Cardano (ADA) is the brainchild of Charles Hoskinson who co-founded Ethereum. The Proof-Of-Stake (PoS) blockchain was founded in 2017 and bills itself as an open-source blockchain where developers and innovators can bring about global change. The blockchain has a token, ADA which is used to process transactions and pay for services. ADA holders are also eligible to vote on decisions affecting the Cardano blockchain.
Cardano launched its ‘Alonzo’ hard fork in September 2021. This gave the blockchain smart contract functionality and NFT capabilities. The native token, ADA has a maximum supply capped at 45 billion with a circulating supply of 34 billion.
New Ways to Invest
Initial Stake Pool Offerings (ISPOs)
There are several ways for a crypto project to raise funds and Initial Stake Pool Offerings (ISPOs) are one of them. ISPOs allow protocols on Cardano to create staking pools for holders of ADA. The protocol sets a margin, collects rewards, and stakers are paid in the ISPO token, ADA, or in some cases both. This allows the protocol to raise funds without altering the decentralized nature of the blockchain. The Cardano blockchain pioneered this fundraising technique with DeFi protocol, MELD, raising funds with the method in December 2021.
This method is a departure from the Initial Coin Offering (ICO) and Initial Dex offering (IDO) models as they do not require investors to buy one coin (BTC, ETH) and swap it for another. This gives ISPO investors greater control over their funds.
PoS blockchains like Cardano require validators to approve transactions and create new blocks. Validators are the operators of the pools where users stake their assets. With the help of the Ouroboros protocol, the network selects the pool with the highest number of stakers and distributes the rewards. This happens at every epoch (about every five days).
The pool with the largest number of stakers stands a better chance of emerging as the validator node in a block and becoming part of the Cardanos’ consensus.
Other blockchains that have employed the model for fundraising include Solana, Tron, Terra, and Polkadot.
Fair Initial Stake Pool Offering
Fair Initial Stake Pool offering (FISO) is an updated version of ISPO developed by MinSwap protocol. The model employs the use of algorithms in fairly distributing tokens to delegators. The FISO model has gained traction among blockchains using the stake pool fundraising technique.
What makes FISO different and perhaps better than ISPO?
For starters, unlike ISPO which discourages short-term engagements by incentivizing validators to focus on long-term gains, FISO encourages short-term engagements by allowing validators to receive rewards in shorter time frames.
FISO funds small stake pools to get additional delegation so that blocks are minted regularly. This enhances decentralization and the smooth running of the network.
FISO builds trust between investors in the staking pool and the developers due to the fairer reward system in place. It is effective as a marketing tool for the developers to leverage and build their community.
