Initial stake pool offerings (ISPO) represent one of the new methods for crypto projects to secure funding, originating from the Cardano blockchain ecosystem .
Given Cardano's proof-of-stake ( PoS ) protocol , investors can stake their ADA tokens to support the decentralization of the network and earn rewards in return. This arrangement allows investors to delegate their ADA to a selected pool operator, even if they lack the resources or time to manage their proprietary pool independently.
As the cryptocurrency industry evolves, innovators continue to look for ways to improve the investor experience, support developers, and engage the community. Technological advances drive these innovations, and funding is a key concern for stakeholders.
The ISPO model emerged from various previous fundraising strategies, which were the culmination of efforts to simplify project development financing. In the next section, we explore the main funding methods that paved the way for ISPO, methods that are still relevant and used today by developers, communities and investors.
What is meant by Initial stake pool offering (ISPO)?
The initial staking pool offering introduces a new fundraising approach carried out through Cardano staking pools . In this model, developers set a variable margin, collect rewards, and compensate their delegates with utility tokens.
Curious users may wonder about how staking pools work. Basically, the project team builds a staking pool where ADA holders delegate their tokens. Next, the project team distributes tokens from the project to ADA delegators, while the pool operators retain all or part of the ADA rewards to fund their projects.
The ISPO concept was conceptualized by the SundaeSwap team in April 2021. However, SundaeSwap did not implement this approach thereby delaying the launch of their staking pool twice. In contrast, MELD, a pioneer of non-custodial decentralized finance ( DeFi ) banking protocols , successfully utilized the ISPO model for their project campaign, which started on December 8, 2021.
Recently, MinSwap introduced a new version of the model, called fair stake pool offering (FISO). MinSwap's FISO model uses an algorithm to distribute tokens fairly among delegators.
The FISO fundraising mechanism has gained traction across blockchain ecosystems due to its benefits to project teams, delegators, and communities. Currently, seven DeFi projects on the Cardano blockchain use the ISPO model to distribute their tokens among different ADA delegates.
ISPO example
ISPOs are quickly gaining popularity as the funding model of choice among investors, given their ability to reward networks and project developers while maintaining the security and accessibility of investor funds.
MinSwap, a decentralized exchange ( DEX ) on the Cardano blockchain, focuses on offering users low fees for cryptocurrency exchange. MinSwap uses a Babel fee mechanism to ensure successful trading for all investors, regardless of their funds. Additionally, MinSwap allows users to pay transaction fees using their own tokens, eliminating the need for ADA.
During their ISPO project spanning 20 epochs, MinSwap offered its native token MIN, using the FISO model in 10 staking pools.
Other PoS blockchains have also adopted the ISPO model, including:
Tron: TRON (TRX) investors can stake TRX to receive airdrop tokens.
Polkadot: Polkadot allows staking native tokens DOT or Kusama (KSM) to receive tokens from various projects.
Terra: Investors can stake Luna to receive tokens from Anchor Protocol (ANC), Mirror Protocol (MIR), and others.
Solana: Saber and Sunny Aggregator users can stake Solana SOL to earn native tokens SBR or SUNNY.
Cardano: Mala DEX, Ray Network, MELD, MinSwap, MIRQUR, and SundaeSwap are some of the projects that use the FISO model.
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Also Read:
What is Secure Proof of Stake (SPoS)?
What is Effective Proof-of-Stake? Revealing the Concept and Its Advantages
DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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