Instamine vs Premine

In the world of bitcoin and cryptocurrency, there are some concepts that are considered to be highly controversial. An instamine and a premine are two types of coin distributions altcoin developers should avoid at all costs. While some people think an instamine and premine are exactly the same, there are some subtle differences between the two concepts. Let’s take a look at what makes these concepts so controversial and how they are different from one another.

2. Instamine

As the name somewhat suggests, an instamine refers to a distribution of coins in an unfair manner. In most cases, an instamine revolves around issuing a large supply of all future available coins during the first hours of days of the cryptocurrency’s launch. This can either be the result of nefarious coding by the developers, or a problem with the mining difficulty readjusting in unforeseen manners.

One of the more famous instamines in the world of cryptocurrency comes in the form of Dash’s initial coin distribution. About two million coins were issued over the first 48 hours due to a mining difficulty readjustment issue. Two million coins represent between 10 and 15% of the total Dash supply ever to be issued. Most of these coins were sold across exchanges at very low prices, though, nullifying the threat of a “very large bagholder dumping at a high price”.

While the Dash team did everything they could to make sure the instamine had no negative effect on the ecosystem, other altcoins aren’t always so lucky. An instamine can occur on every new coin launch, and in most cases, the owner of said coins will wait for a major price spike before selling them. Once that happens, most new altcoins will see their value reduced significantly, eventually leading to projects being abandoned by the developer.

1. Premine

It is evident a premine is a more deliberate act of trying to create a new currency and selling coins quickly for a big profit. Most altcoin projects that have no intrinsic value had a premine of some sorts, which allow developers to control a portion of the total supply from day one. Once their coins hit the exchange, the developers will start selling the premined coins and earn quite a few bitcoins in the process.

Another nasty side effect of altcoins is how some greedy exchanges actively advise developers to create a small premine. They are then asked to send over part of these funds to the exchange owner in return for having the coin listed on the platform at an early stage. Such type of behavior is completely unethical, yet far more common among altcoin developers and exchange owners than one might think.

However, not all premines are necessarily bad. A premine can also occur when a new project plans to launch an Initial Coin Offering or an ICO. Since investors have to contribute money to the ICO, they will be rewarded with native coins or tokens based on the amount of money they contributed. Without a premine, such a business model would be impossible to maintain, and the developers have no way to reward investors for financial contributions.

One of the most biggest cryptourrency ICO’s in history is none other than Ethereum, raising over $18 million in funds. It ranks at #6 in the highest funded crowdfund projects. Furthermore, The DAO comes in at #1 after raising over $150 million in funding.

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  • spock

    “While the Dash team did everything they could to make sure the instamine had no negative effect on the ecosystem” – really? Should have been stopped and relaunched the next day. Why wasn’t it?

    • ฿rian

      “While the Dash team did everything they could to make sure the instamine had no negative effect on the ecosystem” – really? Should have been stopped and relaunched the next day. Why wasn’t it?

      First off you should probably disclose that you are a dev for a competing copy coin, pivx.
      As to your comment, no one knew the extent of the instamine/fastmine as there were no block explorers at the time, this was the early days of altcoins. When they did do the math it was too late to relaunch as it was already trading and tons of coins had changed hands. So a vote to do an airdrop was taken but was rejected by the community. If they had relaunched or rolled back people would troll that decision just like they do with ethereum now. You can’t please everyone.

      Pretending pivx and ALL other coins do not have launch and/or distribution issues is laughable. Just read the first 10-15 pages of the pivx ANN thread and you will see they had a lot of the same issues as Dash and more.
      70% of the pivx tokens were mined in the first 100 days. I have seen it claimed that 80% of the Dash tokens were mined in the first 100 days but have not done the math to verify that. Either way, in the end these issues will only affect about 10% of the total coin supply of both coins. This is way better than half the coins in the top 20 that were premined to the extent of 10-20% that only went to one person or very few. 100’s if not 1000’s of people were mining Dash from deep technical analysis that has been done.
      As pointed out in the pivx/darknet ANN thread pivx was heavily mined by people that spent lots of money on rented hash or botnets and blew all the little guys out of the water from the jump.
      The other difference is that the Dash instamine/fastmine was accidental (some coins had a on purpose instamine as part of their distribution method) from a bug in the litecoin code it was originally forked from.
      In pivx, it was “planned” to have 70% mined in the first 100 days and guys spent a lot of money buying up hashing power to make sure they got a ton of it. Another issue pivx has is that those same guys immediately set up masternodes and got even more coins right from the start, centralizing the problem even more, Dash did not have that issue as they “invented masternodes” later, you’re welcome. I have not looked too deep into the centralization this caused in pivx but it was more than with Dash from my limited research and more thorough research of others.

      The Dash instamine is also very well publicized and not hidden like the pivx issues. There is also misleading info put out on the pivx info graph as pointed out by thedashmeister on youtube. Also, pivx’s supposedly better features over Dash are not even implemented but are often talked about as if they are. They also have issues/bugs with their current governance voting system that have been going on for a long long time. So it would probably be best to see if they can ever figure that out before promising other radical changes to the code that may or may not even work.

    • solowhizkid

      Here here i agree and fully supports Brian’s comments here, PIVX was premined, however the only difference with regards to DASH was that DASH was mistakenly done as there were bugs identified in the code which led to this. The bugs were immediately fixed and Ed Duffield mentioned this to the community who were mining in the early days and asked if the coin could be restarted, however the community opted against this and asked for it to be left intact.

      This just shows you first the transparency within the community and the honesty of the developer at heart. Not to mention Evan the developer even disclosed how much coins he mined + but the best part he mentioned they were not his and his actually fudning DASH DAO’s with them, would did you and your devs do with the the pre-mined coins… hmmm.. oh yes… you sold them right..!

      I agree here with Brian that you are definalty a PIVX dev out to bring down DASH and promote PIVX (which is infact a fork of DASH) – Good luck with that… it aint going to work because we’ve had troll comments like this before and it only makes the DASH community stronger.

  • The term “instamine” is actually a misnomer, as coins were not created “instantly” as the name would imply. Coins are actually mined at a very high rate in the first couple of days, but miners who were around for the launch had ample opportunity to participate and grab those coins. A more correct term would be “fastmine”.