Cryptocurrency mining is the process to mine new coins. But pre-mining is a different thing. It is a process to mine a certain quantity of blockchain tokens before the official launch of the cryptocurrency.
The process of Cryptocurrency Pre Mining occurs in the early stages of a mining project. This process is carried out by a group of developers or team members to mine a particular kind of cryptocurrency for them before it is issued to the public.
In this blog, we will discuss the process of crypto pre-mining and how it works with benefits and lots more.
What Is Cryptocurrency Pre-Mining?
Cryptocurrency pre-mining is the procedure to retain a certain portion of new crypto tokens for the developers and founders before the issue of tokens to the public. This practice is not right and might give the chance to the developers to take undue advantage of the situation.
This process is often carried out by the developers to earn money for their new projects. In certain cases, the pre-mined coins are used for instating situations in which a large portion of coins is given to users.
Pre-mining coins can be used to create a large reserve of coins for future development or marketing efforts. The pre-mining process has many negative results like creating an unfair distribution of coins and spoiling the reputation of new projects.
How Does Pre-Mining Work?
The main goal of Crypto Pre Mining is to allow crypto developers to produce a stock of new coins for themselves to use in development and marketing purposes. When a cryptocurrency is pre-mined, the founders will create a large reserve of coins for themselves and then issue them to the public after the initial coin offering begins.
This process causes problems as it gives the founders an undue advantage to gather a large reserve of coins. It also makes it difficult for new investors to buy coins because of limited stock.
It is still a common practice among many founders and developers. This practice will give higher prices to the developers by selling coins in the market. Not all pre-mined cryptocurrencies are scams as one thinks. In certain cases, the developers might just want to keep a fixed amount of coins for completing the projects. It is advisable doing some research before investing money in any kind of cryptocurrency.
Advantages of Pre-Mining Crypto
Crypto mining gives many benefits in a cryptocurrency project such as:
1. Development of a project
Pre-mining of Cryptocurrency is beneficial for the development of new projects. It generates a large reserve of coins that help in the development of a new project. Funds generated in the pre-mining process are used to pay for the costs of infrastructure and salaries, marketing fees, and other miscellaneous expenses connected with the development of a cryptocurrency project.
2. Rewards for founders of new projects
The cryptocurrency pre-mining process acts as a reward for those who start a new development project. The new tokens can be distributed by the company to the employees in the form of an IPO issue.
3. Distributed as financial incentives to the team
Developers spend a large amount of time and money to create a cryptocurrency. So, the pre-mining process is a reward for employees who work hard on a project. Giving them new coins will encourage them to work better for developing new technology for cryptocurrency mining.
4. Marketing activity
Pre-mining of cryptocurrency acts like a marketing activity. When investors get pre-mined tokens, the investors get a lot of excitement and it leads to an increase in the price of the coin before the final issue.
Disadvantages of Pre-Mining Crypto
Pre-mining process of cryptocurrency has certain disadvantages such as:
· The dominance of founders and developers
Pre-mining of cryptocurrency causes dominance of a certain group of people. Certain developers and founders will get a chance to make huge profits by selling the new tokens at a high price. Pre mining crypto process stops new investors and users to invest in the project.
· Price volatility
The process of pre-mining of cryptocurrency will increase the price of tokens. Apart from that, it will also result in speculation about the price of the cryptocurrency in the future. Price volatility is dangerous for the growth of a project.
· Loss of trust in investors
Another drawback of the pre-mining process is the loss of trust in investors. It will also affect the credibility of a project.
Final words
Many founders choose the option of pre-mining cryptocurrency to store a large reserve of coins. If you want to start the process of pre-mining cryptocurrency, pick the best crypto mining hardware. You can get many Crypto miners online from the official site to start the pre-mining process.
You can check the online sites to get affordable Cryptocurrency mining machine for the pre-mining process.
