Testnet serves a variety of vital functions that include: 1) Constant Development
Blockchain technology is still in the infancy stages and a tremendous amount of testing and development is needed to enable mainstream adoption and usage. For instance, one of the main issues that are being addressed in the blockchain community is scalability . Rigorous research and development are being undertaken by a wide range of projects to enhance a blockchain’s capability of processing more transactions . In order to constantly enhance a blockchain’s capabilities, numerous testing on smart contract functionality , transactions, and the mining process must be undertaken. The testnet serves as a simulation on how the actual blockchain protocol (mainnet) would work under real-world conditions. 2) Prevent Disruption
A testnet allows testers and application developers to experiment on the features and functions of the protocol in a separate environment, without worrying about disrupting the main blockchain.
Making the tests on the mainnet would be a nightmare since the complex interactions between components in the protocol could compromise the network or break the main chain. This would cause massive disruptions to the blockchain and could undermine the protocol .
It is thus a common practice for projects to run a prototype on a testnet first, in order to iron out the technical details and ensure that everything is in order. 3) Free Testing
For blockchains that allow smart contract functionality, native coins are required to be spent in order to execute smart contract transactions . For instance, Ether (ETH) is needed to pay for computations that occur in the Ethereum blockchain (Similarly called ‘ Ethereum Virtual Machine ’). Testnets provide a testing ground for developers who are keen to create applications on the blockchain or test out certain functionalities without spending real currencies . It would be extremely expensive for developers to test out their application features or run experiments on the mainnet, since they would then need to buy real-value coins in bulk.
(See also: Public Vs Private Blockchain: What’s The Difference? ) Mainnet vs Testnet in Action
In order to get a better grasp of the differences between mainnet and testnet, let us take a look at Ethereum blockchain . Ethereum is an open-source , decentralized platform that facilitates smart contract functionality and allows for the creation of decentralized applications (dApps) to run securely without any control from intermediaries or third party .
Think of Bitcoin as a single app in your smartphone that is great in what it does, which is to facilitate value efficiently (digital cash).
Ethereum on the other hand is like the app store, which enables anyone to create any kind of mobile applications and can be downloaded and used by anyone. Blockchain platforms like Ethereum expand the functionality of blockchain technology, while Bitcoin is just a single representation of this revolutionary technology.
A mainnet and a testnet are two separate networks that operate independently from each other. Here’s an illustration from the context of Ethereum: × Embed this image on your site!
Ropsten is the most popular public testnet for Ethereum and is often used as a testing network for developers creating their own dApps on the Ethereum blockchain .
Using Ropsten network, DApp developers can experiment on the functionalities on the dApp and also avoid using valuable ETH that is needed for transaction fees and smart contract deployment. Once they’re confident that their dApps work and testing is complete, they can confidently deploy their dApp on the main Ethereum network!
What sets a mainnet and testnet apart are the following factors: Network ID: A network ID is just an identifier for a network, similar to your ID card that represents your identity. If a new node wants to join the actual Ethereum blockchain itself), they will need to join the mainnet which has a network ID of 1. If they’re keen on joining the testnet instead, they can join the Ropsten testnet which is identified using a network ID of 3.
Genesis Block: This refers to the very first block in the blockchain, which represents the starting point. Since both the mainnet and tesnet are different networks, they have a different genesis block. However, the content of the genesis block can be similar.
(Read more: Guide to Ethereum: What is Gas, Gas Limit and Gas Price? ) Upgrades
From time to time, projects would undergo changes to enhance the capabilities of the blockchain.
This is akin to the software updates of your smartphones that has solved previous issues or bugs associated with the previous software versions. Although we mentioned early on that mainnets are the ‘ end product ’, it may not be the ‘ final product ’.
The blockchain can undergo updates or revisions to a particular functionality, depending on the need of doing so by the developers and the greater community. In order to upgrade the blockchain, a hardfork is required. Here is a detailed guide that explains the complex concept of hard forks .
(See more: Guide to Forks: Everything You Need to Know About Forks, Hard Fork and Soft Fork ) Mainnet Swap
When a project is starting out, it will issue their tokens on other blockchains such as Ethereum or NEO to raise funds. Once they have developed their own blockchain, they will need to migrate the existing tokens issued on other blockchains to the project’s native blockchain (mainnet).
This is common practice for new projects in the ICO phase .
This process is called a mainnet swap or a token swap, involving the exchange of one coin for another coin on a one-to-one ratio. The old coin that is issued on another blockchain is discarded and a new coin is issued on the new native blockchain that has been developed and launched by the project. Mainnet swaps usually occur in the following way: Registration & Auditing: Coin holders are expected to register their coin through the project’s developers, who will then accredit these coins through a supported digital wallet . At the scheduled mainnet swap date, the old tokens are burned while the new, official coins will replace the old coins in the same wallet . Cryptocurrency Exchange Support: Once the announcement is made, coin holders are invited to keep their coins in the cryptocurrency exchange that supports the swapping process. At the scheduled swap date, the exchange will handle the auditing, accrediting and exchange of the older coin for the newer ones.
(Read also: Breaking: 88% of Crypto Exchanges are Manipulating Trading Volume to ‘Boost’ Rankings ) Effects of Mainnet on Price
The release of a project’s mainnet can cause tremendous excitement in the community, which could affect the coin’s price. This could also contribute to an increase in volatility of the coin’s prices during that period. Let’s take a look at several instances where a mainnet launch coincided with spikes in prices. Golem (GNT) × Embed this image on your site!
Golem is a project that is focused on creating a decentralized marketplace for sharing computing power. They released their mainnet – called Brass – on April 2018. Here’s a look at how prices reacted to the launch of the mainnet. × Embed this image on your site!
Golem announced on mid-February that their mainnet would be ready by the end of March to early April.
The duration leading up to the mainnet launch saw GNT’s prices consolidating with relatively low volatility , as indicated by a technical analysis indicator called the Relative Volatility Index (RVI) at the bottom of the chart. When Golem officially launched their mainnet on April 10, prices started to soar tremendously, going from $0.20 to $0.60 within a span of 3 days. That’s a three-fold increase in prices ! We can also see that there is an increase in volatility after the mainnet launch, which means that there is an increase in risk during that period. .