What is Initial Stake Pool Offering (ISPO)?
Let's find out Initial Stake Pool Offering (ISPO) meaning, definition in crypto, what is Initial Stake Pool Offering (ISPO), and all other detailed facts.
In recent years, crypto fundraising methods have seen a significant transition, introducing more convenient and accessible mechanisms for both developers and investors. The Initial Stake Pool Offering (ISPO) is a promising new fundraising strategy that offers more benefits than existing methods such as IDOs, ICOs, and others.
Though note that ISPO is exclusive to the Cardano ecosystem. It enables project developers to create staking pools in which holders of ADA can stake their tokens. Developers can define varying margins for each staking pool, collect rewards, and pay stakeholders with their project's utility tokens. The higher the stake in a pool is, the more likely it is to be chosen as a validator node for the following block.
Though ISPO has one major difference from other similar models, which require investors to buy, sell, or trade one token in order to purchase and stake project-specific tokens. The difference is that with the ISPO model users can utilize the ADA tokens they already own. Besides, users stake ADA tokens in the staking pool of the project in order to earn the project’s native tokens as a reward, instead of staking these tokens in the Proof-of-Stake (PoS) ecosystem of Cardano.
An ISPO is more secure for investors than other funding choices. It's less risky because users are just giving up their ADA rewards in exchange for project-specific rewards. Though the staked ADA is theirs, and it remains in their non-custodial wallets.
In addition, in an ISPO, there is no lock-in period. Users not only have complete control over their assets, but they also have the freedom to use their ADA any way they want. This includes selling, trading, unstaking, using ADA to buy NFTs, and everything else you can do with these tokens.
How Does an ISPO Work?
Generally, PoS consensus mechanism is used in the stake pools of Cardano. Therefore, transactions and the production of new blocks are verified by network validators. These validators are stake pools or nodes that provide delegators (users) with the ability to stake their funds.
The networks, with the assistance of the Ouroboros protocol, choose staking pools that have the biggest amount of stakes to distribute rewards to validators. Validator rewards in the form of ADA are shared among the delegators of the successful staking pool based on the amount of ADA staked by each user after each epoch (which lasts five days in Cardano).
With the ISPO model, delegators stake their ADA in staking pools created by project developers. The staking pool with the largest stakes becomes a validator node in a block, eventually contributing to the Cardano network's consensus.
Though users who stake their ADA tokens in these pools do not receive ADA rewards. They are compensated in the project's native token instead of ADA. The rewards, which would normally be distributed among the delegators, are delivered to the operator of the validator node.
Though ISPO has one major difference from other similar models, which require investors to buy, <strong>sell<\/strong>, or trade one token in order to purchase and stake project-specific tokens. The difference is that with the <strong>ISPO model users can utilize the ADA tokens they already own<\/strong>. Besides, users stake ADA tokens in the staking pool of the project in order to earn the project’s native tokens as a reward, instead of staking these tokens in the <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-proof-of-stake-pos/">Proof-of-Stake (PoS)<\/strong><\/a> ecosystem of Cardano.<\/p>\n<p>An ISPO is more secure for investors than <strong>other funding choices<\/strong>. It's less risky because users are just giving up their ADA rewards in exchange for project-specific rewards. Though the staked ADA is theirs, and it remains in their <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-non-custodial/">non-custodial wallets.<\/p>\n<p>In addition, in an ISPO, there is no lock-in period. Users not only have complete control over their assets, but they also have the freedom to use their ADA any way they want. This includes <strong>selling<\/strong>, trading, unstaking, using ADA to buy <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-non-fungible-token-nft/">NFTs, and everything else you can do with these tokens.<\/p>\n<h3>How Does an ISPO Work?<\/h3>\n<p>Generally, PoS consensus mechanism is used in the stake pools of Cardano. Therefore, <strong>transactions<\/strong> and the production of new blocks are verified by network <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-validator/">validators. These validators are stake pools or nodes that provide <strong>delegators (users) <\/strong>with the ability to stake their funds.<\/p>\n<p>The networks, with the assistance of the Ouroboros protocol, choose staking pools that have the biggest amount of stakes to distribute<strong> rewards to validators<\/strong>. Validator rewards in the form of ADA are shared among the delegators of the successful staking pool based on the amount of ADA staked by each user after each <a href=https://www.bitdegree.org/"//crypto//learn//crypto-terms//what-is-epoch/">epoch (which lasts five days in Cardano).<\/p>\n<p>With the ISPO model, delegators stake their ADA in staking pools created by project developers. The staking pool with the largest stakes becomes a validator node in a block, eventually contributing to the Cardano network's consensus.<\/p>\n<p>Though users who stake their ADA tokens in these pools do not receive ADA rewards. They are compensated in the project's native token instead of ADA. The <strong>rewards<\/strong>, which would normally be distributed among the delegators, are delivered to the operator of the validator node.<\/p>","definition":"a cryptocurrency fundraising tool that is only available in the Cardano ecosystem.","status":"published","meta_title":"What is Initial Stake Pool Offering (ISPO)? Definition & Meaning | Crypto Wiki","meta_description":"Initial Stake Pool Offering (ISPO) meaning: Initial Stake Pool Offering (ISPO) - a cryptocurrency fundraising tool that is only available in the Cardano ecosystem.","meta_keywords":null,"author":{"id":1,"user_id":1,"created_at":"2023-05-03T14:30:55.000000Z","updated_at":"2023-05-11T07:18:20.000000Z","title":"Editor-In-Chief","slug":"aaron-s-editor-in-chief","description":"<p>Having completed a Master’s degree on Economics, Politics & Culture for the East Asia region, Aaron has written scientific papers with a comparative analysis of the differences between US’ Western and Japan’s Collective forms of capitalism, 1945-2020.<\/p>\n<p>With close to a decade of experience in the FinTech industry, Aaron understands all of the biggest issues and struggles that crypto enthusiasts face. He’s a passionate analyst who is concerned with data-driven and fact-based content, as well as that which speaks to both Web3 natives and industry newcomers.<\/p>\n<p>Aaron is the go-to person for everything and anything related to digital currencies. With a huge passion for blockchain & Web3 education, Aaron strives to transform the space as we know it, and make it more approachable to complete beginners.<\/p>\n<p>Aaron has been quoted by multiple established outlets, and is a published author himself. Even during his free time, he enjoys researching the market trends, and looking for the next supernova.<\/p>","user":{"id":1,"first_name":"Aaron","last_name":"S.","email":"aaron@bitdegree.org","email_sanitized":"aaron@bitdegree.org","email_verified_at":"2023-12-01T09:40:20.000000Z","must_verify_email":false,"is_registered_with_wallet":false,"status":"active","country":"LT","last_connected_ip":"88.119.132.125","image_id":2641,"referral_token":"05TMu2NysXOCn525","referred_by":null,"created_at":"2023-05-03T14:30:55.000000Z","updated_at":"2024-01-09T15:22:21.000000Z","full_name":"Aaron S."}}}" :chapter-list="[{"id":1,"title":"Blockchain","slug":"blockchain","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-blockchain.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/blockchain-101.jpg","rating":100,"sections":[{"chapter_id":1,"order":1,"slug":"what-is-blockchain","title":"What is the Blockchain?","status":"published","modified_content":null},{"chapter_id":1,"order":2,"slug":"decentralized-blockchain","title":"Anonymous & Decentralized Blockchains: The Cornerstone of Crypto","status":"published","modified_content":null},{"chapter_id":1,"order":3,"slug":"blockchain-transaction","title":"What is a Blockchain Transaction in Crypto?","status":"published","modified_content":null},{"chapter_id":1,"order":4,"slug":"crypto-fees","title":"The Different Types of Crypto Fees Explained","status":"published","modified_content":null},{"chapter_id":1,"order":5,"slug":"what-is-bridging-in-crypto","title":"The Key Notion Behind the Concept of Bridging in Crypto","status":"published","modified_content":null},{"chapter_id":1,"order":6,"slug":"types-of-blockchains","title":"Different Types of Blockchains: What to Look Out For?","status":"published","modified_content":null}]},{"id":2,"title":"Cryptocurrencies","slug":"cryptocurrencies","updated":null,"chapter":"crypto\/assets\/crypto-book\/chapters\/learn-cryptocurrencies.jpg","chapter_simple":"crypto\/assets\/crypto-book\/chapters-simple\/cryptocurrencies-101.jpg","rating":100,"sections":[{"chapter_id":2,"order":1,"slug":"what-is-a-cryptocurrency","title":"What is a Cryptocurrency?","status":"published","modified_content":null},{"chapter_id":2,"order":2,"slug":"how-does-cryptocurrency-work","title":"How Does Cryptocurrency Work?","status":"published","modified_content":null},{"chapter_id":2,"order":3,"slug":"is-cryptocurrency-a-good-investment","title":"Is Cryptocurrency a Good Investment? 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current-section="what-is-initial-stake-pool-offering-ispo">