When it comes to determining the success of a project, there are a few crucial components that one will need. Arguably the most important of these factors is technology itself. It is true that investors do not have to know exactly about the technical details of a project. However, it is still very important to at least see some progress in this particular area. ‘Mainnets’ are one of these important aspects when it comes to valuing a cryptocurrency’s real-world implementation.
Another related term is ‘testnets’, which is something that many would mistake for being the same as mainnets. Contrary to popular belief, these terms are distinct and have different roles. This article will not only clear up this confusion but will also dive into what mainnets are and what their significance is.
What is it?
The term ‘mainnet’ refers to a blockchain that carries out the general functionality of the transference of digital currency. Specifically, from senders to recipients. It is both the original and main network for Bitcoin transactions, which is where Sats (satoshis) have real economic value. It describes the point at which a blockchain protocol has achieved full development and deployment. This means that there is a broadcast, verification, and recording of the cryptocurrency on a blockchain (i.e. distributed ledger technology).
The closely related term ‘mainnet launch’ is a defining period for a blockchain project. To elaborate, it is when it will open to the public and commence mass adaptation. Whenever a blockchain project team is set to distribute their product, they will carry out a ‘mainnet launch’. It will effectively put the product into actual production and operations.
Testnet: How is it different from the mainnet?
To reiterate, while mainnet and testnet are seen as fairly interchangeable, they are both different. The easiest way to spot the differences is, of course, in their names: “test” and “main.”
The testnet – a shorter version of ‘test network’ – is an exact replica of the original blockchain. It consists of the same technology, software, and functionalities. The primary (and only) difference is that transactions on the testnet are simulations; in other words, they are fake. Moreover, the coins in the testnet do not possess any real value beyond the testnet environment.
The best way to look at a testnet is as a sandbox environment for developers. It allows them to experiment and test-run the functionality of a project that is claimed in the white paper. Blockchain developers are able to execute an array of tests in a safe, separate network without needing to worry about potentially damaging the main blockchain.
As you can see, a mainnet is a different concept from a testnet. The latter is more of a method of experimentation than anything else. The best way to understand this is that testnets are essentially prototypes. Their basic purpose is to demonstrate the potential capabilities of a project. Mainnets, on the other hand, are the end product itself that’s available for the public to use. With that in mind, similar to testnets or code frameworks, mainnets are changeable. Specifically, whenever teams behind projects or cryptocurrency open-source communities believe that there needs to be updates and alterations.
The conventional mainnet will serve a wide variety of vital functions in order to work properly. Among them are two notable factors: Proof of development and Credibility.
Factor #1 – Proof of development
The thing about mainnets is that they are pieces of verifiable proof. They prove that projects are developing a fully functional and working blockchain where transactions can occur. By having a mainnet, it’s basically a tell-tale sign that the project is live and is also in technical progress.
In addition, a live mainnet will put the blockchain’s functionalities and capabilities to the test. This is because the public will be able to participate in the network. Moreover, any malfunction that occurs could potentially compromise the inner workings of the blockchain. So, launching the mainnet will take an excessive amount of resources and development to ensure the successful operation of every component. On top of that, a mainnet serves as an active proof that the project is carrying out its vision correctly.
Factor #2 – Credibility
A project possessing a mainnet will undoubtedly have more credibility than a project without one. A mainnet is a functioning protocol, therefore all transactions are live. Furthermore, participants are able to transact with one another with the native coins belonging to the blockchain. Parties in the community that show interest often choose to become a participating node and will download the protocol software.
Let’s assume that the blockchain is not only open-source but is also free for anyone to engage in. In this case, the underlying codes of the blockchain will be visible to the public. Moreover, it is possible for participants to highlight any notable concerns or issues. The main point to take from this is that the existence of a mainnet enables the creation of a live ecosystem. One consisting of participants and facilitates the occurrence of both real interaction and transactions with full transparency.
Conversely, without a mainnet, the project is purely conceptual or ‘theoretical’. It has no trace of a working product that participants can test out. This is especially important to keep in mind when it comes to evaluating an ICO project that’s raising money. It is comparatively much more difficult to judge projects without a mainnet or even a testnet.
So, should I invest in a project that doesn’t have it?
In the grand scheme of things, it seems ideal for all projects to have a mainnet released at the time of ICO. However, in actuality, this is rarely the case. As a matter of fact, plenty of projects don’t even have a testnet during the ICO period. When it comes to fundraising, many blockchain projects are able to raise sufficient capital. Specifically, drawing from potential use cases, technical concepts, and an array of other factors like the project’s team and partnerships. Most of the time, teams utilize a lot of the funds from their ICOs. They do so for the purpose of building out the testnet and mainnet versions of their projects.
So, the real question here is how exactly does a mainnet help an investor? Alternatively, how does a mainnet help the user of a particular cryptocurrency? From the perspective of an investor, the mainnet is concrete proof that a project is making substantial technical progress.
Suppose that you do not wish to invest in a project prior to the mainnet launch. In this particular case, it is important to remember how a mainnet can have a positive – or even negative – impact on the value of a cryptocurrency. There are a lot of investors who choose to purchase cryptocurrencies in advance of a mainnet. This is because a successful launch can occasionally result in a significant value increase.
Mainnets are just as important as testnets. Their purpose is to either prove or disprove a project’s capability of taking a blockchain project to implementation. Admittedly, the initial release of a mainnet may not always provide solid insight into a project’s overall progress. However, it is an essential technical facet to take into consideration when you are investing in cryptocurrencies.
Given past cases, it is rather difficult to determine what effect mainnets have on short-term price changes. That being said, they are able to pinpoint the potential for better functionality.