The pre-mining process is the initial stage of the project launch, in which the currency creators mine a specific currency for their personal use even before revealing it to the general public. But it is considered a biased benefit for those who contribute to the pre-mining process. They get control of the bulk quantity of coins that will be released publically. Trading and possessing these coins leads them to enormous benefits, visit: stocksprofit.org.
Some individuals are in the favor of pre-mining because according to them, it is essential for network security and the collection of a mounted fund to support the project. Others consider it a shortcut for the developers to get rich in no time without any genuine effort. In both conditions, you have to do your homework about the decision making whether you will invest in a pre-mined currency or not?
What Is Pre-Mining?
When the latest cryptocurrency is about to be released in the market, its developers set aside a portion for mining. This process takes place before the currency is publically available through an ICO – Initial Public Offering.
It is called Pre-Mining. It is the compensating process for the developers, their teammates, and the founders who participated in launching this currency. Simply the stock is first sold to the employees, and then Initial Public Offering (IPO) is made. So, the value of pre-mined coins enhances when they are traded on the exchange.
Why Is Pre-Mining Important?
Pre-Mining provides a chance for the early investors to make profits. It helps to build a reserve for future needs and makes sure that the project will succeed in the long run. As it rewards mostly the ones who invest at early stages, it attracts the community and investors to make early investments. Pre-mining also covers the costs associated with the project and assists in the completion of the project. It controls the supply of coins in the market, the market remains balanced, and the currency does not lose its value.
How Does Pre-Mining Work?
The pre-mining process aims to enable the generators to reserve a coin stock for themselves and utilize it for development purposes. In pre-mining mass production of coins is done, developers reserve their share and then reveal them to the general public through ICOs – Initial Coin Offerings. It might be problematic for the developers to gain unjust benefits over the public. Moreover, this situation can cause coin scarcity because developers are already having heaps of stock.
Pre-Mining can also be used as a fundraising scheme. Having enough stockpiles of coins ensures that the project will not be abandoned. After launching the latest currency, during the ICO period, investors aim at buying the coins and then selling them later at high prices when they will be tradable on exchanges. Developers are already having a significant amount, and that is how they get the additional benefits because they can sell their coins even during the ICO period at higher prices.
Some people believe that all the pre-mined currencies are scams, but it’s not true. Sometimes the only purpose of the pre-mining is to keep a reserve of coins so that the project completes efficiently. The top-rated cryptocurrency sometimes uses the Pre-Mining Process. You can also trade them via Bitcoin Trading Software.
How Is Pre-Mining Beneficial?
- Initial investors can claim a specific %age of the coins like someone has shares in a company.
- It builds trust and harmony among communities which results in getting the interest of new traders and investors.
- When the developers and founders get a significant share, market sharks are unable to manipulate the market.
- Pre-Mining raises funds that are utilized for multi-purposes like payment of salaries, building infrastructures, and handling other expenses associated with the project.
- It helps in minimizing the competition among various crypto projects.
Can Pre-Mining Be Harmful?
- Pre-mining results in excessive supposition and price fluctuations because investors start predicting the possible values of a specific cryptocurrency.
- Pre-mining can make the developers greedy, and they use all the means to make money.
- Investors tend to stay away from a pre-mined cryptocurrency.
- Pre-mining endangers the reputation of the project. If there is no transparency and fairness in the pre-mining process, its credibility becomes suspicious. It will result in losing the trust of potential investors and the community.
Pre-Mining helps in the establishment of a community before launching the main product, it makes the later releasing rewarding, and all the blockchains should think about it.