Initial Stake Pool Offering, also known as ISPO or ISO is a new way for helping startup projects raise funds in the PoS (proof-of-stake) ecosystem, particularly, in Cardano.
ISPO is a simple and no-risk method for investors to support a startup by delegating ADA to the startup’s stake pool.
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How Does an ISPO/ISO Work?
Before you can understand how an ISPO works, you need to have a rough idea of how PoS (proof-of-stake) works.
To put it simply, this is how PoS (proof-of-stake) works:
- The more delegators or ADA you have in your node, the higher the chances of validating a transaction.
- The more transactions you validate, the more ADA rewards you can earn.
- The more rewards you earn, the more you can fund your startup project.
An ISPO works this way:
- You, as a startup, can create a node to allow delegators an opportunity to stake their ADA to your staking pool. (You can get pool operators to host your node for you)
- You can earn larger ADA rewards to fund your startup growth since you now have more delegators staking to your pool. Remember, the more delegators, the more rewards you earn.
- Instead of giving ADA rewards back to your delegators, you reward them with your own unique token which may or may not rise in proportion to ADA’s value.
That, in essence, is how an ISPO works.
To recap:
- Create a Cardano node
- Invite investors/delegators to your staking pool
- Earn ADA rewards to fund your startup
- Reward investors/delegators your own token instead of ADA
The Risk of ISPO for Delegators
Technically speaking, this is a no-risk investment even if the startup fails since ADA holders will not lose their ADA by delegating to a stake pool.
The most an investor could lose is the average 5% annual returns if they were to delegate to a normal Cardano stake pool.
How to Participate in an Initial Stake Pool Offering (ISPO)
- Purchase ADA on an Exchange such as Binance or Coinbase
- Download a Cardano wallet such as Daedalus and Yoroi (NAMI wallet users cannot participate in ISPO at the time of writing this)
- Transfer your ADA from the exchange to your wallet
- Delegate your ADA to an ISPO staking pool in your Cardano wallet (see below for several ISPO launches)
- Earn project’s token every epoch or every 5 days
SundaeSwap ISO vs MELD ISPO
The Initial Stake Pool offering model was first introduced by the SundaeSwap community in early 2021. It was initially named ISO.
However, SundaeSwap ISO was delayed and MELD renamed the model to ISPO. SundaeSwap was the first to come out with the model; MELD was the first to execute.
Nevertheless, ISPO and ISO are basically the same things.
Top 3 Most Anticipated Initial Stake Pool Offering in 2021
1. MELD ISPO
Start Date: | 1 July to 27 October 2021 |
End Date: | 8 December 2021 |
Reward supply: | 20% of the total supply |
Locked Period: | Until 8 December 2021 |
There is a total of 10 MELD stake pools. You can earn 100% MELD tokens or 50% MELD and 50% ADA depending on which stake pool you delegate to.
For more information, check out MELD’s ISPO details and ISPO dashboard.
Update 27 October 2021: MELD ISPO is currently full.
2. SundaeSwap ISO
Date: | Q4 2021 |
Duration: | 5 Epochs (25 days) |
Reward supply: | 1% each epoch (5% of the total supply to ISO participants) |
Locked period: | None. You are free to withdraw your ADA at any time |
SundaeSwap will also be implementing a Whale Control mechanism by reducing rewards to large ADA holders.
This makes the ISO a more decentralized and fairer launch that will ultimately benefit the majority of smaller ADA holders.
For more information on SundaeSwap ISO, read this article.
3. Empowa ISPO
Start date: | 7 October 2021 |
End date: | When 2% of token supply has been fully allocated |
Reward Supply: | 4,000,000 EMP tokens (2% of the total supply) |
Locked period: | You are free to redelegate your ADA at any time |
The duration of Empowa’s ISPO is roughly around 20 epochs based on the amount of delegated ADA in their stake pools: EMP1 and EMP2.
Holders of Empowa’s Founding Community NFT have a higher reward in their ISPO. For more information, read their FAQs and ISPO details.
The Advantages of Initial Stake Pool Offering
- You can use your current ADA to get access to ISPO tokens. In other words, you can get free tokens just by holding Cardano
- It is secure and easy to participate in an ISPO. All you need is a Cardano wallet such as Daedalus or Yoroi and you can stake to an ISPO pool just like you delegate to any Cardano pool
- Little-to-no risk. Even if the project fails, you do not lose your initial ADA capital
- Most ISPOs do not lock your ADA. You are free to redelegate or withdraw your ADA at any time
The Disadvantages of Initial Stake Pool Offering
The purpose of ISPO is to raise funds and hopefully build a community around the project.
However, with a no-risk model like an ISPO, investors/delegators may:
- Move on to the next project as soon as they feel they earned enough tokens
- Sell their tokens as soon as the project hits the exchanges to make a quick buck
No-risk may equal no loyalty in certain endeavors. But I could be totally wrong… I hope I am wrong.
Conclusion
An ISPO is an excellent way for new projects to raise funds and for investors to earn extra tokens without risking their ADA.
ISPO is a novelty in Crypto but I believe it will soon be the norm for startups launching in the PoS ecosystem.
Are you a fan of the ISPO model? If so, why? Let me know in the comment section below.