UNDERSTANDING INSTA-MINING, PRE-MINING & NINJA-MINING

Investment returns from a successful ICO are eye-popping. Just a glimpse over our tokens ranked by ROI emphasizes this. In traditional finance, 7% market returns are great. A 40% stock increase would be awesome. In the world of ICOs, a 10,000% return is common. These are the types of high ROI tokens we’re looking for in our premium, members-only Coinist Insiders Network.

A high ROI displays the explosive growth of a coin, incentivizing further investors. But numbers can lie. A coin’s ROI can be manipulated by instamining, premining, and ninjamining. These are different words for similar concepts, that every prospective miner or investor should understand. We’ll examine these controversial topics through the lens of two popular cryptocurrencies: NXT and DASH.

The #5 cryptocurrency in the world by market capitalization, Dash has been one of 2017’s biggest winners. Priced at $770 USD a coin, Dash has been hailed for its speedy transactions and security measures. Many in Dash’s passionate community claim it will supersede Bitcoin someday. But many Dash opponents complain about the controversial instamine.

It’s important to distinguish between a premine, instamine, and ninjamine, although they’re similar concepts. Premining is when developers of a coin, or other select individuals, get to mine a coin extensively before public release. This gives them a significant edge in stacking tokens, and they can easily dump theirs when the token hits the public market and increases.. Instamining is heavily mining a token immediately after its release. Early on in a token’s lifecycle, it’s easy to mine to incentivize miners. Those lucky enough to instamine a coin get large amounts of it, significantly easier than others down the line. Lastly, ninjamining is announcing a coin without any prior warning or buildup and mining it then. All of these are frowned upon for perceived unfairness.

Another concern with any kind of quick mining or rapid distribution of tokens, is that big investors could swing the market easily. Satoshi Nakamoto, the anonymous creator of Bitcoin, likely still holds a million Bitcoins. If he ever decided to cash out, the Bitcoin market could crash and never recover. Developers could start a project, mine coins for themselves, and flip them for a big easy profit once the project gathered buzz. That would be the death knoll for a token.

After Dash was released, creator Evan Duffield and another anonymous user mined heavy amounts of Dash. Around 2 million Dash were mined in around 48 hours. Today, those coins are worth over a billion dollars. It’s easy to understand the concern over instamining.

DASH INSTAMINE: TECHNICAL ERROR OR STRATEGIC MOVE FOR FOUNDERS?

Dash is defined by its masternode system. There’s potential for profit when operating a masternode, but it takes 1000 Dash to set up a masternode. Thus, early accumulators of Dash tokens have an advantage forever with their ability to set up a masternode.
For their part, Dash claims it was a combination of technical errors and oversights that allowed the instamine to occur. When Dash was created, originally under the name DarkCoin, it was just a fun project for Evan Duffield. Duffield would tinker with Dash at night after working a day job. Dash didn’t go through the extensive prep and vetting process tokens today undergo. Dash was also originally run off LiteCoin’s code base, which made it easier to mine at first then intended. This was later fixed. Dash has a passionate community behind it, but also many quick to call it a scam. Whether you’re for or against Dash is probably driven by your opinion on the instamine.

NXT DISTRIBUTED 1 BILLION TOKENS TO 70 PEOPLE FOR ABOUT $6000

Another hot coin dogged by instamine accusations is NXT. First, it’s essential to understand NXT isn’t a minable coin in the same way Dash, Bitcoin, or Ethereum are. It’s a proof-of-stake system. The more coins someone owns, the better chance they have to accumulate more. In the case of NXT, it drew flack for originally distributing its entire 1 billion tokens to 70 people.

But there’s a fair reason. NXT’s original ICO was long before the current ICO boom. It was rough around the edges, to say the least. some would argue that finding 70 people back in 2014 to back the project was a huge accomplishment. Even many in the crypto community at the time didn’t know what an ICO was. NXT was one of the first ICOs ever.

NXT’s original ICO announcement was a short BitcoinTalk post, where a user called BCNext posted instructions to submit money, along with a brief project description. The user reassured board members: “I’m a veteran member of this forum.  I have to use this brand-new account to remain anonymous but later I may reveal my identity.” It wasn’t the most authentic looking announcement. People called it a scam early and often. Eventually, 70 people pulled the trigger and invested, and consequently, received all of the NXT tokens. They took the risk, and now they’ve reaped the reward.

Crypto can be a murky world, defined by its anomity and technical complexity. The he-said she-said nature of instamining claims can be impossible to get to the bottom to. NXT and Dash both have potential red flags from their early days, but both teams have offered explanations. It’s just another factor to keep in mind when investing.