Why does XEP have premined coins?

Electra Protocol is an open-source and crowdsourced blockchain project. This means that the entire work was and is implemented by volunteering individuals who are not paid for their work – in contrast to most other layer-1 blockchains.

Even given the fact that anyone is working for free does not mean that the community does not have expenses, such as providing this website here to you. As a result, the community needed a way to be able to pay for project expenses. In order to make that happen, 10 percent of the total coin allocation was originally determined as community premine. In the meanwhile, this value has dropped to 6.7% (and it will further drop in the years to come as unused coins are burned).

Electra Foundation Is Safe-Keeping Premine

Since a larger amount of premined coins should not be in the hands of a single person, the community decided to create a legal “real world” entity which could take over the management of the premined community coins. At the end of 2021, the Electra Foundation was created. The foundation safe-keeps the premine of the project, is involved in the identification and due diligence processes when needed, signing agreements with partnering entities, funding community initiatives, supporting blockchain developments, and educating the public about the adoption of Electra Protocol’s blockchain.

Usage of Premined Coins

The community premine is covering strategically important cost. The premine is not used for “unnecessary” expenses, such as to pay for Youtubers, like many blockchains do. Among those expenses are also to make XEP coins available to a wider audience, by using parts of the community premine as collateral for providing wrapped XEP tokens.

All premined coins, which are not used, are planned to be burned during each year if right conditions are met (or at least at the end of it).

Allocation of XEP Coins

The following tokenomics are as of January 1, 2022 when the Electra Protocol mainnet became one year old.

46% of all XEP coins are held by the public (which are today partly offered on exchanges), while now 47.3% are reserved to pay for XEP staking rewards.

The community premine dropped from 3 billion XEP to 2 billion XEP during 2021, because burn events and collaterization measures took place. As of January 2022, this means that 6.7% of the total supply are left to be used as community premines. The remaining premine is locked for the years during 2022 to 2024. This means the premine will sharply drop further with every upcoming coin burn of unused XEP coins.

The wrapped XEP tokens traded on PancakeSwap are part of the shown allocations.

January 2022 - Updated tokenomics of XEP - Electra Protocol - stakes - supply

Many Cryptoprojects Have a Premine

Premines coins are nothing unusual. Many cryptoprojects have them, especially when they perform an ICO, IDO, IEO, or other forms of funding in order to later sell parts of their premine, for example to conduct marketing. Electra Protocol is different: It is not selling XEP coins in order to create (fake) hype. Instead, it is carefully using the community coins to become a credibly neutral public infrastructure.

Bitcoin: Even Satoshi Nakamoto Created Coins

Bitcoin started out as a cryptocurrency that was not pre-mined. In other words, when Satoshi Nakamoto first started using the Bitcoin protocol on 3 January 2009, no BTC tokens had yet been created. The first 50 BTC tokens were created by Satoshi himself by mining the first block. However, there are those who argue that because he was one of the very few Bitcoin miners at the time, he actually created many of the first BTC, as if he had “pre-mined” them. In other words, he would have mined them before a significant number of other people started mining them.

It is estimated that Satoshi Nakamoto mined more than 1 million BTC, which today would have a dollar value of more than 60 billion, although there is no record that he ever used them.

Source: The Cryptonomist