In our cryptocurrency community, while there are various innovations in technology and application scenarios, the most significant impact for us old investors is still the innovation in asset issuance methods.
Almost every new asset issuance method brings a wave of wealth effects. Today, let’s discuss the characteristics of various asset issuance methods throughout history:
Proof of Work (PoW):
When the first cryptocurrency, Bitcoin, 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 anyone can join as long as they follow the standardized work process, usually involving mathematical calculations. It has high inclusiveness and low entry barriers in the early stages of a project. However, as the project gains popularity, the barriers in the later stages increase. Participants not only need to compete in terms of hardware but also consider electricity costs and operational capabilities. While this issuance method is user-friendly, it is not conducive to fundraising for the project.
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 crypto industry and traditional private placements. Investors and project parties negotiate the terms privately. However, most projects do not issue tokens during private placements. Instead, they adopt a SAFE (Simple Agreement for Future Tokens) model, which is similar to equity investment. This method is highly compliant, and most mainstream projects now use this method for fundraising. However, it is primarily suitable for professional financial investors, and the threshold for retail investors is still relatively high.
IXO (Initial Coin Offering):
ICO is the initial public offering of digital currencies. It originated from the concept of initial public offerings (IPOs) in the stock market and refers to the first issuance of tokens by blockchain projects. Early 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 influenced by Solana, where project parties only need to post a tweet with an address. As we have covered in our previous videos on Solana’s marketing strategies. With the deepening of this game, ICO has evolved into IDO (Initial DEX Offering) and IEO (Initial Exchange Offering).
IDO refers to the initial token issuance conducted on decentralized exchanges (DEXs). In simple terms, project parties create a pool on Uniswap or other DEXs, and that becomes an IDO. Retail investors can purchase the token on DEXs. Currently, IDO is the mainstream method for most projects in the crypto industry.
IEO stands for Initial Exchange Offerings, which is similar to IDO. However, if the project initially lists on a centralized exchange (CEX) instead of a DEX, it is called an IEO. The barriers for IEOs are usually higher than DEXs because anyone can create a pool on DEXs, while centralized exchanges still conduct some audits for projects. Most tokens issued through IEOs have already raised some funds through private placements.
Airdrop:
Many crypto projects distribute tokens through airdrops when they need an active community. This concept is familiar to crypto enthusiasts, as it refers to receiving free tokens. However, this method has become increasingly challenging recently. On one hand, many projects have cracked down on bot activities, making it difficult to expand profits through technical means. On the other hand, some projects’ airdrop rules have become less transparent. For example, the founder of the Taiko project refused to disclose the rules publicly. This issuance method has led to conflicts between project parties and users, and it has even evolved into a competition between sellers. Most individuals who receive airdrops immediately sell their tokens, fearing that they may miss out on selling at higher prices.
Fair Launch:
Due to the increasing conflicts between project parties and users through airdrops, the fair launch model gained popularity in 2023, with the notable asset being Inscriptions. In this model, project parties and retail investors rush to acquire tokens together. However, this approach, which seems fair on the surface, was eventually stifled by manipulators. Many projects saw a large number of tokens taken by manipulators, making them the actual market makers, with even more tokens than the project parties. Moreover, projects using this method cannot raise funds, and it is impossible to rely on manipulators holding a large number of tokens to build the project.
Node Sale:
In 2024, an increasing number of projects have adopted the node sale model to issue tokens. A decentralized network requires a large number of nodes, and in the era of PoW, users’ mining machines served as nodes. However, in this method, project parties do not directly obtain funding; the money users spend on purchasing mining machines goes to production companies unrelated to the project. The node sale model allows project parties to raise funds while allowing users to participate in project development and receive returns. This method may become the mainstream for many crypto projects in the future and is superior to the previously mentioned methods.
Issuance Method:
Decentralized
Participation Threshold
Fundraising
POW
Yes
Low
No
Private Placement
No
High
Yes
IXO
No
Low
Yes
Airdrop
No
Low
No
Fair Launch
Yes
Low
No
Node Sale
Yes
Low
Yes
Which projects currently use the node sale model? This year, three prominent projects are XAI, Aethir, and Sophon.
XAI:
XAI set the trend for node sales this year. It was listed on Binance in January and is the brainchild of Arbitrum, a Layer 3 gaming project. XAI sold 35,155 nodes, raising 13,080 ETH, equivalent to $400 million based on the Ethereum price at that time. In the tokenomics of this project, 85% of the tokens are allocated for node rewards, totaling approximately one billion tokens. Based on the recent market value of $0.76 per token, the average profit for node investors is approximately 20 times. Both investors and the team have a six-month lock-up period. Node investors should have already recouped their investments through mining before other investors’ tokens are unlocked.
Aethir:
Aethir is a familiar project, as we mentioned it when discussing AI depin. It is also 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 the time. The release rules for Aethir are not explicitly stated, but it is mentioned that there is a four-year release period. Only 15% of the total supply is allocated for node rewards, and it is estimated to be around 5% to 7% in the first year. This is because Aethir has reserved a significant portion of the rewards for mining providers.
Sophon:
Sophon is a modular blockchain project that raised $10 million in funding from OKEx in March this year. Sophon has sold 121,261 nodes, raising 31,087 ETH, equivalent to $96 million. As you can see, the node sale method seems more attractive than private placements.
However, it is important to note that node sales are still a new issuance model. XAI, as the first project to adopt this method in this cycle, has not yet reached the six-month unlock period for node investors. Nevertheless, based on the calculation of exchanging 62.5% of XAI tokens after 90 days, node investors should have already recouped their investments. As for Aethir and Sophon, their tokens have not been officially released, so this model is still in its early stages. In essence, it is similar to private placements but with a lower entry barrier through the node sale model, allowing wider participation in projects’ infrastructure development.
In summary, the node sale model, as the most suitable method for the crypto industry, surpasses other methods. The original ICO model, which directly launches on public chains, does not meet the long-term needs of project development and easily leads to users being exploited by project parties. Airdrops, which directly send tokens to users’ wallets, have caused conflicts between users and project parties. Private placements have high participation thresholds, which do not align with the decentralized nature of the crypto industry. Only through the node sale model can users obtain better fundraising conditions than private placements, while project parties can complete infrastructure development. It is a win-win situation.
