Pre-Mining for success?

[chris112]

This question is regarding pre-mining a coin that is currently in an idea phase and will quickly go into its development stage.  Please read why the coin will be pre-mined and give a fair assessment based on the facts of this coin.

A coin must be based on a solid foundation in the beginning in order for a successful launch and a successful coin for all of the alt coin community.

Is it fair to PreMine a coin in order to provide bonus incentives to minors, early adopters, incorporation fees (business set up), development of an exchange for the coin (one will understand why it may need its own exchange once you see the coin launch), multiple programmers and developers, security, compliance to state and federal laws, ongoing hack testing and upgrades, marketing etc.

In other words no benefits for any of the above unless everyone is honest, lawful, and supports the alt coin community.

If a member of the alt coin community were to accept a pre-mine...at what percent would be fair given the above facts?  If not, what alternatives to pre-mining are there to achieve the desired outcome above.

Based on the above facts....
is
1% fair?
2% ?
3% ?
4%? We believe 4 may be highly inappropriate and not feasible at all, but your opinion is still valuable.

The concept behind the new alt coin is similar to other coin but the idea, implementation, features etc. will be entirely unique and we believe will cause buzz in the alt coin community and beyond.  You wont find another coin like this in the market.

It has taken a great amount of time to get to the point we are in the project, and we are at the point of asking this question in order to move forward on development.

Thank you in advance for your input.

[Zzzack]

We will see what pre-mining does.

An interesting experiment is going on with Preminecoin. The announcement is on this site if you google it. While I don't recommend putting money into the coin, I definitely recommend looking at how the coin develops and how it is maintained. They are attempting to redistribute ALL of the coin so that the developer doesn't get any besides donations and I personally am going to be watching the network strength and mining.

Also, I want to see how a fully premined coin distributes itself through initial infrastructure bounties and if faucets actually create coin support.

[Shmoopy]

put all your premine in the genesis block and distribute it however you wish. I think that's the way to do it since I'm pretty sure what you're describing is instamine...

[Zzzack]

Nothings fair IMO.

We just need transparency and trust. If you trust a coin developer not to dump all of their premined coins, then I say do it 100% if you can find a good way to distribute. (Although the market does distribute coins pretty well)

[thejepper]

some funds for dev and promotion are good! but most pre/insta mines are excessive

[Jollyburner]

I didn't even read the whole op yet, but imo theres nothing wrong with a premine, especially a reasonable one and a transparent one.

people shouldn't even have an issue with devs wanting to get rich.

its a question of whether the premine is a "fair" amount, and whether the devs are looking to "pump and dump" (read exit quickly with the least work possible)

also while were here, I would like to point out that not all 1% premines are the same, how many coins will be released over x time affects the *actual* % premine.

so a 1% premine of a coin that will only release 50% of its coins in the first year is a ~2% premine, depending how u want to look at it.

I think speculating on the value of any coin beyond 12 months right now is foolish and its a good starting place to get an idea of what the actual coin distribution of a premined coin will look like post-launch.

I usually look at 1 mo, 6 mo and 1 yr #s to get a good picture of this effect.

also when there is a managed premine you should account for how much of the premine is distributed at any given time. if there is still coins held back for bounty (etc) then you can modify your coin cap totals to get more accurate math for the actual coins in circulation at a given time.

eg 200 000 premine
100 000 to devs
50 000 already given away
50 000 held for future giveaways

means that only 150k of the premine is available to be dumped on the market, not the full 200k and you should take that into account when judging the market dynamics in play.

[chris112]

Jollyburner,

Good points! 

States/SEC have implemented laws to prevent pump and dump in stock exchanges (non coin).

In sticking with the SEC (securities and exchange commission in the USA) you are able to do INTRAstate (inside the state only) stock exchanges without regulation, which literally costs hundreds of thousands of dollars, as long as stock holders agree to keep the stock (by law) for a period of 9 months. 

This prevents pump n dump.  I would sign something similar to that to benefit our new coin and the coin community.  This is something every ALT coin foundation should look.

This may be something we will implement for any stakeholders etc. in the new coin.  We want the miners to be able to use it immediately I believe, but if they were smart maybe holding on to the coin would be better in the long run.

Christian

[MakeBelieve]

If you are going to pre mine a alt coin before you release it to the public then don't even bother that's cheating and sounds like the owner is just hoping to pump and dump and get a decent price on their pre mined coins.

[chris112]

If you are going to pre mine a alt coin before you release it to the public then don't even bother that's cheating and sounds like the owner is just hoping to pump and dump and get a decent price on their pre mined coins.

MakeBelieve,

Thank you for your comment.  I appreciate it.  I have a question for you. 
If the "owners" sign a legally binding contract not to sell or trade etc. their shares/coin for a certain time period would this make you more comfortable getting to know the coin or better?
Also, please see the previous posting to yours for further explanation.

[Jollyburner]

to be clear, people DO have a problem with premines.

im just saying they shouldn't, or they should have a lot more of a problem in certain cases than others.

personally, I would consider a coin in a much stronger position to benefit me as an investor/miner if there are some coins available to the dev team to improve the coins' exposure and give bounties for tasks. obviously if someone is going to create the coin and oversee the management of these things they deserve also a portion for themselves to profit from.

I really don't understand why the community thinks its important theres NO premine at all, all you are trading it for is a dev team capable of instamining or buying up a lot of coins early. fundamentally there is no difference during the early stages of the coins' growth, the premine dumping argument only applies to large % premines. people are literally dropping that argument on coins where someone has instamined 10x the amount of the premine. you should be worried about that guy dumping on the market, not the devs. and unless you do a reduced block reward launch (which we are seeing more of now) this will always be a concern. (imo not a very valid one)

so I guess most everyone is expecting someone else to do all the work, take all the responsibility, and then get absolutely nothing for it. that's pretty ridiculous.

a coin is worth whatever it is worth, and if someone has 1% of the coins in circulation and you're worried about them "holding the market down" and "killing the coin" then you need to learn more about market dynamics. it is possible to affect the price with a 1% chunk of a coin, depends on trading volume and whether there are any underlying valuation metrics to the coin in question, however, it will be nearly impossible to affect the overall trend of a relatively healthy coin in this scenario. any manipulation will be confined to the shorter term and then only within a reasonable deviation from the rest of the market's consensus on the coins trading value.

short version:
in most cases you wont successfully hold down the value of a coin for very long with 1% of the market cap or 1% of the circulating coins. if there is any real demand for the coin then it will eat the sell wall and all will proceed normally from there.

so try to figure out how much % the premine will represent when a coin is reasonably expected to make exchange (say 2 weeks - 1 mo depending on the coin) and if you are considering the coin for a longer term investment then perhaps 3 mo - 6 mo projected coins minted.

I expect premined coins to eventually start considering these ratios and explaining them to the community so people can understand what % will actually be controlled by devs within the reasonable future of the coin.

saying "1% premine" really doesn't mean anything, I think a lot of people aren't even considering the implications of the dynamic im discussing here, they are assuming only a small portion of coins are represented by a 1% premine. really it could easily be 10% or 20% of the coins that will be in circulation within a given timeframe representing your intended investment window.

hopefully some people will read this and better understand what to look for in a new coin to decide if the premine amount is acceptable to YOU, because only you can decide whether a given coin is being managed "fairly". personally I wouldn't be too into any coins in which the premine % is projected to be over 5% of the total minted coins during the first 3 months, and I would consider something around 1-2% fair, depending on the situation. 0% is great, but not at the expense of the coins growth. it all depends on the dev teams' resources, strategy and intentions.

[Ix]

If the "owners" sign a legally binding contract not to sell or trade etc. their shares/coin for a certain time period would this make you more comfortable getting to know the coin or better?

Why would you need to bother with any hoopla like that when you could just program that time period in? If you're genuinely bringing something new to the table, most people probably wouldn't mind that much. However, you imply that it is the same old silly fixed supply like bitcoin's and it is probably just a clone with a few tweaks that really don't matter in the grand scheme of things. But there have just been too many claims of innovation around here when there really isn't any, so that sours my views a bit.

[Calhil]

I think 50% premine is fair. 50% of the coins for you, 50% for others (assuming your not going to mine it). Nobody is forcing people to use your coin. If it has good features and is innovative in some way it will attract users whether there is premine or not.

Just look at XRP: over 50% premine and the coin is doing fine.