Cryptocurrency testnet: the blockchain sandbox

Cryptocurrency testnet: what it is

Every blockchain project goes through several stages before launch: starting with concept development and ending with the release of a working prototype (MVP). One of these stages is the testnet.

What is a cryptocurrency testnet?

Before releasing a working version of a blockchain, known as the main network or mainnet, developers first present its test version to the public — the cryptocurrency testnet.

A cryptocurrency testnet is conducted to verify the functionality of both the protocol as a whole and its individual features before release. In this way, developers aim to minimize the risks of potential failures after the launch of the main version.

A cryptocurrency testnet is essentially a "sandbox" in which developers and users can comprehensively test the network's performance without the risk of real damage.

The term "cryptocurrency testnet" refers to a test network for a cryptocurrency. Test networks are an integral part of the crypto project development process, as they provide a safe environment for experimentation.

In a test network, as in a mainnet, there are tokens, but they have no real value, so there is no risk of actual financial loss. Test tokens for testing network operations can be obtained for free using extraordinary cryptocurrency faucets.

Cryptocurrency testnets can be conducted not only before the mainnet launch, but also in parallel with the operation of the main network, for example, if developers plan to release an update. The Dencun and Fusaka updates were first tested on testnets before being implemented on the Ethereum mainnet.

There are also specialized test networks, such as Sepolia, designed for testing individual applications and protocols built on Ethereum, including layer-two solutions. For example, the Sepolia test network was used for early testing of the well-known cross-chain protocol LayerZero.

Types of cryptocurrency testnets

There are two main types of cryptocurrency testnets:

Incentivised, where test participants are later rewarded with real tokens after the mainnet launch;
Non-Incentivised, which do not initially offer any rewards for participating in the cryptocurrency testnet.

There are also two ways to participate in an incentivised or reward-based cryptocurrency testnet. The most straightforward approach is to test the core functions of the blockchain using wallets and decentralized applications (dApps). For standard testing, basic knowledge of wallets and Web3 applications is sufficient; however, the rewards are usually not very large.

Well-known examples of incentivised cryptocurrency testnets include Aptos, Sui, and Solana. For instance, active participants in the Solana testnet received up to $3,500 in SOL tokens.

The second and more complex way to participate in a cryptocurrency testnet is running your own node* and performing the role of a transaction validator* in the test network. This approach requires advanced technical knowledge and even programming skills, but it allows participants to receive higher rewards for participating in a cryptocurrency testnet.

* Node — a computer or server connected to a blockchain network that stores a copy of the blockchain, transmits data to other network participants, and takes part in transaction processing.

* Validator — a participant in a blockchain network who verifies the correctness of transactions and blocks, and also participates in achieving blockchain consensus, receiving rewards for this work.

For example, participants in the Avalanche testnet who operated their own nodes could receive rewards worth up to $286,000, based on the peak price of the native AVAX token. Validators in the Solana testnet were also eligible for rewards, which could amount to tens of thousands of dollars.

However, participation in a testnet is not always rewarded with free tokens. Some crypto projects provide active participants with large allocations (maximum amounts)* to purchase tokens before exchange listings.

* Allocation — a pre-defined limit of tokens or funds that a project allocates to a user for purchasing tokens at an early stage, usually before exchange listings.

For example, each qualifying node holder during the Moonbeam testnet was granted an allocation of up to $2,500 upon completion of testing. If investors had used this allocation and held the tokens for some time, they could later have sold them for up to $250,000.

Is it worth participating in a cryptocurrency testnet?

A cryptocurrency testnet has several advantages for participants:

Learning the principles of blockchain networks, transactions, and wallets without the risk of losing real funds;
No risk of losing investments when interacting with decentralized applications.
The opportunity to receive rewards for activity if a real token is issued upon mainnet launch, in some cases, even without investments or with minimal investments.
A cryptocurrency testnet also offers the opportunity to try yourself as a network validator without the risk of real losses.

However, cryptocurrency testnets also have disadvantages:

No guarantee of rewards: users risk wasting time if they initially expect compensation for participating in a cryptocurrency testnet.
The project may shut down before the mainnet launch.
Even with a confirmed airdrop*, receiving rewards is not guaranteed, as the conditions for claiming* tokens are not known in advance.

* Airdrop — the free distribution of tokens to users for meeting certain conditions, such as participating in a cryptocurrency testnet or other activity within the project ecosystem.

* Claim — the process of receiving (requesting and withdrawing) accrued tokens to a user's wallet after meeting the conditions of an airdrop or incentivised testnet.