DEFINITION of 'Instamine'

New cryptocurrencies inevitably search for one or more features that will hook a potential investor or user base. These features run the gamut from structural elements to gimmicky offers, with everything in between. In the flurry of new cryptocurrency launches which have dominated the space over the past several months, some of the unique features that have emerged have become controversial. The concept of "instamine" (or "instamining") is one of these problematic ideas. Put simply, instamining is a process that allows coins to be distributed in an unfair or uneven manner. Typically, a cryptocurrency that undergoes an "instamine" period offers up a large portion of the total mineable quantity of coins or tokens over a short period of time just after the digital currency launch, when investor interest is likely to be at a high point.


Instamining may take place unintentionally or on purpose. Some cryptocurrencies have experienced gluts of supply immediately after launch as a result of imperfect mining algorithms which fail to adjust the difficulty level associated with the generation of new coins in a predictable, controlled fashion. It can also take place because of nefarious coding on the part of one or more developers. Other cryptocurrencies have toyed with the idea of building in an instamine period into the launch of the currency as an incentive to early investors.

There are a number of potential issues with instamining. First, investors and analysts cite it as a potential area for fraudulent activity or unfair business practices. If a particular individual or group is able to secure an outsized portion of tokens relative to the amount of time, energy, and other resources they dedicate toward the mining procedure, that individual or group can then turn around and sell off those tokens. If this happens quickly enough after an ICO, when investor interest in the digital currency is at a high point, this large seller can dump a significant quantity of tokens for a high price, negatively impacting the health of the overall market for that currency.

Among existing cryptocurrencies today, perhaps the most famous case of instamining took place following the initial coin distribution of Dash. The algorithms responsible for adjusting mining difficulty for Dash did not adjust as they were supposed to, resulting in the issuance of about 2 million coins in a period of just 2 days following the launch of the currency. Two million coins accounted for roughly 15% of the total Dash supply to ever be issued. As the supply of coins overwhelmed investors, most coins were sold across various exchanges, often for extremely low prices. In this case, a single seller was not able to dump a large holding of Dash coins, so the overall damage to the cryptocurrency market and ecosystem was minimal.

While Dash managed to emerge from its unintended instamining fiasco relatively unscathed, the same cannot be said for all digital currencies. Indeed, instamining can take place upon the launch of any new cryptocurrency. If this does happen, it's likely that the owners of large quantities of those coins will hold onto them for an extended period of time, selling them once the price of the coin is sufficiently high. After that massive sale, it's not uncommon for the price of the coin to drop precipitously, potentially even bringing about the downfall of that coin.

Instamining is occasionally used interchangeably with the term "premining," although these are somewhat different concepts. Instamined coins are those that have been the victim of a glitch (either deliberate or accidental) in the mining algorithm, which allows them to be generated at an accelerated rate following a launch. Premined coins, on the other hand, have been generated before the launch itself takes place. Most cryptocurrencies are premined to a certain controlled extent, typically by developers who retain a share of the coin supply upon launch. Premines can also be nefarious, however; an exchange might ask a new cryptocurrency to provide a private supply of premined coins in exchange for a place in its list of offered currency pairs.

How can an investor determine whether a particular cryptocurrency has been premined or instamined? Unfortunately, at the time of the launch it can be very difficult to assess what the situation is. The frenzy that takes place surrounding highly-anticipated launches makes this an especially opportune time for individuals looking to take advantage of errors in mining protocols. It's typically only after the fact, as the coin attempts to establish itself for the longer term, when this comes to light. Coins that experience massive sales of tokens and then which decline in price immediately thereafter may have been subjected to instamining activity. In many other cases, though, it may be impossible for an investor to determine whether instamining was a factor in the overall health of a new digital currency.

  1. Premining

    Premining is the mining or creation of a number of crypto coins ...
  2. Bullion Coins

    Coins made from precious metals that are generally used for investment ...
  3. Krugerrand Gold Coin

    A gold coin minted by the Republic of South Africa. Krugerrand ...
  4. Dash

    A peer-to-peer cryptocurrency that was forked out of Bitcoin ...
  5. Gresham's Law

    Gresham's law is a monetary principle stating that "bad money ...
  6. Proof of Burn (Cryptocurrency)

    Proof of burn consensus algorithm combines the proof of work ...
Related Articles
  1. Tech

    How to Find Your Next Cryptocurrency Investment

    It’s hard to predict which coins will receive the most attention and why.
  2. Tech

    New Counterfeit-Proof £1 introduced by the British Royal Mint

    Dubbed "the most secure coin in the world", the new British £1 coin entered circulation March 28.
  3. Tech

    Tron Surges: Ethereum Tops $1,000 As Bitcoin Price Falls

    As bitcoin's price stumbles, altcoins like Tron are driving the cryptocurrency markets right now.
  4. Tech

    How to Identify the Next Big Cryptocurrency

    As new bitcoin millionaires are minted, investors are looking for the next big thing in cryptocurrencies.
  5. Insights

    Giant Gold Coin Stolen From German Museum

    The 221-pound coin would be worth close to $4.5 million at current gold prices.
  6. Tech

    How to Buy Privacy-Focused Cryptocurrencies Dash and Monero

    Here's how to buy Dash and Monero, two privacy-focused cryptocurrencies.
  7. Tech

    The 5 Weirdest Cryptocurrencies

    These new digital coins exhibit vastly different technological capabilities and applications than bitcoin.
  8. Tech

    What Caused the Massive Cryptocurrency Correction Last Weekend?

    Last weekend saw sudden plunges in the prices of leading cryptocurrencies. Here's why they might have fallen so fast.
  9. Tech

    Montana Will Build $251 Million Cryptocurrency Mining Farm

    Power Block Coin plans to launch a cryptocurrency mining farm outside of Butte, Montana.
  10. Tech

    Could Cryptocurrencies Replace Cash?

    The debate whether Bitcoin is currency rages on, the true test will be if cryptocurrencies are able to replace cash.
  1. What are the advantages of paying with Bitcoin?

    Learn how payments made with Bitcoins offer certain advantages over standard currency, including user anonymity, no taxation ... Read Answer >>
  2. What are key economic factors that can cause currency depreciation in a country?

    Read about the causes of currency devaluation, and find out how to differentiate between relative and absolute currency devaluation. Read Answer >>
  3. What is a currency converter and how do I use one?

    A currency converter is a calculator that converts the value or quantity of one currency into the relative values or quantities ... Read Answer >>
Hot Definitions
  1. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  2. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  3. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  4. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  5. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  6. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
Trading Center