Crypto currencies are revolutionizing the way online transactions are carried out and the way digital “money” is created. The core value proposition that sets crypto currencies apart from traditional fiat money is decentralization. Because there is no central governing entity that controls the system, crypto currencies rely on a decentralized computational process called mining to maintain and secure the blockchain network, and create or “mint” new crypto currencies into circulation.
While Bitcoin is considered the pioneering crypto currency in the market, there are many other types of crypto currencies available online. The nature of how these crypto currencies are mined or created delineates them from one another. To date, there are three types of crypto currencies:
Pre-mined crypto currencies are those that were mined ahead of time by developers before they are made available for trading to the open market. What happens here is that a blockchain developer allocates a certain amount of credit to an address or wallet before launching the source code later on to other miners.
A pre-mine typically happens if the developer needs to pay for certain features during development, or during an Initial Coin Offering (ICO) where the coins bought at pre-sale are later on mined as part of the genesis block. These types of crypto currencies largely benefit the developers and those that were involved during the early stages of the development (i.e., ICO investors and token holders).
Most crypto currencies are considered pre-mines to a certain extent, including Bitcoin and Ripple. AuroraCoin is one of the most known kind of pre-mined crypto currency in the market.