When we talk about mining, we often think of the bitcoins that we can mine. Bitcoin is continuously mined and there will only be 21 million issued. Not one more. And, the end of bitcoin mining is estimated for the year
However, there are other cryptocurrencies that have already been fully mined. This is the case for cryptocurrencies like Ripple , Cardano , or NEO, for example.
These are called pre-mined cryptos. These cryptos are already mined before they are released to the public. The term "pre-mined" therefore refers to the idea that a portion of the coins have been mined (and distributed) before the official launch date.
Why have pre-mined cryptos been criticized?
It should be noted that, as a general rule, crypto-holders have often decried and criticized pre-mined crypto because, at first glance, it makes the project less "democratic".
For what? Because we can say that the distribution of pre-mined cryptos will not be fair. Typically, we can say that the founding team will want to keep more for themselves…
Thus, for Ripple (XRP), holders kept a substantial amount of XRP; This has been a source of massive criticism towards Ripple, for a very long time. Ripple has actually been criticized for being a centralized project...A single entity mines cryptos for users who can only then buy them (and not mine them as is the case with Bitcoin, Litecoin, etc.).
Mined and pre-mined cryptos also exist
There are indeed cryptos that are both pre-mined and currently being mined. For example, for the first version of Ethereum, pre-mined ETH was sent to people who participated in its ICO in 2014.
This is actually a very common system because it's more consistent and easier for distributing an initial portion of the tokens to investors and developers. For a launch of this type (ICO, IDO , etc.), it's perfectly normal, in fact.
Yes, it makes sense, with this in mind, to pre-mine cryptos to reward the developers who participated in its creation and the first people who worked on it.
It is also since Ethereum that pre-mining is now more "accepted" and tolerated by the community. In fact, to be exact, it is more accepted if there is only a part that has been "pre-mined".
What is not accepted is when all cryptocurrencies have been pre-mined.
Final word on pre-mined cryptos
Frankly, it's difficult to decide and it will depend on each project. In fact, even if this is consistent for project launches, it must still be said that there is a risk that projects will take advantage of this to appropriate more crypto than the public.
Furthermore, feel free to read the article on the Messari report to discover that very few cryptocurrencies are decentralized.
In fact, pre-mined cryptos are often the source of bad market manipulations such as the famous "Pump and dump" that can be created by people who own a large amount of cryptos...
It is up to you to check for each project whether pre-mining is justifiable and whether, above all, the distribution is “fair”…
In short, always the famous Do Your Own Research because nothing is radical in crypto.
Note: No financial advice is given in this or any other article on zonebitcoin. This is information of which you are the sole judge and master. Be responsible with your investments and only invest as much as you are willing to lose.
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