A mainnet is an important concept for projects in the cryptocurrency space. Blockchain technology has proven itself to be a revolutionary actor across a wide spectrum of industries and its development has opened up the possibility for secure transactions between individuals using a decentralized database. However, these technologies do not happen overnight. There is painstaking work that must take place for even simple projects to come to fruition. This is where the mainnet and testnet enter the picture.
Testnet vs. Mainnet
Testnets and mainnets are fundamental components for project development in the crypto world. They are both blockchains but serve different purposes.
So, what is the difference between a mainnet and a testnet? A mainnet is the blockchain that completes the operation of transferring digital currency from senders to recipients. This is the network that allows the project to achieve whatever goals they have promised to investors. As the final product in a cryptocurrency blockchain, the mainnet launch is arguably the most important aspect of any functioning project.
A testnet, on the other hand, is an alternative blockchain that is used for testing the code that determines the functionality of a project. Testnets are important in this context because they allow developers to experiment without the risk of lost capital and disrupting the ecosystem with flaws and bugs. Decentralized apps and EDCCs can be developed and fine-tuned within a testnet to ensure a properly functioning final product. The swap from testnet to mainnet is generally the most important milestone for a project.
Use of Proxy Coins in Cryptocurrency
During the initial investment period, it is usually the case that the project will issue proxy tokens on a different blockchain. This is done because before a mainnet launch all of the coins being used by the testnet are simply placeholders with no real economic value. Once the mainnet is successfully launched, the investors will swap their proxy coins for new tokens offered by the project.
What can be seen, is that a functional testnet and an effective mainnet launch are key to the ongoing success of a project.
Mainnet and Testnet Influence on Price
A common question that traders ask is whether a mainnet launch increases the value of a crypto. When researching different crypto projects to invest in, examining the mainnet and testnet can provide insights into the legitimacy of a project which will then likely reflect in the price. It’s a good idea when watching a project to look into the testnet progress. A legitimate project should have information on their testnet status and updates on its functionality. As expected, a well-documented and functioning testnet can inspire confidence in investors.
The same goes for mainnets. Regular press updates on the progress of a mainnet are positive indicators for the health of a project. A non-functioning or non-existent mainnet can be a cause for alarm. This was the case for EOS when a delayed launch was exasperated by ongoing security issues. Difficulties like these are not good for business.
While the swap to mainnet can be a positive influence, what matters most is the project as a whole. In general, though, there will likely be an impact on price as it is a major milestone, and so it will gain more attention and capture the interest of a wider audience.
Continued Development of the Blockchain Technology
As a project grows and develops it is often the case that the mainnet will evolve as well. A successful project will adapt to changing demands by developing updates to better serve its users. Well executed mainnet updates can lead to increased value as well, although not necessarily.
An example of this continued development is Bitcoin’s ongoing advances. In March the Lightning Network was launched, augmenting the mainnet by adding a second layer. This update is intended to make BTC more scalable and address some of the issues with TPS rates that have held them back and, while Lightning addresses a key issue, it has not been explicitly reflected in stock price.
Is a Mainnet Necessary Before Investing?
While a functioning mainnet provides a tangible indication of how a project functions it is often the case that projects don’t have a mainnet at the time of the ICO. In these cases, it is important to look at different factors when considering investing. Examining the project team and their history in the industry can be an important step. It is also necessary to look at the project’s goals and purpose. Does it fill a gap in the market? What sets it apart from other projects?
The Impact of a Mainnet Launch
Investing in cryptocurrencies has always been an exercise in informed guesswork. Looking at these aspects, as well as broader market trends is important for any crypto investor. The unpredictability of crypto prices often has more to do with investor speculation than any of the actual technology involved.
To answer the question ‘what does mainnet mean?’ it means that a project is moving forward in its development to become the fully functional system that was envisioned. While it is true that a functioning mainnet is an essential part of any good crypto project, the mainnet launch is not necessarily the defining aspect. A successful project also needs real-world adoption and the media campaign to implement it can be an important factor as well. The continuing tech development and progress can bring a project back from a sluggish start, and all the hype in the world cannot create a functioning crypto ecosystem.
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