Entering a field as technically complex as the crypto space requires a deep learning process. The crypto ecosystem merges two areas of knowledge that stand out for the use of technical terms, whose academic definitions do not usually resolve doubts in some cases.
For greater context, these are English terms, which generates even more confusion among laymen in these matters whose mother tongue is not the language of Shakespeare.
The first concepts that beginners in the crypto space often grapple with are hidden behind words like “ blockchain ”, “ ledger ” or “node”. In this guide, we will resolve doubts about the term “ mainnet ” and define how it relates to another equally important concept: “ testnet ”.
What is a mainnet?
In general, when we talk about networks like Bitcoin , we mean its mainnet . We refer to the entirety of the blockchain , including its development, its activity, its verification processes, etc.
In this sense, a mainnet translates as main network. In fact, the term is shorthand for main network : a blockchain network that has been launched, is fully operational, and processes transactions using DLT technology .
In other words, a mainnet is the space where the network activity of a crypto takes place. This activity is possible thanks to the interaction between the nodes of the blockchain .
Characteristics of a mainnet
A mainnet is an independent network: it works autonomously , using its own technology and its own token. At this point, it should be noted that there are assets that do not have their own network. To differentiate both situations, we usually speak of " cryptocurrency " when the asset has a network, and we say "token" when it does not.
For example, Shiba Inu is considered a simple ERC-20 token that does not have its own network. It moves through the Ethereum network . Instead, XRP is considered a cryptocurrency: it is Ripple's native token.
In general, a crypto is expected to offer greater potential in terms of value and utility by the mere fact of having a mainnet . Of course, each project is unique and cannot be generalized.
Why are mainnets necessary?
The launch of a mainnet is the definitive step between the design phase and the real world. A mainnet represents the implementation of an idea and the fruit of the work of an entire team.
Mainnets are the fundamental pillars of the decentralized financial ecosystem of the crypto space. Without these networks, the digital asset revolution would not have taken place. Bitcoin would have stuck in Nakamoto 's mind or been little more than an interesting idea in a paper .
But no, by mid-2009, the technology to launch the Bitcoin mainnet already existed . The launch took place a year after the publication of the white paper that would revolutionize the world of finance.
Bitcoin was one of the first pieces on the board. Countless network launches have followed. Just two years later, the Litecoin mainnet was launched , followed in 2013 by the Dogecoin mainnet . In 2015, the Ethereum mainnet was released , the first to allow the use of smart contracts.
Importance of testnets
Now that we have a clear idea of what a mainnet is , we can talk about an equally important type of network: testnets . These are blockchains that run parallel to a virtually identical mainnet . Basically, it is a test network.
The fundamental difference between both networks is the value of the assets. In a testnet the tokens have no real value; on a mainnet , yes. In this way, developers can carry out all kinds of tests without fear of losing users.
Obviously tokens used on a testnet cannot be sent to the corresponding mainnet , and vice versa. Any attempt to send them between the networks would result in the loss of the tokens, since they would arrive at an address from which it would be impossible to recover them.
A good example of the importance of testnets during development processes is the upgrade of the Ethereum network.The Merge successfully completed the transition from the PoW consensus mechanism to the PoS algorithm. Before the release, the developers conducted tests on various testnets : Ropsten , Sepolia, and Goerli .
Differences between mainnet and testnet
Grosso modo , we could draw a dividing line between both concepts based on the real value and utility of the tokens. On a testnet , they don't have; on a mainnet , yes. In this sense, the mainnet is the “final product” after the development phase in its respective testnet .
Actually, this product is not so definitive. Most major project networks are constantly evolving. Developers are always looking for ways to improve the functionality of the mainnet . To do this, they test new applications and code on testnets , which do have an expiration date: they are only for testing.
Understanding these differences and how mainnets and testnets interrelate is vital to doing your research before investing in a project. Similarly, it helps to understand how networks evolve over time.
How is a new mainnet launched?
Launching a mainnet is expensive. Sufficient time and resources are needed for the network to function properly. Among other issues, we must invest in development and promotion. The necessary funds are usually obtained in financing rounds .
This is where initial token offerings come into play, such as initial DEX offerings ( IDOs ), initial exchange offerings (IEOs), or initial coin offerings ( ICOs ). The Ethereum team popularized the latter type in 2014, with ICO launches multiplying to peak levels in 2017.
Saving the basic differences, it is a financing model similar to the IPO of the stock market. In ICOs, developers offer a specific number of project tokens to investors interested in buying at low prices.
ICOs present themselves as opportunities to generate significant profits, but they come with just as considerable risks . In fact, the scams ended up scaring away most of the investors, who saw in the IEOs a safer way.
Beyond the type of financing, the question is through which network the initial offer is made. The developers haven't launched the mainnet yet , but they need one to sell the tokens.
In this sense, Ethereum is one of the most used networks, which has popularized the ERC-20 standard. Many developers have chosen to finance themselves through the sale of ERC-20 tokens, promising that they will appreciate in value with the launch of their own mainnet .
What impact does the launch of a mainnet have on prices?
Are these promises credible? Certainly, the launch of a mainnet has a direct effect on the value of its native token. It seems logical to think that the launch of a network is associated with the rise in the price of its token. After all, a working mainnet is the main success of an entire project in the development phase.
Rise and fall of prices
Markets are not that simple. Logic doesn't always move them, if ever. A study conducted by TokenGazer in 2019 indicates that the price of tokens falls after the launch of its mainnet.
The study analyzed the launch of 11 mainnets between September 2017 and June 2018. Obviously, the time limitation is biased. We could explain the fall based on the downward trend that began after the exponential rise of the crypto market at the end of 2017.
TokenGazer analysts tried to circumvent the bias by ignoring the ratio between the capitalization of each project and the total. They noted that at the time of the launch, the price of the tokens had been rising, reaching its maximum.
The conclusions of the study suggest that “the price of the tokens rises before the launch and falls after it.”
Why does the price drop after the launch of a mainnet?
If the behavior of the market does not explain the drop in prices after the launch of the networks, what variable can make sense of this phenomenon? Analysts believe that a potentially successful network that has not been launched yet may attract investor interest .
These investors could sell massively after the launch, just when the desire to buy increases, especially if it is a successful launch. In these circumstances, the issuance of more tokens by developers could add to the selling pressure.
It is also possible that the mainnet will not live up to expectations . In that case, it is most likely that the expected profit levels will not be achieved. In any case, investing in cryptocurrencies is a huge speculation exercise associated with a very high risk .
إرسال تعليق