Pros & Cons of a Cryptocurrency Presale

Some people immediately claim any cryptocurrency that holds a Presale is a scam, and in most cases this is probably correct. However, I think that’s a specific case of the more general rule that most new cryptocurrences (full stop) are either scams or destined to fail.

All currencies need a method of distributing themselves as they are minted, and the more distributed a currency is, the more useful it is.

In the cryptocurrency world, this has mostly been accomplished through Proof of Work (PoW) mining, which effectively shows you can prove you burned through a certain amount of computing resources. This also serves the dual purpose of securing the network from various attacks.

However, if you can move the task of securing the network off Proof of Work but keep Proof of Work as a distribution method, you’re left with Proof of Work being simply proof that you traded resources for the new currency. This is the model that most of the recent PoW/PoS “hybrid” currencies have been choosing.

At this point, the only difference between distribution by Proof of Work and distribution by Presale is whether the money goes to hardware manufacturers and utility companies or to the organization who developed the new cryptocurrency.

In addition, most of the mining power is going to be from miners who immediately sell the mined cryptocurrency to BTC and then to fiat currency to pay for their expenses and to take profit. Of course, in order for this to happen, there have to be people willing to pay for the new currency.

The end result of this is that most of the distribution of the currency still, in effect, happens through people buying it on the open market in the first few weeks of the currency’s life. Again, the only difference between this model and the Presale model then ends up being the entities that receive the money paid for the currency.

This is the reason I have chosen to hold a Presale for Credits at the launch of the currency. Rather than subsidize miners and mining pools and complicate the codebase with functionality that will only be meaningful for a small portion of the currency’s life but required forever, that effort and funding can be put to use ensuring Credits has every fighting chance to push cryptocurrencies further into the future and build a useful and valuable platform.

Of course, this isn’t to say you should go throw money at any currency that holds a presale. The vast majority of new cryptocurrencies being released are still a ripoff and bring no innovation. However, I also think you shouldn’t be mining these currencies or buying them from people who do mine them.

Instead, I think it’s time for the cryptocurrency community to leave behind the breathless pump & dump narrative cycle and throw money into real innovation and R&D that has the potential to make a substantive change rather than coins which are effectively lottery tickets and miner subsidies.

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