Tenebrix, a lesson in premining.

In today's Tales from the Cryptocrypt we're going back to 2011 to look at one of the first Bitcoin forks and the first cryptocurrency to use Scrypt as a hashing function.

We heard you like mining, so we put a miner on your miner, so you can mine while you mine. - Lolcust on Bitcointalk ANN thread

September 2011 saw the introduction of the first Scrypt PoW cryptocurrency called Tenebrix. The Scrypt algorithm, made famous by its adoption by Litecoin shortly afterwards, is a cryptographic hash function designed to counter the hardware advantages that large GPU mining operations had over home computers. Scrypt (pronounced es-crypt) is a CPU and memory intensive algorithm and thus could only be mined efficiently by a CPU. The aim of this coin was to eliminate GPU mining and discourage FPGA and ASIC mining allowing for as fair a distribution of mined coins and a more distributed and robust network. At a time when mining Bitcoins on a home PC was becoming unprofitable for most people this seemed like a great innovation, it also allowed existing mining operations to make use of their more or less idle CPUs while at the same time opening up the pools to regular folks who wanted to use their desktops to mine. Perhaps ironically the lead developer of Tenebrix was ArtForz, reported to be one of the first, if not the first person to mine Bitcoin using a GPU using his own mining program and the first person to set up his own mining farm “Artfarm” consisting of 24 Radeon 5970s and at one point made up to 25% of the hashing power on the entire Bitcoin network. ArtForz was already a known developer in the crypto community, an early authority on Bitcoin mining and one of the few people can be said to have shaped the cryptocurrency environment drastically by both beginning the GPU arms race, and trying to end it by implementing GPU resistant hash functions as part of mining. The dev team saw the forthcoming GPU arms race and attempted to offset it by introducing CPU mining so that new adopters to cryptocurrencies would not be put off by the inability to mine without first building expensive mining rigs. A side effect of this is strengthening the network and less concentration of hashing power coming from large mining farms. The logic was that if more people could mine it, more people would use it. In Lolcust's own words “By not having the "must have a card this ossom to really mine" effect it has different adoption dynamics “

Shortly after Tenebrix's release it was observed by a Bitcointalk user who actually bothered to inspect the Tenebrix blockchain that the genesis block, the first block in the chain that is mined by the dev before release into the wild contained 7,700,000 coins. While most coins released around that period had a small premine to go towards faucets, promotion and various bounties; the size of the Tenebrix premine caused significant outrage among the community due to its relative size compared to the total amount of coins available. Tenebrix's chain released 25 coins per block initially after the genesis block and were released roughly every 5 minutes, so at at a rate of 7200 coins being minted per day it would have take the entire network almost 3 years to mint an equal amount of coins that the developers held since block 1. Immediately accusations were leveled against the anonymous devs and many of the community probably rightfully branded the coin as scam. The devs claimed this premine was to fund bounties, to give away and to promote the coin but the vast majority saw this as a quick cash grab on the part of the devs, a scam or just plain greed.

Plans were swiftly put underway by members of the community to fork (copy) the Tenebrix project without the controversial premine and release it. Multiple users in the Announcement thread on Bitcointalk suggested a fork of Tenebrix with better distribution that still used utilised Scrypt hashing. This release soon came in the form of Fairbrix, headed by developer Charlie Lee (coblee), who shortly after went on to develop and release Litecoin, a further fork of Tenebrix that has achieved huge popularity and widespread use and is today one of the most well known and traded cryptocurrencies.
Tenebrix after this soon faded away, at a time where exchanges were not commonplace there was nowhere to trade it, the bitcointalk community were highly skeptical of the coin and those who had heard of it were aware of the huge premine sitting in a privately controlled wallet. Premining became the new Sadim touch in the cryptosphere, for months, if not years afterwards this would be one of the first questions asked in any new announcement thread for a new coin. If a coin was released and it had a premine, many would refuse to trade or mine it.

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