What Is a Mainnet in Cryptocurrency?

Understanding Cryptocurrency Networks and Terminology

Getting to grips with jargon is an important part of learning about any highly technical field. Finance and technology are both notorious for their use of highly specialized language. Cryptocurrency, as an emerging financial technology combining both domains, presents a unique challenge with its specialized terminology.

Crypto novices might soon encounter terms like "mainnet" and "testnet" after learning foundational concepts such as "blockchain" and "distributed ledger." These two words are abbreviations for "main network" and "test network," representing critical infrastructure components in the cryptocurrency ecosystem. Understanding these concepts is essential for anyone looking to navigate the crypto space effectively.

What Is a Mainnet in Cryptocurrency?

Normally, when someone refers to the Bitcoin network, what they are actually referring to is Bitcoin's mainnet. They are referring to Bitcoin's fully developed, live blockchain network that is actively broadcasting, verifying, and recording transactions on a global scale. A mainnet is a blockchain network that has been launched, is fully operational, and is actively processing transactions using distributed ledger technology.

The mainnet represents the production environment where real value is exchanged and where the cryptocurrency's native tokens have actual market value. It is the culmination of extensive development, testing, and refinement efforts by the project's development team. When a mainnet goes live, it signifies that the project has moved from theoretical concept to practical implementation.

What Are the Characteristics of a Mainnet?

A mainnet is an independent blockchain that runs by itself, using its own technology and its own native cryptocurrency. This independence is a key distinguishing feature of major blockchain projects. An ERC-20 cryptocurrency token such as Shiba Inu does not have a mainnet of its own, given that it is traded on top of the Ethereum network and relies on Ethereum's infrastructure for transaction processing.

By contrast, Dogecoin has its own independent blockchain, based on its own technology, and thus has its own mainnet. This means Dogecoin operates autonomously with its own network of nodes, consensus mechanism, and block validation process. The distinction between having an independent mainnet versus operating as a token on another blockchain has significant implications for a project's autonomy, scalability, and governance.

Similarly, fully functional and live decentralized applications built on top of the Ethereum network do not have their own mainnet. Rather, they operate on top of Ethereum's mainnet, leveraging its security and infrastructure. The crypto assets trading on a mainnet like Ethereum are designed to have real-world value and utility, enabling various use cases from financial transactions to smart contract execution.

Why Do We Need a Mainnet?

The launch of a mainnet is what brings crypto technology from the stage of intellectual theorizing to practical real-world application. Mainnets are the foundation upon which the entire emergent, decentralized crypto financial system is built. Without the launch of mainnets, the cryptocurrency revolution would have remained purely theoretical, unable to demonstrate its transformative potential.

Pseudo-anonymous developer Satoshi Nakamoto pioneered this transition in early 2009 with the launch of the Bitcoin mainnet. The launch came just under a year after Nakamoto had released the first crypto whitepaper outlining the theory behind how Bitcoin would function as a peer-to-peer electronic cash system. The Litecoin mainnet launched in 2011 and the Dogecoin mainnet in 2013, each introducing variations on Bitcoin's original design. Ethereum's mainnet, the first to support programmable smart contracts, was launched in 2015, opening up entirely new possibilities for blockchain applications.

Each mainnet launch represented a significant milestone in cryptocurrency evolution, demonstrating that decentralized networks could operate reliably at scale and provide real value to users worldwide.

Importance of Testnets

Testnets are blockchains that run parallel to and are almost identical to the mainnet in terms of technical architecture and functionality. Unlike a mainnet, users are not trading with tokens that have tangible real-world value as they do on a mainnet. Instead, testnet tokens are freely distributed and carry no monetary value, making them ideal for experimentation.

Testnets exist so that cryptocurrency developers can test and refine their code in something akin to a sandbox environment, where mistakes have no financial consequences. If development and testing were taking place directly on the mainnet, there would be substantial risk of costly disruptions, security vulnerabilities, and network instability. Additionally, developers would incur transaction fees whilst adding to network congestion and potentially affecting other users. Testnets exist to avoid such complications and provide a safe space for innovation.

Tokens cannot be sent between a testnet and mainnet due to their fundamentally different purposes and value propositions. An attempt to do so essentially burns the coins by sending them to an unrecoverable address, as the networks operate independently despite their technical similarities.

A compelling example of the importance of testnets in cryptocurrency development is the Ethereum Merge. The Merge refers to the network's transition from a proof-of-work consensus mechanism to proof-of-stake, which occurred in 2022. This represented one of the most significant technical upgrades in cryptocurrency history.

Prior to implementing the mainnet Merge, Ethereum developers conducted three separate major rehearsals on public Ethereum testnets to identify and resolve potential issues. The Ropsten, Sepolia, and Goerli testnets all successfully went through the upgrade over several months in 2022, allowing developers to refine the process and build confidence. Their success enabled the mainnet Merge to subsequently take place with minimal disruption.

Mainnet vs. Testnet: What Are the Differences?

A mainnet is the blockchain that provides all the real-world utility and value proposition of a cryptocurrency project. The digital assets trading on the mainnet have genuine market value and can be bought, sold, and used for various purposes. It is the live blockchain that is actually being used by members of the public for real transactions and applications. It is the "finished" product of cryptocurrency development, representing the culmination of design, testing, and refinement efforts.

Testnets, on the other hand, exist solely for developers looking to enhance and improve the mainnet without risk. Testnets allow developers to test out their new code, experiment with protocol changes, and validate applications before deploying them to the production environment where real value is at stake.

The digital assets trading on testnets are worthless in monetary terms, removing the financial risk that development errors might otherwise incur. This allows for bold experimentation and rapid iteration without fear of causing financial losses to users or damaging the project's reputation.

The relationship between mainnets and testnets is symbiotic: testnets enable safe innovation that ultimately improves mainnet functionality, while mainnets provide the real-world validation and value that justify continued development efforts.

Launching a New Cryptocurrency Mainnet: The Process

Releasing a new cryptocurrency mainnet requires substantial resources and careful planning. These resources include funding for product development, community building, security audits, marketing, and ongoing maintenance. As a result, before a mainnet launch, a cryptocurrency development team will often seek to raise funds through various mechanisms to support their development roadmap.

This fundraising is usually accomplished via an Initial Coin Offering (ICO) or Initial Exchange Offering (IEO). In an ICO, crypto developers will sell blockchain-based tokens to early investors, who can then trade these tokens among themselves on various platforms. While the process differs significantly from traditional finance, the general concept parallels an Initial Public Offering (IPO), where a company raises capital directly from public markets for the first time.

Ethereum popularized the ICO model when it conducted its own fundraising in 2014, demonstrating the viability of this approach for blockchain projects. There was subsequently a boom in ICOs during 2017, with hundreds of projects raising funds through this mechanism. IEOs represent an evolution of the ICO model, where a major exchange platform takes the lead regarding the sale and initial distribution of tokens, providing additional credibility and infrastructure.

Given that a team of cryptocurrency developers hasn't yet launched their mainnet but still wants to sell tokens and raise funds, they might choose to issue their tokens on top of an existing, established mainnet. For example, Ethereum supports the creation and trade of alternative tokens through standards such as ERC-20, which defines a common interface for fungible tokens.

A development team hoping to eventually release their own independent mainnet could raise funds by selling ERC-20 tokens with the promise that these tokens would have future utility and value when they launch their own mainnet. Once sufficient funding is secured, development completed, testing validated, and community excitement built, developers are ready to launch their mainnet and transition to full independence.

Do Mainnet Launches Have an Impact on Crypto Prices?

One might reasonably assume that a successful mainnet launch would always be bullish for a cryptocurrency's price. After all, a successful mainnet launch signifies to investors that the project is progressing from concept to reality, demonstrating technical capability and commitment. However, as is consistently the case with financial markets, the relationship between events and price movements is rarely straightforward.

Crypto Prices Rise Before Mainnet Launch and Fall After

According to research conducted by cryptocurrency research house TokenGazer in 2019, which analyzed 11 mainnet launches between September 2017 and June 2018, token prices generally "increased before the mainnet launch and dropped after it." This pattern reflects the complex dynamics of cryptocurrency markets, where expectations and reality often diverge. Much of the observed price decline can be attributed to a broader downtrend in the cryptocurrency market during that period.

The research found that, for most tokens studied, market capitalization was highest at the time of the mainnet launch. This means market cap increased substantially in the run-up to the launch and then decreased afterwards, suggesting a "buy the rumor, sell the news" dynamic common in speculative markets.

Why Might Prices Fall After a Mainnet Launch?

Cryptocurrency analysts have identified several potential reasons why a mainnet launch might not immediately boost a cryptocurrency's price, despite representing a significant technical milestone. A successful mainnet launch could encourage early investors to realize profits, as they may view the launch as validation of their initial investment thesis and an opportune time to exit or reduce their positions.

A successful mainnet launch might also unlock tokens previously held by members of the development team or early investors subject to vesting schedules, potentially adding a further source of selling pressure to the market. This increased token supply can temporarily overwhelm demand.

Meanwhile, the mainnet's actual performance metrics might not live up to pre-launch expectations and promises. For instance, a mainnet may be unable to deliver transaction throughput (TPS) rates as high as initially projected, or may experience technical issues during the critical launch period. User adoption may also be slower than anticipated, leading to disappointment among investors who expected immediate mainstream usage.

Either way, investing in speculative cryptocurrencies ahead of mainnet release remains a highly risky endeavor that requires careful due diligence, realistic expectations, and risk management strategies. The technical success of a mainnet launch does not guarantee immediate price appreciation.

Mainnets Are a Huge Milestone for a Project

Understanding the difference between a mainnet and testnet, and how the two are fundamentally interlinked, is a crucial foundation for investors and users wanting to comprehend how a cryptocurrency network evolves over time. This knowledge enables more informed decision-making about project maturity and investment timing.

Testnets serve as a proving ground for the development team's ideas and innovations, and can greatly help in refining the protocol before it faces the scrutiny of real-world usage with actual value at stake. They allow for experimentation, bug discovery, and performance optimization in a consequence-free environment.

Mainnets represent a major milestone for any blockchain project, signifying that the protocol has been developed sufficiently for release to the general public with actual tangible value being utilized. The mainnet launch demonstrates technical capability, team commitment, and readiness for real-world adoption. However, it also marks the beginning of a new phase where the project must prove its value proposition in a competitive market and deliver on its promises to users and investors.

FAQ

什么是加密货币中的主网(Mainnet)？

A mainnet is the live blockchain network where actual cryptocurrency transactions occur. Unlike testnets used for development, the mainnet represents a fully operational, independent blockchain with its own native token. It ensures transaction security, authenticity, and maintains a permanent record of all verified transactions on the network.

What is the difference between Mainnet and Testnet?

Mainnet is the live blockchain where real transactions occur and have actual value. Testnet is a separate environment for developers to test new features without risking real funds. Testnet transactions have no real-world value.

What does mainnet launch of a blockchain project mean?

Mainnet launch means a blockchain project officially goes live, enabling users to perform real operations like sending tokens and participating in consensus mechanisms. It marks the project reaching a production-ready stage for large-scale commercial use.

How to determine if a cryptocurrency project has launched its mainnet?

Check the official project website, blockchain explorers, and community announcements for mainnet launch confirmation. Mainnet activation typically shows native token transactions, ecosystem activity, and official statements from the project team confirming the mainnet is live.

Why is a testnet phase needed before mainnet launch?

Testnet allows developers to identify and fix bugs at scale before mainnet launch, ensuring the network operates smoothly and securely when it goes live, preventing critical failures and protecting user assets.

What is the difference between trading on mainnet and testnet?

Mainnet transactions have real value and are permanently recorded on blockchain, while testnet transactions are for testing only with no actual value. They use separate networks and storage systems independently.