What are the pros and cons of premined altcoins?

Question

When starting an altcoin from scratch, how would distributing premined coins to a certain community affect the currency?

Answer 1

pro's:

• dev gets paid
• some bounties and coin distribution can occur

con's:

• depending on the size of the premine, developer could get an unreasonably large amount of coins for what is essentially a copy and paste job.
• negative preconceived opinions about the coin because it is premined.
• dev could be a scammer and dump all the coins, rapidly deflating the price(ie, a pump and dump)
• those who claim the bounties may run with the money and pull the services at a moments notice once the bounty is paid.
• coin may be subject to 51% attacks, difficulty stranding attacks, and other undocumented forking attacks from anti-premine "activists", who may be the vocal minority but often have the majority of hash on any given coin.
• the coin will be under constant attack from trolls

Answer 2

I'd say a fair distribution of premined coins has these benefits:

• Gives the coin visibility over the 80+ altcoins out there, some with competing target markets (e.g. PesetaCoin vs SpainCoin - latter is premined and will be distributed)
• Creates interest in it (mostly from the group that can potentially receive them)
• A lot of people end up with at least some of those coins, increasing the possibilities some will use such coins to pay for stuff (kick-starting an economy using this coin) rather than simply cashing them right away
• Even for those who do cash the coins right away, it's literally money fallen from the sky, created ex-nihilo. Just like fiat, but directly benefiting them.

Answer 3

With 100% premined coins, this means that at the time the coin start to be used all the coins are already sent to people. This reduce the inflation since all coins are already sent.

One of the problems of premined coins is that it removes the need of mining and mining is an important thing, because its "the process of adding transaction records to Bitcoin's public ledger of past transactions.". Mining is needed to make things secure but without an incentive to mine no one will do it.

One solution to the mining problem is to have an transaction fee, so when you receive some money, an ultra small % of what you received goes back to the system, the problem is that the transation must be ultra small or no one will use the coin. But if the transaction fee is small, then almost no one will want to mine just for those few coins. There is also the problem that the coin is premined, and deflation will occur, at some moment the coin will be worth alot, and the and the transaction fee, if it is X coins instead of Y% of the coins you received, those X coins that were just an small fee, will now be a big amount of money.

Another problem of premined coins is that people usually think the way its distributed to people is not fair, if developers sell the coins before it start some may consider it a scam. This problem could be solved by having people mine numbers instead of coins, this would happens before the coin is sent to people, after X months or years, they get those numbers people mined, and share the total amount of coins based the amount of numbers people mined. As some example, if just 2 guys mined numbers, and the first mined 1 number and the other mined 99 numbers. The first one will get 1% of all coins and the other 99% of all coins, at the time the coins are shared to people. If 4 guys only mine, and each one get 50 numbers, they will get 25% of the coins when the coins are shared.