development without initial external investment. However, it can also raise concerns about the fair distribution of coins and potential market manipulation. Therefore, understanding pre-mining is essential when evaluating a new cryptocurrency.
Pre-mining and Exchanges
On exchanges, pre-mined coins can affect the market. Developers might sell their pre-mined coins, impacting the price. As an investor, knowing whether a coin was pre-mined allows for better strategic decisions. It's especially relevant in all-in-one platforms where trading, staking, and other financial activities converge, making transparency crucial.
Pre-mining vs. Mining
Unlike traditional mining, which occurs over time as users mine coins using computational power, pre-mining happens entirely before public launch. This method creates an instant supply of coins that developers can use strategically. It’s important to distinguish these methods to fully understand a cryptocurrency's economic model.
