What Is Instamine?
Instamining is the current trend in crypto mining. Learn all about it in this post. It develops a new outlook for the crypto market.
Definition Of Instamine
As is the practice everywhere, new cryptocurrencies are inevitably searching for one or more features that will eventually hook a potential investor or user base. From structural elements to gimmicky offers with everything in between are found the features that run the gamut. Some of the unique features that have emerged have become controversial whereas in the flurry of new cryptocurrency launched having dominated the space. This is where the concept of instamine or instamining comes as one of these problematic ideas. Instamining to state is a process allowing coins to be distributed unfairly or unevenly. It is typically true that cryptocurrency undergoes an instamine period offering a large portion of the total mineable quantity of tokens or coins over a short period after the digital currency launch where investor interest is likely to be at a high point.
Breaking Down Instamine
As it is sure to take place, instamining takes place unintentionally or on purpose as cryptocurrencies have experienced gluts of supply immediately after the launch as a result of imperfect mining algorithms failing to adjust the difficulty level associated with the generation of new coins in a predictable controlled fashion. It is taking place due to the reason that nefarious coding on the part of one or more developers whereas other cryptocurrencies have toyed with the idea of building in an instamine period to launch the currency as an incentive to early investors.
Instamining has several potential issues, where the first one is investors and analysts citing as a potential area for fraudulent activity or unfair business practices, where a particular individual or group can secure an outsized portion of tokens relative to the amount of time, energy and other sources dedicated to mining procedure with individual or group turning around and selling off those tokens. In case such an event happens, it is quickly enough after an ICO, where investor interest is in digital currency at a high point as the large seller dumps a significant quantity of tokens for a high price that negatively impacts the health of the overall market for the currency.
How Is Instamine Affecting The Cryptocurrency Ecosystem?
The most famous case of instamining among the existing cryptocurrencies today took place following the ICO distribution of Dash. Resulting in the issuance of about 2millioncoins, the algorithms responsible for adjusting mining difficulty for Dash in a period of just 2 days following the launch of the currency. The supply of coins overwhelmed the investors as most coins were sold across exchanges for extremely low prices. While it is a fact that a single seller is notable to dump a large holding of Dash coins, the overall damage to the cryptocurrency market and ecosystem was minimal.
Managing to emerge from its unintended instamining fiasco, Dash is relatively unscathed as the same cannot be said for all digital currencies with instamining taking place upon launch of any new cryptocurrency. Owners of a large number of coins in case this happens should hold onto them for an extended period selling them once the price of the coin is sufficiently high. It’s not uncommon that after a massive sale the price of the coin drops precipitously potentially bringing about the downfall of the coin.
Occasionally used interchangeably with the term premining, is instamining that although somewhat different in concepts, these instamined coins are those that have been the victim of a glitch in the mining algorithm allowing them to be generated at an accelerated rate following a launch. On the other hand, premined coins are generated before the launch itself takes place. Whereas in the case of premined cryptocurrencies it is certainly controlled extent is typically by developers retaining a share of the coin supply upon launch. The certainty that premines can also be nefarious, in exchange it might ask a new cryptocurrency providing a private supply of premined coins in exchange for a place in its list of offered currency pairs.
The Final Words On The Discussion
The next is how an investor can determine if a particular cryptocurrency has been premined or instamined? At the time of launch, unfortunately, it is very difficult to assess the situation as the frenzy takes place surrounding highly anticipated launches thereby making this an especially opportune time for individuals who are looking to take advantage of errors in mining protocols.
This comes to light only after the fact the coins attempt to establish itself for the longer term, as they experience massive sales of tokens and then decline in price immediately thereafter subject to instamining activity as in many cases of cryptocurrency it may be impossible for an investor to determine whether instamining was a factor in the overall health of a new digital currency.