Venture capital has long been the go-to method for crypto projects looking for funding during the peak of a bull cycle. However, as the bear market of 2022 extended, the amount invested by crypto venture capital funds dwindled, showing a clear need for a self-sustained funding system for the blockchain space.A Cointelegraph Research report shows that while 2022 saw more capital inflow to crypto projects in total, there’s a clear decline on monthly funding charts after May 2022 — or the time of the Terra ecosystem collapse.Web3 and crypto projects lacking access to VC funds need ways to raise money from within the space, and blockchain technology provides several methods, such as initial DEX offerings, security token offerings and initial exchange offerings.
One such method that benefits from a unique characteristic of proof-of-stake (PoS) blockchains is the initial stake pool offering, or ISPO.Utilizing the delegation mechanism of a supported PoS blockchain, the ISPO model helps Web3 and crypto projects raise funds without the custody of investors’ funds.
An ISPO starts with a project launching a staking pool on the blockchain. Users can then stake their native tokens, such as ADA for Cardano, in the pool, delegating the rewards to developers.
In return, stakers get rewarded with said project’s utility token. The whole process provides developers an opportunity to raise funds, while users can earn rewards with ISPOs during the bear market.Since ISPO lets investors maintain control over their funds, it quickly became a popular method of fundraising for projects, mainly across the Cardano ecosystem.Read more on cointelegraph.com