Why premined altcoins are considered scam-coin?

[AndreaF]

I want to avoid flame wars between this or that altcoin so invite everyone partecipate to this discussion to avoid any direct attack to a specific coin using only examples and argumentations.

I have noticed that the community pay much attention to the fact a coin is premined but i haven't clearly understand the reason why this is necessarly evil.


I have understood that if few people controls the largest part of the whole monetary base is very bad for all the rest of people, but I'm not sure this is directly related to premined.

-Suppose to have an altcoin A that is premined but there are tons of way to get much coins for free without mining.

-Suppose to have another altcoin B that isn't premined but is insanely hard to get some coins using mining for a common user that cannot use a cluster with huge hashrate that only few people or companies can have.

Assuming that both altcoins are limited to a fixed max amount of mineable coins.

What is the scientific reason that should lead me to consider the altcoin A scam and the altcoin B fair?

[d5000]

You already noticed it: Considering a coin a scam only because it's premined is childish and serious investors should not do this.

Much more important is that the project is transparent about the use of the premine. Serious projects make clear the proportion of the premine and how it's used before an ICO or IPO is carried out. And they provide details about the development team, roadmap etc.

The proportion for the developers should not be too large. I consider it better if there is a model where the developers get continuous rewards for their works than a simple premine. There have been many cases where the "developers" sold their premined coins without writing a single line of code.

Premines that are distributed in the form of "airdrop" or "giveaway" are a good way to gain a larger user base. But if the proportion of the "airdropped coins" is too large, then there is a chance that many of the holders will sell as fast they can - the "Auroracoin effect".

[bathrobehero]

Premine introduces the need to trust the developer(s) and causes centralization of funds which are two terrible things in crypto.
The premine holder can dump a huge amount of coins on the market at any time screwing with all investors be it ICO participants, miners, etc so premiend coins are risky.
Premine also means the devs get paid in advance before they even have to do any work other than cloning a wallet.
I'm not going to disect why paying anonymous people in advance is a terrible idea.

Devs should slowly get funded instead of a premine to motivate them not to abandon their coin. For example 1% of every coin going to a fund address.

I strongly believe if a developer believes he can create a successful coin he should fund it himself because let's be honest, most "devs" have no idea about how to make a coin and they are just experimenting with other people's money or just want to simply scam people.

In your example coin A has no floor value. Its value is completely arbitrary because it's free to create. And coins need value.
Just because someone convinces you that a handful of dirt is valuable it doesn't make it true.

But for coin B it costs to create (mine) them so there's a floor value, meaning miners won't sell it below what it cost them to mine.

"Insanely hard to get some" is a moot point. It only means that it's more scarce or more people are interested in it and therefore probably more valuable. You can't get a bunch of bitcoins for free and look at its price.
Also, it doesn't matter if you mine with 1 GPU or with a massive farm; the reward is proportionate to the hashrate. The more you invest, the more you get, it's that simple.

[AndreaF]

The problem is that mining a cryptocurrencies isn't affordable for everyone. A developers that premine its coin but start a transparent and proportionate distribution of mined coins to the crowd could grant more fairness that a developer that doesn't premine its coin but the largest part of the coin will be controlled by few people with an huge mining net that can reach insane hash power level as soon as the coin become a bit popular.

The measure of fairness should be related to distribution of the monetary base to people otherwise is only mining mobbing.

If despite I have an above the average PC I basically have to melt my motherboard to get few 0.00000coins and I'm forced to buy from some rich dude or some company that has a megacluster mining-net, this isn't fair distribution to me.

[ArticMine]

For starters who ever issued the pre-mine will likely be an MSB under FinCEN regulations in the United States either as an Exchanger or Administrator. https://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html. If the proceeds of the pre-mine are sold in whole or in part to fund development of the coin then there is a very good case for at least an Exchanger status for the devs who created the pre-mine. If these devs are not registered as an MSB within the required period (I believe it is 6 months) then they are in violation of the law. If they register as an MSB then they have to do AML/KNC. So as far as I can see they are scamming the users, scamming the government or both.

Edit: Ripple had to pay substantial fines because of this. The fact that Ripple acknowledged it was a pre-mine was part of the settlement. https://www.fincen.gov/news_room/nr/pdf/Ripple_Facts.pdf

[gustav]

A premined coin isn't a scam, but when the premine dumps on the market and the coin is abandoned the same day, then it's a scam and experience has shown that the premine dumps more often than not. Sometimes the premine is traded out in a civilised manner or dumps months after release which doesn't make it better. A sensible investor would stay away from premine because it only ads risk and there is options for the devs available to pay themselves over time like in the code of devcoin or freicoin so a premine can actually not be justified. Exactly because these other options exist a premine is a red flag. Honest devs have other options to raise funds.

[AndreaF]

For starters who ever issued the pre-mine will likely be an MSB under FinCEN regulations in the United States either as an Exchanger or Administrator. https://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001.html. If the proceeds of the pre-mine are sold in whole or in part to fund development of the coin then there is a very good case for at least an Exchanger status for the devs who created the pre-mine. If these devs are not registered as an MSB within the required period (I believe it is 6 months) then they are in violation of the law. If they register as an MSB then they have to do AML/KNC. So as far as I can see they are scamming the users, scamming the government or both.

Edit: Ripple had to pay substantial fines because of this. The fact that Ripple acknowledged it was a pre-mine was part of the settlement. https://www.fincen.gov/news_room/nr/pdf/Ripple_Facts.pdf

With all the respect but FinCEN can kiss my ass. Cryptocurrencies don't need government bullshit of any sort but a fair system that can work to exchange services and commodities at service of people in the real world.

[AndreaF]

A premined coin isn't a scam, but when the premine dumps on the market and the coin is abandoned the same day, then it's a scam and experience has shown that the premine dumps more often than not. Sometimes the premine is traded out in a civilised manner or dumps months after release which doesn't make it better. A sensible investor would stay away from premine because it only ads risk and there is options for the devs available to pay themselves over time like in the code of devcoin or freicoin so a premine can actually not be justified. Exactly because these other options exist a premine is a red flag. Honest devs have other options to raise funds.

Obviously if you premine a coin to have most of the monetary base for yourself or cheating the other users this is bad and the currency has no future. But my point is that premining used with a fair transparent distribution policy could be more fair than let the monetary base in the hands of big boys of cluster mining that can easily grab the largest part of the monetary base for personal speculation crushing the possibilities of all others normal users that with their little home pc cannot compete.

[gustav]

Obviously if you premine a coin to have most of the monetary base for yourself or cheating the other users this is bad and the currency has no future. But my point is that premining used with a fair transparent distribution policy could be more fair than let the monetary base in the hands of big boys of cluster mining that can easily grab the largest part of the monetary base for personal speculation crushing the possibilities of all others normal users that with their little home pc cannot compete.

There is no such thing as a "fair transparent distribution policy". Coins come from mining. Mining is necessary to run a blockchain. I'm not a miner but i prefer buying coins from a miner instead of hoping for "fair transparent distribution policy" because that's just some scam-artistery normally. I've seen enough of these "fair distributions" over other avenues than mining. None of it was fair. Pow mining is the fairest distribution possible even if you're not a miner.

Remember: the miner did not create the coin. Letting the creator distribute his own coin "fairly" is an hilarious idea. You obviously have no clue about human nature.

In my humble opinion longterm pow-mining (no flash-mine or ninjalaunch bullshit) is the only fair way of distribution. Blockrewards should slowly fade away, not abruptly. Until 50% of supply is mined, should be at least 4 mionths or more. I'm talking currency (valid money) here, not tokens.

Just my personal minimum requirements to even look at a market .... everyone is free to buy into a premined coin and make some experiences themselves 

[AndreaF]

Obviously if you premine a coin to have most of the monetary base for yourself or cheating the other users this is bad and the currency has no future. But my point is that premining used with a fair transparent distribution policy could be more fair than let the monetary base in the hands of big boys of cluster mining that can easily grab the largest part of the monetary base for personal speculation crushing the possibilities of all others normal users that with their little home pc cannot compete.

There is no such thing as a "fair transparent distribution policy". Coins come from mining. Mining is necessary to run a blockchain. I'm not a miner but i prefer buying coins from a miner instead of hoping for "fair transparent distribution policy" because that's just some scam-artistery normally. I've seen enough of these "fair distributions" over other avenues than mining. None of it was fair. Pow mining is the fairest distribution possible even if you're not a miner.

Remember: the miner did not create the coin. Letting the creator distribute his own coin "fairly" is an hilarious idea. You obviously have no clue about human nature.

This make no sense. Suppose that I have An altcoin X and its monetary base is limited to N coins.

If I start to annunce the currency as public and put all these premined coins in a reserve wallet that cannot be used by me but is used by a service where each user can get freely a fixed amount of these coins. This would be way more fair than let all the monetary base to strongest miners and there are tons of technological way to avoid that developers or greedy people can scam other users using multiple account getting more coins that allowed.

I find hilarious that so many people consider fair a system where basically the rich who has insanely powerful miner cluster get all the coins and the rest of the people can only melt their PC to grab some little crumb and are forced to buy the coins from these few people.

The only way to make fair the mining approach in the real world is creating a system that doesn't depend on mining power but assign a limited number of coins to each miner wallet that must use a real identity to assure the net He is not faking the system using multiple miner accounts.

[kelsey]

AndreaF Glad you asked this question.

What seems to be lost on 99% of the current 'in it for the fiat' crypto community is the entire point of a peer to peer currency is to take the money changes out of the equation (in fiat the money changes being the bankers, who get there cut in creating and being a middle-person in transactions).

now if devs start taking their premine 'cut' they become nothing more then the new breed of bankers, and it no longer becomes a viable alternative to fiat.



 

[AndreaF]

AndreaF Glad you asked this question.

What seems to be lost on 99% of the current 'in it for the fiat' crypto community is the entire point of a peer to peer currency is to take the money changes out of the equation (in fiat the money changes being the bankers, who get there cut in creating and being a middle-person in transactions).

now if devs start taking their premine 'cut' they become nothing more then the new breed of bankers, and it no longer becomes a viable alternative to fiat.

The huge difference is that

- if developer premine and choose an unfair way to distribute the monetary base, everyone can see this and its coins worth nothing, He alone cannot impose any value.

- If developer premine and choose a fair way to distribute its coin. The monetary base could have a fair equilibrium among people.

- If developer doesn't premine and the mining is strictly relate to hash power. Few rich people will control the monetary base, in the same way central banks do (nd even worst). No fairness in this.


This is my point.

[reRaise]

if u knew how many pow coins are scams, only the tehcnology matters. some miners are pissed they cant instamine with botnets anymore thats all.

[gustav]

If I start to annunce the currency as public and put all these premined coins in a reserve wallet that cannot be used by me but is used by a service where each user can get freely a fixed amount of these coins.

It's not a fair distribution because there will be people claiming coins more than once. Basically the one figuring out how to successfully multi-claim is coming out on top. Also since you, who launched the coin will have made the claiming-mechanism you can cheat it too.

It's just a whacky game too.

I still prefer buying from a miner where i have blockchain evidence when and how the coin was created with what difficulty and how hashrate is distributed and so on
Pow distribution is superior in transparency.

Also mining takes knowledge and costs money. It's not like the miner is getting it for free. Maybe you better look for karl-marx-coin, i think.

Here, have some free tits and be happy: https://bitcointalk.org/index.php?topic=1502314.0

[AndreaF]

If I start to annunce the currency as public and put all these premined coins in a reserve wallet that cannot be used by me but is used by a service where each user can get freely a fixed amount of these coins.

It's not a fair distribution because there will be people claiming coins more than once. Basically the one figuring out how to successfully multi-claim is coming out on top. Also since you, who launched the coin will have made the claiming-mechanism you can cheat it too.

It's just a whacky game too.

I still prefer buying from a miner where i have blockchain evidence when and how the coin was created with what difficulty and how hashrate is distributed and so on
Pow distribution is superior in transparency.

As I have said there are tons of way to prevent same people claims coins more times using the blockchain, way more ways than you have to avoid few powerfull rich people grab the biggest slice of monetary base with unruled mining.

if u knew how many pow coins are scams, only the tehcnology matters. some miners are pissed they cant instamine with botnets anymore thats all.

The mining of all cryptocurrencies that I know depends on Hashpower. And all normal people cannot mine with the same hashpower of the people that has large serverfarm that can fire TeraHash of power as soon as an altcoin became a bit popular creating an unfair marked where few people grab the largest slice of monetary base.... basically the same problem of coins created by unfair developers with the only difference that in a case developers and their friends grab the largest slice, in another case big companies and rich people with the access to ultra strong computational power grab the biggest slice.

This is an huge problem that needs attention by the community that unfortunately seems completely ignored.

[kelsey]

AndreaF Glad you asked this question.

What seems to be lost on 99% of the current 'in it for the fiat' crypto community is the entire point of a peer to peer currency is to take the money changes out of the equation (in fiat the money changes being the bankers, who get there cut in creating and being a middle-person in transactions).

now if devs start taking their premine 'cut' they become nothing more then the new breed of bankers, and it no longer becomes a viable alternative to fiat.

The huge difference is that

- if developer premine and choose an unfair way to distribute the monetary base, everyone can see this and its coins worth nothing, He alone cannot impose any value.

- If developer premine and choose a fair way to distribute its coin. The monetary base could have a fair equilibrium among people.

- If developer doesn't premine and the mining is strictly relate to hash power. Few rich people will control the monetary base, in the same way central banks do (nd even worst). No fairness in this.


This is my point.

I would concur that many if not the majority of non premine coins are also scams.

I would also concur that premine in order to fairly distribute wouldn't violate the avoid money changes principle p2p is founded on (however i am yet to see a fairly distributed crypto).

 

[gustav]

As I have said there are tons of way to prevent same people claims coins more times using the blockchain, way more ways than you have to avoid few powerfull rich people grab the biggest slice of monetary base with unruled mining.

You really are new here. Make some research. There were all kinds of distribution mechanisms, i have really seen a lot. I watched at least 600 or more coins launch. I do know.
Read my lips: you. can. not. prevent. multi-claim.

And sure as hell, you're a socialist.

Also there is no such thing as "unruled mining" as all mining is ruled by code.

You are proposing a centralized trustbased method instead of using a decentralized trustless method just because you envy the miner for his rig that you don't have. lol

Rent your hash then.


further edit: also if you would launch a coin why would you waste moneysupply on air? Coins are the reward for securing the chain. A premine does not produce any security. By creating moneysupply out of thin air you take away future security of the chain but that's probably too much for you to wrap the head around.

If mining is fair for all the miners and the competition amongst them is real, then pow-distribution is superior to all other methods and i'm happy to buy from the miners in these circumstances all day.

You think fairness means you get something for nothing.
I think fairness is equal opportunity and when someone gets something for nothing someone else gets nothing for something.

[WaffleMaster]

Do you see the issue with the devs having mined hundreds of thousands of dollars worth of coin before it has any difficulty? Basically it seems like they just want to make up a magic currency, get all of it or a majority to themselves and then let the users pay for it from them. It's a monopoly essentially.

[AndreaF]

Do you see the issue with the devs having mined hundreds of thousands of dollars worth of coin before it has any difficulty? Basically it seems like they just want to make up a magic currency, get all of it or a majority to themselves and then let the users pay for it from them. It's a monopoly essentially.

that is right, but if you have followed the whole discussion I want to highlight another issues that damage the fairness of the cryptocurrencies, that isn't the premine itself but unfair distribution that there is for both premined and not-premined cryptocurrencies if aren't adopted others policies

As I have said there are tons of way to prevent same people claims coins more times using the blockchain, way more ways than you have to avoid few powerfull rich people grab the biggest slice of monetary base with unruled mining.

You really are new here. Make some research. There were all kinds of distribution mechanisms, i have really seen a lot. I watched at least 600 or more coins launch. I do know.
Read my lips: you. can. not. prevent. multi-claim.

And sure as hell, you're a socialist.

Also there is no such thing as "unruled mining" as all mining is ruled by code.

You are proposing a centralized trustbased method instead of using a decentralized trustless method just because you envy the miner for his rig that you don't have. lol

Rent your hash then.


further edit: also if you would launch a coin why would you waste moneysupply on air? Coins are the reward for securing the chain. A premine does not produce any security. By creating moneysupply out of thin air you take away future security of the chain but that's probably too much for you to wrap the head around.

If mining is fair for all the miners and the competition amongst them is real, then pow-distribution is superior to all other methods and i'm happy to buy from the miners in these circumstances all day.

You think fairness means you get something for nothing.
I think fairness is equal opportunity and when someone gets something for nothing someone else gets nothing for something.

I have already said why leave the mining capability enterely dependent on hashpower without additional rule to prevent unfair distribution cannot grant any fairness.
Cryptocurrencies should be a more fair alternative to bank controlled money.... if all the money are controlled by few big guys the cryptocurrencies became same shit as other regular currencies and also worst.

The only thing that give value to cryptocurrencies is the trust, more fair is its their distribution higher will be their value.

And just to be clear I'm not a socialist I'm an anarc-darwinist. Everyone must be set in the same position at the start and gain wealth and power with his own abilities not because of inherited wealth and initial benefits of his position.

[Dajackal]

there is no such monster as a scam coin. People call them scams because they have no patience and cant wait to see how the coin develops.