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Initial Stake Pool Offering (ISPO) - Cardano's risk-free fundraising method

Publish by Charlie at 09 November 2021

In September 2021, ADA reached the target price of $3 with a market cap of over $90B. This was a milestone for the Cardano community as it proved that they have a strong belief in the project.

In this article, we will break down some recent activities of Cardano and its ecosystem.

  • How Cardano motivates new projects.
  • What’s about the infrastructure of Cardano?
  • What is Initial Stake Pool Offering?

Let’s get started!

Cardano Ecosystem Overview

Since the Cardano smart contract mainnet was released in September 2021, we’ve seen the expansion of Cardano in the increasing number of new projects. To prove that point, we will compare the Cardano ecosystem before and after the Alonzo mainnet.

Looking at the landscape of Cardano in May 2021, no one can think of any blockchain ecosystem with years of development to have so few projects on it.

Cardano Ecosystem in May 2021. Source: Cardians_

And after the smart contract mainnet, we’ve witnessed lots of new projects becoming a part of the Cardano ecosystem. Every lego part of the ecosystem is available such as DEX, Lending, Launchpad, Tools, especially NFTs. We have a great article that breaks down those legos of the Cardano ecosystem.

See Also: Cardano Ecosystem Overview

Cardano Ecosystem in Sep 2021. Source: Cardians_

As a result, the size of the Cardano ecosystem can now be compared to other blockchain ecosystems such as Fantom, Avalanche, or even Solana.

Plutus Smart Contract

Cardano smart contracts are written in Haskel/Plutus programming language, which is different from the popular Solidity one. Therefore, developers need time to get their hands on Plutus to build DApps (Decentralized Applications) on Cardano. Since the smart contract mainnet, we can track the number of Plutus scripts that have been executed in the following chart.

The number of Plutus Scripts. Source: Cardians_

We can see the number of executed scripts has been strongly increasing recently to 162 scripts. However, it’s hard to anticipate that which number will be enough to have the first DeFi application running on Cardano. At least, we can know that they’re making progress instead of standing and doing nothing.

Cardano Acceleration

By looking above at the two landscapes, you can see the big picture of the fast Cardano ecosystem growth. You might wonder what is the reason behind this expansion.

Like other blockchain ecosystems, they released DeFi incentive programs with millions and billions of dollars to accelerate the growth. Cardano also has independent entities that focus on the development of projects on the Cardano blockchain platform.

EMURGO $100M Incentive Program. Source: Cardians_

Emurgo has released the $100M incentive program that focuses on DeFi acceleration. Three projects received the incentive investment: ADAVerse, MilkomedaM1, Adanian Labs.

Project Catalyst

In simple terms, Project Catalyst is a decentralized forum built on Cardano that has the ultimate goal to fund prominent projects on Cardano. It is a core program that profoundly contributes to the development of the ecosystem and its expansion.

Cardano Project Catalyst. Source: Cardians_

ADA delegators can propose their ideas to the community for discussion, consultation, and assessment. After this process, the community will vote on projects that will be funded by the treasury of Project Catalyst which is over $2B worth of ADA.

Project Catalyst Proposals. Source: Cardians_

In the DApps and Integration category of Fund6, we’ve seen projects with the highest vote. Those projects had to pass many rounds of assessment. The ADA delegators have the strongest voting power to decide which projects will get the requested fund.

Funding Approval in Fund6. Source: Cardians_

Recently, Project Catalyst fund6 has finished the voting process and the result is going to be released soon. As you can see the rapid growth of the number of proposals, Fund1 had 56 proposals then Fund6 had over 800 proposals. The total distributed value of Fund6 is 4M ADA for most trusted projects.

Catalyst Fund7 will be $8M in ADA for the best proposals

Cardano Developer Portal

Cardano Developer Portal is an educational program started by the Cardano Foundation with its partners to equip newcomers to Cardano with information and basic knowledge about the blockchain platform.

Furthermore, this is specially designed for developers who want to deploy their ideas or contribute to the Cardano platform. Generally, Cardano Developer Portal is like a 101 book of Cardano for starters.

Cardano Developer Portal. Source: Cardians_

The program consists of the following six phrases:

  • Get Started: Understanding overview, tools, and technical concepts.
  • Integrate Cardano: Exploring Cardano wallets and diving in Cardano applications.
  • Metadata Building: Learning about Metadata and how it works.
  • Discover Native Token: Learning how to build a native token and an NFT on Cardano.
  • Project Funding: Understanding Project Catalyst.
  • Stake Pool Operation: Learning how to stake in stake pools and operate a stake pool system.

cFund

cFund is a mutual collaboration among three organizations: Wave Finance, Input Output Global (IOG), and the Cardano Foundation. It independently operates like an institutional VC. Moreover, like Project Catalyst, they are contributing a lot to the development of Cardano in the crypto world as well as the real world.

Invested in by cFund

IOG and the Cardano Foundation are popular in the Cardano community while Wave Finance with a total asset value of over $500M has recently “skin-in-the-game” by choosing Cardano. In the present, cFund has invested in 11 projects ranging from DeFi to financial entities such as Ardana, SundaeSwap, Occam Finance, Runtime Verification, etc.

Infrastructure

Wallet

In June 2021, there were only 6 supported wallets on Cardano, but currently, that number has become 15 wallets. The wallet is a bridge that connects users to platforms such as CEX (Centralized Exchange) or DEX (Decentralized Exchange) for using services. Therefore, it is a very important lego part of the ecosystem.

Wallets for Cardano. Source: Cardians_

From Jan 2021 to Oct 2021, the number of ADA wallets has linearly increased to over 2M wallet addresses. This reflects the demand of users for ADA storage considerably increasing.

The number of Cardano wallets. Source: Cardians_

Bridge

Bridge in the crypto world is regarded as a solution for blockchain interconnection. It indicates the scalability of the blockchain while connecting with others, which helps the cash flow move among blockchains.

On Cardano, we’ve seen multiple solid partnerships to build bridges among blockchains. Despite no DeFi projects in operation, those collaborations are building blockchain bridges to connect with Cardano for the upcoming mega migration, including IOHK <> Bondly Finance, Ardana <> Elrond Network, Cardano <> Nervos.

Initial Stake Pool Offering

Initial Stake Pool Offering (ISPO) is an innovative fund-raising method on Cardano. In simple terms, ADA holders stake their tokens in stake pools owned by the project team. Those ADA delegators will receive tokens given by the project. Then the stake pool operators will take the ADA rewards to fund the projects.

Before going into which projects are running the ISPO program on Cardano in the following part, we will introduce some advantages of it:

  • Attracting new delegators (stakers) to generate long-term profits ⇒ This reduces short-term hop in and out.
  • Measuring the credibility by evaluating the number of ADA in stake pools ⇒ This eliminates fraudulent and scam projects.
  • Having the demand for tokens distributed by the ISPO projects, users have to buy ADA for staking ⇒ This incentivizes the ADA price to grow ⇒ attracting attention.

Therefore, this method is widely used by multiple blockchain ecosystems since it benefits both delegators and the project team. We will list blockchain platforms using this similar method:

  • Terra: Stake LUNA to earn MIR, ANC, etc.
  • Solana: Sunny Aggregator and Saber allow users to stake SOL to earn SUNNY and SBR.
  • Polkadot: Stake DOT or KSM to earn native tokens of projects
  • Tron: TRX holders often receive token airdrops.

ISPO Trend

Currently, there are 7 DeFi projects on Cardano running ISPO programs to distribute their tokens to ADA delegators. This might create a new trend in the Cardano ecosystem since it can be an effective marketing tool for projects to raise their community.

Projects use the ISPO program
Total ADA Staked

As you can see in the chart above, the total percentage of ADA staked was about 68% at the beginning of 2021, then the percentage increased to 72% and has been ranging around it over time. This means over 70% of the total supply ADA is being staked in pools to earn ADA rewards, reducing the number of circulating ADA in the market.

⇒ Less ADA holders who want to sell ⇒ the ADA price will increase in the long-term.

We calculated that the total of ADA staked in the ISPO stake pools is just over 1B ADA. This humble number is just 4% of the current total supply of ADA. Therefore, the ISPO program can expand further if it becomes a trend inside the ecosystem.

Initial Stake Pool Offering (ISPO). Source: Cardians_

There are hundreds of large stake pools with millions of ADA staked. If projects on Cardano can collaborate with them to release the ISPO program, it will be a huge wave since the ISPO program is a win-win game. Delegators get the tokens and don’t worry about being rug-pulled or losing their ADA. The pool operators get the rewards and more ADA staked in their pools.

ISPO Projects

Minswap is an AMM DEX on Cardano that has recently released testnet then the concurrency issue happened. Talking about ISPO, Minswap called it FISO and has been running the program since the epoch 285th. They are now having over 200M ADA staked in stake pools of Minswap partners.

Minswap ISPO

MELD is a lending protocol on Cardano that is running the ISPO program with over 600M ADA staked in their MELD pools. This gives MELD first place in the ISPO leaderboard in terms of ADA.

MELD ISPO

Ray Network is an all-in-one DeFi station offering multiple products such as Swap, Launchpad, Tools, NFT, etc. They are running the ISPO program with nearly 100M ADA staked in their RAY pools.

Ray Network ISPO
Ray Stake Pools

SundaeSwap is an AMM DEX on Cardano that has a working principle similar to Uniswap v2. They’re planning to launch the stake pool offering (SPO) program with a period of 5 epochs to distribute SUNDAE tokens to users.

SundaeSwap
SundaeSwap ISPO

Conclusion

We will briefly conclude the article via some key highlights for readers’ convenience:

  • Cardano has a perfect trio (Project Catalyst, Cardano Developer Portal, and cFund) to accelerate the Cardano ecosystem, especially DeFi.
  • The infrastructure basis of Cardano is being assembled together with new-supported wallets and blockchain bridges.
  • Initial Stake Pool Offering might be a useful tool for Cardano and projects to attract new crypto enthusiasts to the ecosystem.

And that is all you need to know about the most recent activities of the Cardano ecosystem and the ISPO programs. I hope you’ve gained the overview and our insights will be useful to you.

If you want to know further about the Cardano ecosystem, please leave a comment below and join Coin98 Community for further discussions about Crypto.

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Charlie

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