Premining: Advantages and Disadvantages

Preminer Mining Bitcoin

With an extensive experience as an electrical/software/coding engineer along with having a diverse financial background, Thomas Wettermann’s areas of interests include Machine Learning (ML), artificial intelligence (AI), and Financial Technology (FinTech), including all areas of cryptocurrency ecosystems. 

Cryptocurrencies include Bitcoin, Ethereum, and Dogecoin (to name a few cryptocurrencies) and these currencies continue to dominate the headlines and financial markets. 

Bitcoin

Bitcoin, the original cryptocurrency, is the most popular. Bitcoin uses a process called mining to issue new coins and to reward “miners” that participate in the network. Mining involves a process wherein new bitcoins are entered into circulation. It is also an important component for the maintenance and development of the blockchain ledger. Miners help to verify and legitimize all Bitcoin transactions. This convention is meant to keep Bitcoin users honest. Verifying transactions, miners are helping to prevent the "double-spending” problem. Mining is performed using sophisticated GPU and ASIC based computers to solve extremely complex computational math problems. 

In contrast, other cryptocurrencies such as Ripple, Cardano, Stellar, and EOS are all “pre-mined.” That is, these are all coins that have been mined (and distributed) before an official launch date of the coin. 

ripple (XRP)

As just one example, Ripple (XRP) was created as a cryptocurrency for a centralized payment system that enables a cost-effective and efficient method of transferring funds. However, a large portion of XRP is still owned by Ripple who centrally control the output of coins. 

As with many aspects of cryptocurrency ecosystems, there are perceived advantages and disadvantages relating to premined coins. 

For example, proponents of premining argue that it makes sense to premine cryptocurrencies so that developers can be rewarded to take part in its creation and who did the work necessary to give the cryptocurrency a certain momentum. Premined coins distributed to team members behind a cryptocurrency can also serve as an incentive to employees and early adopters. Premining also allows the coin issuer to cover certain expenses and fees that are incurred, such as listing the coin in exchanges.  A premine can also serve as proof to investors that the coin or token that has been created is actually functional. 

In contrast, opponents of premining argue that premining mainly serves Initial Coin Offering (ICO) startups to “pump and dump” their own cryptocurrency.  That is, an investment fraud where the value of the coin is initially bought at a low price and then this price is artificially inflated to sell the coin at a higher price.  Premining also can create a reserve of coins that can be later sold by the initial coin recipients on the market, thereby depressing their initial value.  In addition, premining gives the perception that the initial miners receive a lot of influence.

All the views expressed on this site are those of Thomas Wettermann and do not represent the opinions of any entity whatsoever with which Thomas Wettermann has been, is currently, or will be affiliated.

Trading digital financial assets such as cryptocurrencies can carry a high level of risk, and may not be suitable for all investors. Before deciding to invest, purchase, and/or trade cryptocurrency you should carefully consider your investment objectives, level of experience, adversity to risk and volatilities. The possibility exists that you may sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with cryptocurrency trading, and seek advice from a qualified and independent financial advisor. Thomas Wettermann is not an independent financial advisor.

Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary of Thomas Wettermann, and does not constitute investment advice. Thomas Wettermann will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. All opinions expressed on this site are owned by Thomas Wettermann and should never be considered as advice in any form.

Potential U.S. Stablecoin Regulation

Secretary of the Treasury Janet L. Yellen

With an extensive experience as an electrical/software/coding engineer along with a financial background, Thomas Wettermann’s areas of interests include Machine Learning (ML), artificial intelligence (AI), and Financial Technology (FinTech), including all areas of cryptocurrency ecosystems. 

Cryptocurrencies include Bitcoin, Ethereum, and Dogecoin (to name a few cryptocurrencies) and these currencies continue to dominate the headlines and financial markets. Bitcoin, the original cryptocurrency, is the most popular. Cryptocurrencies are a relatively new asset class evolving rapidly in an increasingly tech-driven economy. As a consequence, cryptocurrencies are subject to major volatility, which can change their value in a matter of seconds. 

A stablecoin is a digital currency that is linked to an underlying asset. Essentially, stablecoins are a type of cryptocurrency that are designed to maintain a fixed value. To achieve and maintain such a fixed value, these digital currencies are often pegged to a fiat (government-backed) security or other similar underlying asset. This underlying asset may be a national currency or a precious metal such as gold. The main types of stablecoins include fiat-backed, cryptocurrency-backed, and commodity-backed stablecoins. 

tether

For example, a popular fiat backed stablecoin is Tether (USDT). Tether was one of the first stablecoins that entered the digital currency market with both the widest adoption and largest market capitalization. While it is purportedly pegged one-to-one to the U.S. dollar, its solvency relies upon the strength of its reserves. 

Interest and investment into stablecoins has been explosive over the last year. For example, as illustrated below, as of July 22, 2021 the supply of stablecoins is approaching $100 billion:

 

Stablecoin Searches and Supply

Some critics of stablecoins argue that these coins pose a threat to financial stability. Specifically, these critics argue that many investors use stablecoins as a cash substitute, but yet these coins remain lightly regulated. This is unlike similar cash substitutes such as bank deposits or money market mutual funds which are highly regulated. 

For example, just last week, Federal Reserve Chairman Jay Powell said in a congressional hearing that regulators should treat stablecoins similarly to these other regulated instruments. As a follow-up to Chairman Powell’s concerns, the nation’s top financial regulators met earlier this week to discuss stablecoins. 

On Monday, Secretary of the Treasury Janet L. Yellen convened the President’s Working Group on Financial Markets (PWG). She was joined by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. Minutes from this meeting are captured in the Readout provided by the U.S. Department of the Treasury. 

According to this Readout, the topics of the PWG discussion included: 1. “the rapid growth of stablecoins,” 2. the “potential uses of stablecoins as a means of payment,” and 3. “potential risks to end users, the financial system and national security.” Importantly, the Readout also stated that US Treasury Secretary Janet Yellen emphasized “the need to act quickly to ensure there is an appropriate U.S. regulatory framework in place,” for these digital assets.

All the views expressed on this site are those of Thomas Wettermann and do not represent the opinions of any entity whatsoever with which Thomas Wettermann has been, is currently, or will be affiliated. 

Trading digital financial assets such as cryptocurrencies can carry a high level of risk, and may not be suitable for all investors. Before deciding to invest, purchase, and/or trade cryptocurrency you should carefully consider your investment objectives, level of experience, adversity to risk and volatilities. The possibility exists that you may sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with cryptocurrency trading, and seek advice from a qualified and independent financial advisor. 

Thomas Wettermann is not an independent financial advisor. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary of Thomas Wettermann, and does not constitute investment advice. 

Thomas Wettermann will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. All opinions expressed on this site are owned by Thomas Wettermann and should never be considered as advice in any form.

China Sending Mixed Cryptocurrency Signals

With an extensive experience as an electrical/software/coding engineer along with having a diverse financial background, Thomas Wettermann’s areas of interest includes Machine Learning (ML), artificial intelligence (AI), and Financial Technology (FinTech). For the past few years, Thomas Wettermann has focused on the underlying technologies that support and promote all phases of cryptocurrency ecosystems. 

European Cup: Winners and Host Countries

In addition to his background in intellectual property law, electrical engineering, and business administration, Thomas Wettermann is also an experienced soccer coach. Thomas Wettermann holds a C Coaching license from the United States Soccer Federation and has completed a Union of European Football Association’s (UEFA) training program in Germany. The UEFA is the association that organizes the EURO cup.

After the World Cup, the EURO Cup is the most prestigious international soccer tournament in the world. The national teams of 55 countries participate in the multi-year qualifying matches that culminate in the EURO Cup championships, which are played every four years.

UEFA member countries include all E.U. countries, as well as nations that are geographically located in Europe, the Middle East, and Eurasia, such as Israel, Azerbaijan, and Russia. While more than 55 countries compete, only 10 have ever won the title. As of 2020, Germany and Spain have both won three cups, while France has earned two.

The first EURO Cup final was held in France in 1960. For more than six decades, all final matches were held in one or two member countries at a time. However, to celebrate the competition’s 60th anniversary, UEFA made the historic decision to spread hosting duties for the 2020 finals across 12 countries.

Bitcoin vs. Stablecoins: Investment Options?

 

Cryptocurrencies and Artificial Intelligence