Understanding Initial Stake Pool Offering (ISPO)
The Initial Stake Pool Offering (ISPO) is a unique fundraising model specific to the Cardano ecosystem.
It provides advantages over existing models such as IDOs and ICOs, offering a more convenient and accessible process for developers and investors.
Innovative Staking
In the ISPO model, project developers create staking pools within the Cardano ecosystem.
ADA token holders can stake their tokens in these pools.
The developers can set variable margins, collect rewards, and distribute their project’s utility tokens to the stakeholders.
The likelihood of a staking pool being selected as a validator node for the next block increases with the size of the stake in the pool.
Revolutionizing Participation
The key difference between ISPO and other models is that investors do not need to buy, sell, or exchange tokens to acquire and stake project-specific tokens.
Instead, ISPO allows users to utilize the ADA tokens they already hold. By staking their ADA tokens in the project’s staking pool, users earn the project’s native tokens as rewards in addition to their regular ADA rewards from Cardano’s proof-of-stake (PoS) ecosystem.
Enhancing Investor Security
Compared to other funding options, ISPO offers increased security for investors.
It involves less risk since users forgo their ADA rewards to receive project-native rewards.
The staked ADA remains in the user’s personal, non-custodial wallets, and they retain full control over their assets.
Importantly, there is no lock-in period, allowing users to freely use their ADA tokens as they wish, whether it’s unstacking, selling, trading, or using them for other purposes like purchasing NFTs.
How Does an ISPO Work?
In an ISPO, delegators stake their ADA tokens in staking pools created by project developers.
The staking pool with the highest stakes becomes a validator node and contributes to the Cardano network’s consensus.
However, users staking their ADA tokens in these pools do not receive ADA rewards. Instead, they receive rewards in the project’s native token.
The ADA rewards that would have been distributed among the delegators are redirected to the operator of the validator node itself.