A mainnet is an independent and live blockchain that carries out the task of transferring digital currency from senders to receivers via its own network and using its own unique technology and protocol.
What is a mainnet?
In essence, every single blockchain project has what is called a mainnet. A mainnet effectively carries out the task of transferring digital currency from senders to recipients.
A mainnet is working software that is accessible by real users for real crypto transactions. Think of it as a live website or app that you might use to access and use your online banking facilities.
There is usually also a testnet
There is however also a testnet, which is as the name suggests, a test network, something akin to a sandbox in the software world where developers can test their system without using real crypto.
An example of this in everyday use could be Paypal. Paypal is used by millions of people worldwide to process and send money, this is their “mainnet”.
Paypal also provides a sandbox environment for developers where they can test their payment systems before going live, their “testnet”.
In much the same way in the crypto world, the mainnet is like live Paypal where you can send and receive real money and the testnet is like Paypals´ sandbox environment which allows developers to test their systems before going live.
As a prospective crypto investor, it’s well worth understanding where the developers are with the progress of their mainnet.
If we were to look at this from the perspective of investors in the traditional business world the existence or progress of a mainnet could be as follows:
A project without a testnet or a mainnet, the highest level of risk
This is effectively just an idea, a concept without anything tangible to show.
Continuing with the Paypal example above, it´s like say Elon Musk and Peter Thiel talking about this amazing new company they are planning to start that will revolutionise the transfer of money and it’s going to be called Paypal.
In this example the risk factor is at its highest, there is no proof that they can build it, if it will indeed work or whether it will gain popularity (these guys were not rich and well known back then!).
In much the same way in crypto, it´s like a bunch of people talking about a cool new project they want to develop to solve X problem or to disrupt Y but there’s currently nothing to actually see or play with.
There are cases where ICOs (initial coin offerings) take place based purely on concepts and whitepapers, the funding from the resulting ICO is then used to develop the mainnet.
This happened in the early days of the internet, more on that later.
A project with a testnet but no mainnet, less risky but no guarantee it will be popular
In this situation, code has been written and the technology can be demonstrated in a test environment.
This reduces the risk somewhat and investors can be a little more confident about their prospects.
In this situation, the Paypal developers have created the code and a demo system to show prospective investors and partners but have yet to open it to the public for real-world transactions.
In crypto it is very much the same thing, the project code is written and is available for testing on their testnet but is yet to go live.
There is no proof yet of how it will perform in the live crypto world but at least the project team can demonstrate the ability to build the technology and show that transactions will be possible.
A project with a mainnet and a testnet, much less risky, there is proof of use or perhaps a lack of use!
This is now a real project with live users, the rubber has hit the tarmac so to speak.
Prospective investors and partners can see that the project has indeed been built and people are actually using it or of course, the contrary could be true. Nobody or very few people are using it and maybe it’s not a wise investment or viable project after all.
As projects progress, the mainnet and testnet are key, the mainnet is of course where real transactions are happening in the live world and the testnet is being used to test new features or updates before they are deployed to the mainnet.
The real deal versus a prototype. Testnets continue to be important as projects develop as this is where the developers can develop and test new features and updates before making them live on their mainnet.
In summary, just as in the traditional business world and startup companies, it’s important and useful to be able to separate ideas from working products.
The risk-reward factors can be quite different.
So, as a potential crypto investor, take a look into where they are with the progress of their mainnet.
Naturally, as the risk reduces so does the opportunity for huge gains. Getting in right at the beginning before the mainnet exists could deliver the biggest gains but also big losses.
On the other hand, investing in a project with a working mainnet could be enough to give you the confidence to invest. Currently, the crypto world is in its infancy and the potential opportunities are huge, it is indeed still possible to raise money based just on an idea.
Well, at the end of the ‘90s at the beginning of the internet boom, just having a dotcom at the end of a name could be enough to raise huge amounts of money.
Nowadays as the internet has matured it’s very difficult if not virtually impossible to raise large amounts of money based on just a domain name or idea.
No doubt, crypto will follow the same path in the years to come. But, for now, at least, it’s all possible and huge fortunes can still very much be made or lost in crypto land whether a mainnet yet exists or is a brilliant idea waiting to happen.