In our cryptocurrency circle, although there are various innovations in technology and application scenarios, the most significant innovation for us old investors is the innovation in asset issuance methods.
Almost every new asset issuance method brings a wave of wealth effects.
Today, let’s summarize the characteristics of each asset issuance method:
Proof of Work (PoW)
When our cryptocurrency dragon Bitcoin first appeared, the issuance method was PoW (proof of work). In the early days, all tokens followed this model, including Litecoin, Dogecoin, and early Ethereum.
The advantage of this method is that as long as the working method follows a unified standard (usually mathematical calculations), anyone can join. In the early stages of a project, it can achieve high coverage and have a low threshold.
Of course, as the project becomes popular, the threshold in the later stages is also not low. Not only do you need to compete in hardware, but also in electricity costs and operational capabilities.
Although this issuance method is more user-friendly, it is difficult for the project party to raise funds.
Private Placement
This method has been in operation in traditional industries for many years, and there is no fundamental difference between private placements in the cryptocurrency industry and traditional private placements. Investors negotiate terms with the project party.
However, most projects do not issue tokens during private placements, so they have evolved from equity investments to Simple Agreements for Future Tokens (SAFT).
SAFT is a simple agreement for future tokens. This method has strong compliance, and most mainstream projects now use this method for fundraising.
However, this method is mainly suitable for professional financial investors, and the threshold for retail investors is still relatively high.
IXO
Here, when we talk about IXO, it includes various derivatives such as ICO/IDO/IEO.
Let’s start with ICO (Initial Coin Offering), which is the first public issuance of digital currency.
ICO, the first token issuance, originated from the concept of Initial Public Offering (IPO) in the stock market and refers to the initial issuance of tokens by blockchain projects.
Earlier ICOs were similar to private placements, where project parties had to prepare a lot of project materials to introduce the project to investors. However, recent ICOs have been distorted by Solana, where project parties only need to send a tweet with an address.
As mentioned in our previous videos on Solana’s marketing strategies.
As the gameplay deepens, ICO has evolved into IDO and IEO.
IDO stands for Initial DEX Offering, which refers to the initial issuance of tokens based on decentralized exchanges (DEX). In plain terms, if a project party creates a pool on Uniswap or other DEX, it is considered an IDO. Currently, the mainstream way for dog-themed projects to distribute tokens is through IDO.
IEO stands for Initial Exchange Offerings, which is similar to IDO. If a project party initially lists on a centralized exchange (CEX) instead of a DEX, it is considered an IEO.
Currently, the threshold for IEO is higher than that of DEX because anyone can create a pool on DEX, while centralized exchanges still conduct some audits on projects. Most tokens issued through IEO have raised some funds through private placements.
Airdrop
Many cryptocurrency projects distribute tokens through airdrops when the community needs to be active.
Crypto enthusiasts who frequently follow the industry are definitely familiar with this concept, which means getting free tokens!
However, this method is becoming increasingly difficult. On the one hand, many project parties crack down on token farmers, making it increasingly challenging to expand profits through technical means. Moreover, some projects’ airdrop rules are becoming more opaque. For example, the founder of the Taiko project even refused to disclose the rules:
Airdrops have led to increasing conflicts between project parties and users, and it has even evolved into a battle between opponents. The first thing most people do after receiving an airdrop is to sell, fearing that they will not be able to sell at a good price if they wait.
Fairlaunch
It is precisely because of the increasing conflict between project parties and users in airdrop-based issuance methods that the fairlaunch model became popular in 2023. An exemplary asset is Inscriptions.
In this method, project parties and retail investors rush to grab tokens together and shout together after grabbing.
But this method, which has no threshold, although seemingly fair, was eventually killed by speculators.
Many projects’ large amounts of tokens were taken away by speculators, who became the actual manipulators of the market, even holding more tokens than the project parties themselves.
At the same time, projects using this method cannot raise funds, and it is impossible to rely on speculators with a large number of tokens to build the project.
Node Sales
In 2024, an increasing number of projects are issuing tokens through node sales.
Because a decentralized network itself requires a large number of nodes, in the era of PoW, users’ mining machines were essentially nodes.
However, in this method, project parties cannot raise funds directly. The money users spend on purchasing mining machines goes to production companies unrelated to the project.
The essence of the node sales model is that the project party officially sells nodes, allowing them to raise funds, while users can participate in project development and receive returns.
This method may become the mainstream for many cryptocurrency projects in the future and is better than the various methods mentioned earlier.
Issuance Method
Decentralized
Participation Threshold
Fundraising
POW
Yes
Low
No
Private Placement
No
High
Yes
IXO
No
Low
Yes
Airdrop
No
Low
No
Fairlaunch
Yes
Low
No
Node Sales
Yes
Low
Yes
Which projects are currently using the node sales model?
This year, there are three prominent projects: XAI, Aethir, and Sophon.
XAI
XAI has led the node sales trend this round.
XAI is a project launched on Binance in January this year. It is the brainchild of Arbitrum and focuses on Layer3 gaming.
In this project’s node sales, 35,155 nodes were sold, raising 13,080 ETH, equivalent to $400 million at the Ethereum price at that time.
In the token economics of this project, 85% of the tokens released are used for node rewards, totaling about 1 billion tokens. Based on the recent market value of $0.76, the average floating profit for node investors is about 20 times.
Investors and the team have a lock-up period of six months. After mining for several months, shouldn’t node investors have already recovered their investment before other investors’ tokens are unlocked?
Actually, it’s not that simple. After nodes mine tokens, they don’t immediately receive the tokens but receive esXai. Converting esXai to Xai requires a waiting period of 180 days. There are also two options: converting in 15 days, which only allows obtaining 25% of Xai, and converting in 90 days, which allows obtaining 62.5% of Xai.
Aethir
Aethir should be familiar to everyone. It was mentioned when introducing AI depin and is a leading project in AI computing power.
Aethir started selling nodes to the public in March this year and has sold 74,040 nodes, raising 41,627 ETH, equivalent to $130 million at that time.
The release rules for Aethir are not explicitly stated, only mentioning a four-year release period. The node reward accounts for only 15% of the total, and it is estimated to be around 5% to 7% in the first year.
This is because Aethir has left a significant portion of rewards for computing power providers to mine.
Sophon
Sophon is a modular blockchain project that raised $10 million in financing from OKEx in March this year.
Sophon has sold 121,261 nodes, raising 31,087 ETH, equivalent to $96 million.
As you can see, since the advent of node sales as a fundraising method, private placements don’t seem as attractive anymore.
The Final Profit Test for a Project Lies in Its Overall Plan
However, node sales are still a new issuance model. As the first project to adopt this model this round, XAI’s node investors’ tokens have not yet reached the six-month unlocking period. However, based on the calculation of redeeming 62.5% of XAI tokens in 90 days, node investors should have already recouped their investments.
The tokens of Aethir and Sophon have not been officially released yet, so this model is still in its early stages. From a fundamental perspective, it is similar to private placements, but it lowers the investment threshold through the node sales model and completes the project’s infrastructure construction.
The previously mentioned XAI/Aethir/Sophon node sales phases have already ended. The recent star project still selling nodes is CARV. Interested individuals can search for relevant information.
In the many years of development in the cryptocurrency industry, it seems that the node sales model is indeed more suitable than other methods.
The direct issuance method on the public chain is the most primitive ICO, which cannot meet the long-term needs of business construction and easily allows users to be exploited by project parties. Directly sending tokens to users’ wallets for free is the airdrop method that has caused conflicts between users and project parties. Private placements have a high threshold and do not align with the decentralized nature of cryptocurrencies.
Only through the node sales model can users obtain better financing conditions than private placements, and project parties can complete infrastructure construction. So why not give it a try?
