Premine
Premining is the issuance of a portion of a cryptoassets supply privately prior to its public launch. It is commonly used to facilitate Initial Coin Offerings.
A fixed amount of tokens are created some of which are offered for sale to the public. The remainder is allocated to insiders like project leads, developers, investors, and advisors.
Allocation schedules can vary widely with 50 – 80% being the typical range for the portion allocated for sale to the public. Large premines with less than 50% of the supply put up for sale is a red flag. That the project is not serious about its intended purpose and is just interested in a cash grab or potentially is an outright scam.
A model from traditional finance premines could be compared to is the issuing of stock options to employees before a startup goes public via an IPO. With employees forgoing maximum short term compensation in the hopes of a superior long term return from having a stake in the company’s future success.
Further Reading Premine
Sale of the Century: The Inside Story of Ethereum’s 2014 Premine