What is Pre-Mining?

Pre-Mining is the development of a particular quantity of cryptocurrencies prior to the digital currency being made accessible to the public. Or in other words, a set of the coins that have been mined before the official release date of the particular coin.

One group of blockchain users is highly opposed to pre-mining, while another believes it is a legal technique. Supporters claim that rewarding developers and staff who participate in the project's design and modeling is reasonable and encourages their involvement.

Moreover, pre-mining should not be mistaken for Premine, a cryptocurrency with the symbol PMC.

From a cryptocurrency perspective, pre-mining could be seen as a similar practice to selling a stake in a firm of workers prior to the company going public using an initial public offering (IPO).

Typically, these early coins would be distributed to ICO investors, developers, and team members who assisted in the creation of the currency.

For example, Ethereum is the second-largest virtual currency by market capitalization and a cryptocurrency that had a substantial number of coins pre-mined ahead of its initial coin offering (ICO). Pre-mined currencies, unlike Bitcoin, are often held by a centralized body such as Ripple (XRP).

This digital currency was created for a centralized payment system that enables faster and more cost-effective means of transferring payments in collaboration with banks. However, a significant portion of this coin belongs to Ripple.

Nevertheless, pre-mining continues to be a gloomy process for a lot of individuals because it creates disbelief among users. A reasonable amount of developers would pre-mine and put away a big number of coins prior to the ICO, without showcasing this data to the public. 

Then, when the cryptocurrency is issued and values are inflated due to an absence of coins available, these creators will reintroduce their pre-mined coins into the market, causing a sharp drop in their price and harming outsiders.