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Initial Stake Pool Offering (ISPO) on Cardano Ecosystem
Initial Stake Pool Offering (ISPO) on Cardano Ecosystem. General information advantages & disadvantages, success & fail projects, current noticeable ISPO Projects

This is the article for Cardano Spot Content Competition at: https://cardanospot.io/news/initial-stake-pool-offering-ispo-cardano-ecosystem

1. ISPO General 

ISPO (Initial Stake Pool Offering) is a fundraising mechanism for projects on the Cardano Ecosystem. This is a fair and safe method for both the project fundraiser and the community  investors based on taking advantage of the Cardano staking reward mechanism for Stake Pool Operators (SPO) and their delegators. To make it easy to understand, the project will receive ADA from ISPO pool while their delegators will deduct part of their staking reward in exchange for the project's token. 

1.1 The advantages of ISPO

For projects using the ISPO programs 

  • The project can be funded by the Cardano Ecosystem community
  • Creating a stable cash flow from ISPO since Cardano blockchain will reward SPOs in ADA every epoch (5 days). So the project could use this fund for suitable purposes in the project development process.
  • The amount of money raised will depend on the number of ADA delegated to their ISPO pools.
  • This is the basis for airdropping the project's tokens to their supporters..
  • Attract a large amount of ADA and delegation wallets to support their pools in the long term, even after the ISPO event ends.

For the delegators participated in ISPO

  • Safe in terms of the delegators' capital. Their ADA still remains in their personal wallets with full control and ownership. The entire amount of ADA participating in ISPO can be withdrawn at any time
  • Still get full or a part of the staking reward from Cardano blockchain and get project tokens even possibly additional project rewards like NFTs
  • Easily check ISPO transparency from on-chain information

1.2 The disadvantages of ISPO

For projects using the ISPO programs  

  • Need to have (a) staking pool(s) or cooperate with Staking Pool Operators (SPOs) to run ISPO
  • Need to build a system or cooperate with a third party (like Dripdropz or Tosidrop) to distribute rewards to participants because Cardano blockchain has not integrated the token distribution feature for ISPO projects
  • Cash flow from ISPO is calculated according to ADA, so it is subject to the risk of exchange rate fluctuations

For the delegators participated in ISPO

  • Exchange rate risk since the value of the project's tokens received from participating in ISPO could be less than the value of ADA received for normal staking.
  • The project's token distribution could be long. It could take up to years for ISPO participants to receive the project's tokens while ADA staking will be received only after 3 epochs.
  • Most of the project token claims of ISPO programs have to be done manually.

1.3 ISPO in other blockchains

Because ISPO takes advantage of the reward staking mechanism, it can only be applied on blockchain that use the proof of stake consensus. Currently, ISPO is being used quite widely in a number of other blockchains because of its benefits to both the delegators and the project..

  • Solana: Sunny Aggregator and Saber allows users to stake SOL to earn SUNNY and SBR.
  • Polkadot: Stake DOT or KSM to earn native tokens of projects
  • Tron: TRX holders usually receive token airdrops.

2. Famous ISPO Projects

2.1. Success Projects

Since the beginning, ISPOs have almost created a phenomenon on Cardano Ecosystem with many projects using ISPO to raise fund, including a few of the following popular names:

2.1.1 Genius yield

Genius Yield is Cardano's first Concentrated Liquidity DEX combined with an AI-powered Liquidity Management protocol. 

Genius Yield ISPO Details:

  • Total $GENS Rewards: 15,000,000 $GENS
  • ISPO Launch: December 15th, 2021 (epoch 309)
  • ISPO End: May 10th, 2022 (epoch 338)
  • Duration: 5 months (30 Epochs)
  • ISPO pools: 4 pools of the project: GENS1, GENS2, GENS3 & GENSX
  • Average ADA delegated: approximate 250 million ADA
  • Total fund project get through ISPO: more than 3 million ADA

During the ISPO period, all 4 pools of the project were always in a near-saturated state, showing the strong attraction of this ISPO program to the community. After the success of the Genius Yield ISPO, these 4 pools continued to host 2 other ISPO programs: Genius X ISPO & Multi-Token ISPO 25 epochs each. Although the pools had not reached a near saturation state like Genius Yield's ISPO program, the total amount of ADA staking for each pool was up to several tens of millions of ADA, still a desirable number for SPOs on Cardano.

2.1.2 Ray Network

Ray Network is an advanced DeFi ecosystem for Cardano blockchain platform, including Decentralised exchanges, API provisioning systems, light wallets, minting tools & explorers. 

Ray Network ISPO Details:

  • Total $XRAY Rewards: 185,422,703 $XRAY
  • ISPO Launch: December 11th, 2020 (epoch 235)
  • ISPO End: November 01st, 2022 (epoch 372)
  • Duration: 23 months (137 Epochs)
  • ISPO pools: 5 pools of the project: RAY, RAY2, RAY3, RAY4, RAY5
  • Average ADA delegated: approximate 200 million ADA
  • Total fund project get through ISPO: approximate 230k ADA

Unlike other ISPO programs, all Ray's pools have a margin fee of 0%. Meaning that Ray project got nothing from variable fee & entire rewards were completely redistributed to the delegators. Ray Network project will only be entitled to 340ADA/pool /epoch comes from the minimum fixed fee. In addition, XRAY tokens from the project's ISPO program can be claimed immediately, similar to ADA staking via the project's official website.

It can be said that the ISPO of Ray Network is quite similar airdropping  project's tokens for their delegators. Because the participants still receive ADA from their staking with a margin fee of 0%.

2.2. Failed Projects

2.2.1 Flickto project failed

Flickto intended to fund media projects on the Cardano blockchain by enabling FLICK token holders to vote. Flickto was one of the first Cardano projects to declare failure, and this also affected the project's own ISPO program. Below is information about the project and its impact on the community participating in the project's ISPO.

Flickto project sumarize

  • Founded: November 1st, 2021
  • Total Raised: 2–3 million US dollars.
  • Project Founder: Rob Knight & Theo Bailey
  • Type of Failure: Mismanaged/Market downturn
  • Terminated: May 19th, 2022

After the team deleted all social media & posted the public announcement, FLICK token price dropped to 0 & FLICK token holders lost all their money. 

The project planned on raising funds through an ISPO with a 99% margin pool. So all the delegators participating in the Flickto ISPO lose all their ADA rewards if they participate in normal staking pools. The good thing is their ADA of the delegators still intact in their wallets. We're not talking about market risk and the need for DYOR before investing in this article. However, it can be seen that for investors, when a project fails, participating in an ISPO program is much less risky than other forms such as ICO, IDO.

2.2.2 SCATDAO ISPO early stop

SCAT DAO is a DAO for decentralised audits, research, and safety on Cardano. The purpose of SCATDAO ISPO is to use the ADA raised through the ISPO to provide liquidity to DEXs and then use those LP fees and a consistent source of revenue to pay to community audits.

The project was attempting to raise 1.5 Million ADA through the ISPO. They expected that with a fully saturated pool from day one, the ISPO  would run for approximately 6 months, the lower the number of ADA staked the longer ISPO time. But actually, there were only around 1 million ADA staked to their pool named AUDIT. This would be the main reason that SCATDAO announced to stop their ISPO program. 

After more than 3 months, ISPO earned a total of 14,648.6 ADA. 733 of that was part of the cost to operate the pool, and 4174.68 was converted to USDC and held to pay taxes on what was earned. Total profit is only 10,473.92 ADA, way lower than 1.5 Million ADA as planned. Therefore, the project has decided to stop the ISPO program on January 3, 2023 after about 3 months of launch. This is an example to show us the difficulty of raising funds through ISPO programs.

3. Current noticeable ISPO Projects

3.1 Orafax ISPO

Orcfax is a decentralised Cardano oracle project by publishing data of real world to blockchain smart contracts. Orcfax will launch with free price feeds on Cardano Mainnet in Q2 2023

Orafax ISPO Details:

  • Total $FACT Rewards: 100,000,000 $FACT (10% total supply)
  • Reward formula: 0.1 $FACT per ADA staked (plus loyalty bonuses per epoch)
  • ISPO Pool:  1 project pool named FACT 99%
  • Distribution: via Tosidrop.io within a 6 month vesting period.
  • ISPO Start: epoch 400
  • Duration: will run until all the 100 million allocated $FACT tokens are distributed, expected around epoch 415 
  • Current Live Stake: 61.6 million ADA 

3.2 Fluid Token

The FluidTokens is a DeFi lending service which permits borrowers to use their valuable NFTs as collateral to borrow crypto

Fluid Token ISPO Details:

  • Total $FLDT Rewards: NOT fixed but < 7 million $FLDT as stated in project tokenomics
  • ISPO Pool:  15 including: 1 project pool named FLDT 99% margin & 4 ambassador pools & 10 community pools 0-3% margin.
  • Distribution: via  a token faucet partner (TBA) within 3 months.
  • ISPO Start: epoch 402 - March 26th, 2023
  • Duration: 24 epochs 
  • Current Live Stake: 9.5 million ADA in FLDT pool & 330 million ADA in other 14 pools.

4. Writer’s final thought

ISPO is a new method for project funding that involves community staking their ADA in particular stake pools to support the development of new projects on the Cardano blockchain that benefits both community & the projects.  

In addition, the coordination program between the ISPO project and SPOs is also an active support of the project for small SPOs when bringing them significant amounts of ADA staking. Thereby helping these small SPOs to continue to operate. At the same time, this is also a positive move to show the mutual support between members in the Cardano ecosystem and also make the Cardano ecosystem more and more decentralised.



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