What is premining? Pre-mining is a procedure for issuing tokens by developers even before the open start of their new project. However, in this case, tokens are not mined using mining, but are created by a special software algorithm.

Developers create these tokens for various purposes:

— the creators pay for the listing of their digital asset on cryptocurrency exchanges;
— these coins are also used to pay various commissions and fees;
– with the help of these coins, the creators reward early investors, consultants, experts, volunteers involved in this project;
— the encouragement of the developers themselves occurs at the expense of these coins.

 

However, some ecosystems create 100% of their tokens for all users even before the opening of a new project. These projects use the PoS consensus algorithm. At the same time, some projects have the condition of partial freezing of the asset.

Premining examples

 

Etherium – 12 million ETH was issued before the project was launched.

BNB – 100% pre-mine.

Ripple – premine was 100% with the condition that some of the coins will be frozen.

Neo is 100% premine.

Secret premine

 

All information about the number of created tokens and their distribution is in the public domain. However, premining has also been involved in fraudulent schemes. As a result, some unscrupulous developers create and distribute tokens in secret from users. Unfortunately, the reason for this is their own enrichment. Investors thus lose their funds.

Benefits of premining

 

The presence of these tokens as a reward fund motivates developers to create new networks. Users, in turn, willingly participate in test programs of networks. As a result, it looks like startup projects.

So, creators motivate early participants by rewarding them with their tokens. It is expected that digital assets will increase in price after the start of the project.

In addition, these tokens also help creators to raise funds for their project, and investors to purchase an asset at the lowest prices. It will bring big profit in the future.

Conclusion

 

So, premining is a kind of pool of tokens for various purposes. Conscientious project creators use these assets to encourage early participants in the program. However, there have already been cases of fraud on the part of developers. In any case, investors need to deeply study the project. In addition, analyze the tokenomics of the ecosystem before investing in a project.