Crypto Tokens with High Pre-mines Get Rejected, TRX, XRP and NEO Make the List
A post published by Crypto Briefing looked into the issues related to pre-mined tokens. As per the report, Morgan Creek Capital Management’s novice Digital Asset Index Fund has excluded cryptocurrencies known for their high pre-mine percentages. This in particular comes of shock, given that many of the cryptos are well known, i.e. Tron [TRX], XRP, Stellar [XLM] and NEO.
Further analysis found that the said cryptocurrencies had pre-mines of nearly 30 percent. Tron and Ripple have both pre-mined nearly 100 billion respective tokens, with NEO’s issuance of nearly 100 million tokens to date. So why are they looked down upon? Turns out they are for obvious reasons.
Before breaking down the reasons, it is essential to understand the concept behind pre-mining tokens. As the name might hint out, pre-mining is when a limited number of a said token is created. The problem with this is that developers get the first cut in the supply, before it is even distributed to investors. Hence, it contradicts the notion of “decentralization”, which is the foundation of the cryptoverse.
The following are some of the main reasons why tokens with high pre-mines might be disregarded:
Increased Supply Means Greater Influence on Crypto Market
If for instance, billions of TRX tokens are held by investors, the moment a price surge occurs, many might resort to selling them. This is something that has been witnessed in most of 2018, namely due to the losses incurred by almost all investors. Therefore, any price hike resulted in immediate sells, eventually hitting the market too hard.
Manipulation Over Tokens
Ripple has been a debatable topic over the last few months as many crypto investors questioned its notion of decentralization, along with that of its token, XRP. An important case made was that of the team’s ability to “freeze tokens”. Such manipulation also has the ability to influence the crypto market both ways (i.e. positively or negatively).
Problems Among Founders
Many have argued that XRP’s dropping trends is a result of “warring founders” and “rival token”. The latter was given as an example to pinpoint Stellar [XLM], which was apparently forked from Ripple. To add to Ripple’s existing concerns, failure to comply by securities-related laws has put the firm in a tight situation, specifically with increased number of lawsuits filed against them.
Getting back to Morgan Creek Capital Management’s new endeavor, it has been revealed that Bitwise Asset Management will be responsible for supervision purposes. As per the latter’s co-founder, Hunter Horsley:
“having a large portion of assets held centrally runs counter to that [decentralization] and could create complexities that differ from what we would expect from public blockchains.”
Is Morgan Creek Capital Management making a mistake in shutting down tokens with high pre-mine rates? Do you think high pre-mined tokens are more or less centralized? Let us know in the comments below!