Pre-Mine

A pre-mine is an amount of a cryptocurrency that is created before the network opens to the public and allocated to particular parties, typically the founders, the development team, early investors or a foundation that funds the project. The coins exist from the first moment of the chain, often written directly into the genesis block, rather than being earned through mining or staking after launch.

Pre-mines are a common way for projects to fund development and reward the people who built them, and they are standard in many token launches that never involve mining at all. They are also a frequent source of controversy, because they concentrate supply in a few hands. The term is often discussed alongside the instamine, in which a large share of coins is mined very quickly just after launch, and the initial coin offering, in which pre-created coins are sold to the public.

Imagine a new board game that comes with a bank of play money. Before the first game starts, the people who designed it set aside a pile of that money for themselves, and perhaps sell some to friends who helped pay for printing. When the other players arrive, part of the money is already spoken for.

That set-aside pile is a pre-mine. It can be a fair reward for the work of creating the game, or it can give the designers an unfair head start. What matters is how large the pile is, whether the other players were told about it, and whether the designers have to wait before spending it.

• Creation. The project's software or genesis configuration assigns a set number of coins to specified addresses when the chain starts.
• Allocation. Coins are divided among categories such as team, investors, foundation treasury, ecosystem grants and community incentives, usually set out in the project's documentation and tokenomics.
• Lock-ups and vesting. Allocations are often locked for a period and then released gradually, for example after a cliff followed by monthly releases, under arrangements such as cliff vesting.
• Release into the market. As locks expire, coins can be sold, an event tracked as a token unlock.

• Bitcoin. Bitcoin had no pre-mine. Its first coins were mined after the software was released publicly in 2009, although its creator mined many early blocks when few others were participating.
• Ethereum. Ethereum's genesis block in 2015 allocated ether to buyers in the 2014 public crowdsale and a further amount to the foundation and early contributors, which is sometimes described as a pre-mine and sometimes as a pre-sale.
• XRP. The entire supply of XRP was created when its ledger launched in 2012, with the large majority given to the company now called Ripple, which later placed much of it in escrow to be released over time.
• Dash. Dash, launched in 2014 under the name Darkcoin, had no formal pre-mine, but it has long faced criticism because a large number of coins were mined in its first days, a case often cited as an instamine.
• Proof-of-stake networks. Most proof-of-stake chains begin with a distribution decided in advance, since there is no mining phase to issue coins.

When pre-mined coins are sold to the public, the sale may be treated as an offering of securities in some countries, depending on how it is marketed and what buyers expect. Regulators and investors look at whether the size of insider allocations, vesting terms and the use of funds are clearly disclosed. Data sites distinguish between circulating supply and total supply partly because large pre-mined allocations may be locked and not yet tradable, which affects valuation measures such as fully diluted value.

Readers assessing a project can usually find its genesis allocation in the whitepaper, documentation or token release schedule, and can often verify large holdings on a block explorer. Useful questions include what share of supply insiders hold, when their coins unlock, whether early investors paid far less than public buyers, and whether the team has sold before. Unclear or changing answers are a common warning sign.

Critics argue that large pre-mines let insiders profit at the expense of later buyers, especially when the team can sell as soon as the public market opens or when allocations are hidden. Some fraudulent projects have used undisclosed pre-mines to dump coins on buyers, a pattern seen in pump-and-dump schemes. Supporters respond that building and maintaining a network costs money, that disclosed and vested allocations align the team with the project's success, and that "fair launch" models without pre-mines can leave projects underfunded. Many communities therefore judge pre-mines by their size, transparency and lock-up terms rather than by whether one exists at all. A related, less common term is post-mine.