Is Cryptocurrency Pre Mining A Secure Option? Know Details Now

We have all heard about digital currency mining. This is a process where the miner avails hardware devices to create new coins in return for which they are rewarded with new coins. Mining is done through solving complex mathematical puzzles. Standard digital currency mining requires no further illustration, but did you know there can be cryptocurrency pre mining? Heaps of pre release cryptocurrency are pre mined. 

So let us see what exactly this crypto pre mining and how it exactly operates. 

What Is Cryptocurrency Pre Mining?

Let us start with the pre mine meaning. Pre mining refers to the formation of a certain number of digital currencies before it is made available to the public. In the crypto space, this is a similar practice to selling any stake in an entity to the employees before the company goes public through an IPO (Initial Public Offering). 

In the case of a digital currency, the coins are formed beforehand and are kept aside before the launch of the currency as this will formulate value for their holders after they become tradeable. In most scenarios, these initial coins would go to the ICO (Initial Coin Offering) investors, team members, and developers that helped in the creation of the currency. 

Ethereum which is the second biggest digital currency as per market capitalization is an example of digital currency that witnessed a huge number of coins that were being pre mined prior to its ICO. 

Unlike BTC, for example, pre mined cryptos are generally held by a centralized organization such as XRP (Ripple). The cryptocurrency was formulated for a payment system that is centralized and that offers cheaper and faster ways to transfer funds in association with banks. Nevertheless, a huge chunk of this virtual currency is owned by XRP itself. 

There are some users of blockchains who are against cryptocurrency pre mining, while others think this to be a legit practice. According to the supporters, it is okay to reward employees and developers who participate in the modeling and designing of the project and that rewards their contribution. 

Benefits Of Cryptocurrency Pre Mining

Cryptocurrency pre mining is witnessed as an option to reward those who are associated in launching the latest digital currency project. Distributing these pre mined coins can be considered similar to the giving away stocks of a company to its employees before an Initial  Public Offering (IPO). 

Developers give a prominent amount of their effort and time to the formation of a digital currency, so it makes sense to reserve a portion of that crypto for them before a public release. This practice also caters as a financial incentive for the team working behind a project. If they get rewards, they are more likely to get motivated to enhance the technology further and make it operate in the long run.

Cryptocurrency pre mining can also be seen as a marketing strategy. When supporters and investors of a new crypto project get pre-mined coins and discuss them, it creates excitement, potentially increasing the price of a coin before it is even launched.

Disadvantages Of Cryptocurrency Pre Mining

Over the past years, pre-mining has received a negative reputation in the digital currency space. This is because it is illustrated as an easy way to orchestrate a pump-and-dump strategy, in which a virtual currency that is primarily low in price is overrated by scammers to increase its value. Then, when the price is increased, scammers pull the rug and they sell their holdings for huge profits.

The idea that a select group of people has sole access to a limited number of cryptos also highlights unfairness within the digital currency community and a scarcity of transparency.

Case Study: Ripple (XRP)

One virtual currency cited as an unpopular instance of a pre-mining is Ripple (XRP). At the time of its release in December 2012, 100% of XRP had already been pre-mined, which at that time was worth nearly $100 billion.

However, it was later stated that RippleLabs, which was the founding team behind Ripple, allegedly controlled 50% to 70% supply of the XRP. The entity grew more suspicious when McCaleb declared his resignation from Ripple Labs in 2014, after which he started to sell colossal amounts of XRP.

As per analytics tracker Whale Alert, McCaleb sold over one billion XRP between 2014 and 2019, receiving nearly $135 million. In 2020, he again sold another 1.2 billion Ripple and cashed out $411 million. The multiple XRP sales of McCaleb greatly scoured confidence in the digital currency and sent the price crashing of the XRP. For example, it dropped 40% to an all-time low of $0.0023 in 2014 May. In March 2018, it went below $0.60 after an all-time high of $3.40 just two months before, as per reports.

This ticking time bomb that surrounded XRP broke out in December 2020: a lawsuit was filed against Ripple by the SEC for selling more than 14.6 billion XRP for the purpose of personal financial gain. Along with that, the SEC claims that Larsen and Garlinghouse made $600 million, helping the sales of XRP.

Example Of Pre Mined Crypto Tokens

The case of XRP illustrates the risk that is associated while investing in pre mined crypto tokens and how easily the developers can commit fraudulent activities. However, despite XRP, a few among the most successful digital currencies by market cap as of now have been pre mined. The pre mined cryptocurrency list is stated below:

Ethereum (ETH)

This is the first pre mine coin on our list. Ether, which is the second biggest digital currency, is renowned for being a pre-mined crypto token. Before its release in 2015, almost 72 million Ether coins were pre-mined. Roughly 10% of the total coins went to co-founders; 10% went to the Ethereum Foundation, and the rest 80%, or 60 million, were sold to the public, on every Ether Scan. This is the Ethereum premine percentage. 

The judgment to pre-mine ETH at that time came under fuel from BTC entrepreneur Matt Odell, who condemned the act as a way for the stakeholders of Ethereum to accumulate more money. However, founder Vitalik Buterin safeguarded the decision:

Cardano (ADA)

Between 2015 and 2017, ADA (Cardano) had what it defines as a “pre-launch sales event,” where 5,185,414,108 ADA vouchers and 25,927,070,538 ADA coins were sold to the public.


IOTA is known for being a “cryptocurrency without a blockchain.” It was one hundred percent pre-mined, but IOTA claims that all MIOTA coins were sold ahead of its 2015 ICO. Founders and developers kept none and had to buy them just like regular members of the public.

The Conclusion

Even though many digital currencies circulating today were pre mined, this practice is now widely avoided by the blockchain and digital currency community. However, cryptocurrency pre mining is yet to be discarded and some latest digital currency projects are still chosen for their promotional aims. Thus pre mining in general certainly raises doubts regarding the ethics behind this practice and the severity of trust among developers, founders, early investors, and their wider users. The procedure is the same as crypto mining.

Frequently Asked Questions On Cryptocurrency Pre Mining

1. How much ethereum was pre-mined?

Before the release of Ethereum in 2015, almost 72 million Ether coins were pre-mined. Roughly 10% of the total coins went to co-founders; 10% went to the Ethereum Foundation, and the rest 80%, or 60 million, were sold to the public, on every Ether Scan.

2. Is Ethereum pre-mined?

Ether, which is the second-biggest digital currency, is renowned for being a pre-mined crypto token. Before its release in 2015, almost 72 million Ether coins were pre-mined.

3. What Cryptocurrencies are Premined?

Cryptocurrencies that were pre-mined. The pre mined coin list includes Ethereum, Cardano, and IOTA.

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