The Dangers of Instamining: Uneven Allocation and Potential Threats

What is instamine?

While Bitcoin's supply is gradually released until 2140, instamining involves swiftly mining a substantial portion of total mineable coins or tokens in a project within a compressed timeframe. This rapid distribution may lead to uneven allocation among investors.

During a cryptocurrency's instamine period, a significant amount of the digital asset becomes available early on when investor interest is typically high. This instamining process often results in a substantial increase in the cryptocurrency's supply, leading to lower prices.

Instamining can occur intentionally or accidentally due to flaws in mining algorithms. Some newly launched cryptocurrencies intentionally incorporate instamining to attract investors during the initial phase.

It's essential to distinguish instamining from pre-mining, where some or all of a coin's supply is generated before becoming available to the public. Instamining has been associated with fraudulent activities, and concerns about unfair competition arise when a large group purchases many tokens and sells them at significantly lower prices.

For instance, Dash faced challenges during its launch, experiencing issues in the algorithm adjusting mining difficulty. This led to the issuance of two million coins (15% of the supply) two days after launch, which were then sold at very low prices. Although the incident didn't result in massive adverse consequences, instamining poses a potential threat to cryptocurrencies.