Stakepad & Stakestarter the funding models of the future
Stakepad & Stakestarter — native to proof-of-stake consensus — will better serve Cardano SPOs, delegators and developers.
We have written 3 proposals, our proposals can be found on Ideascale, have a look and if you support the proposal throw us some claps and feedback! Cheers and have a good read.
1. Stakeboard: Social Staking Platform https://cardano.ideascale.com/a/dtd/Stakeboard-Social-Staking-Platform/383858-48088
2. Beyond ISO: SPO-driven Funding https://cardano.ideascale.com/a/dtd/Beyond-ISOs-SPO-driven-Funding/384955-48088
3. Defending Cardano Staking Ecosystem: https://cardano.ideascale.com/a/dtd/Defending-Cardano-Staking-Ecosystem/384952-48088
Problems with the Current Staking Landscape:
An Initial Stakepool Offering (ISO) could be the most effective way for you to fund the development of your tokenized Cardano project. Under the ISO model:
- Project developers launch special purpose stakepools.
- Delegators to these stakepools may forego some (or all) of their ADA block rewards.
- Any block rewards forwent by delegators are retained by the development team and used for project development.
- In exchange for delegating to the SPO, delegators are rewarded by the developing project with the project’s token(s) or other reward.
The ISO model creates a win/win situation for Cardano developers and delegators: Delegators are among the first to get a share of tokens from a project they believe in, and developers obtain critical funding and community engagement — without having to check the boxes and make the compromises required to obtain venture capital, and without risking getting lost in a sea of projects vying for Project Catalyst funding.
But there have been some serious problems with the ISO funding model until now:
- Because the ISO model is dependent upon widespread support among delegators and the establishment of one or more stakepools, until now it has only been feasible for projects with extensive marketing reach. Practically speaking, this has meant projects have needed a large amount of influence or marketing capital to successfully launch an ISO.
- A major problem has emerged of scammers setting up 100% margin pools mimicking ISO stakepools. In the case of Meld’s ISO, millions of $ADA were delegated to fraudulent stakepools, resulting in a large number of delegators missing out on $MELD rewards and tens of thousands of ADA being diverted from the ISO to malicious actors.
- Currently each new project that wants to launch an ISO has had to develop its own rewards model. And there has been a general lack of transparency about how much delegators will be rewarded, or when, to the point where large projects like MELD have launched ISOs without even first publishing specifics on the rewards ISO delegators would receive. This lack of clarity, and most projects’ lack of a rewards dashboard for delegators to track their ISO rewards, has led to projects spending inordinate amounts of time fielding questions on ISO reward issues. And ISO delegators have expressed frustration with the ISO reward claiming process — both with the lack of communication, and the fact they had to pay seemingly inflated fees to claim their rewards.
- In launching new stakepools for their ISOs, projects have cannibalized block rewards previously earned by small stakepool operators (SPOs). This trend could undermine the ability of small stakepool operators to maintain their pools, and prevent new, purpose-driven stakepools from being formed by small SPOs. This is not only a negative for the diversity and distribution of the Cardano SPO community. It’s also one more pressure that could reduce the decentralization of the Cardano blockchain. And because SPOs are very active and influential within the broader Cardano community, insensitivity on this issue could harm the image of a development team fundraising via SPO, and limit not only their fundraising success, but also limit Cardano user adoption of their project.
The Minswap FISO Model — Pros and Cons
In response to this last problem, the Minswap development team innovated the ISO model in what they’ve called their Fair ISO (FISO) model. Rather than launch new Stakepools for their ISO, Minswap adopted a model that was fairer to small SPOs by partnering with single pool operators who were randomly selected from a number of applicants that met criteria outlined by the Minswap team.
As stated by the Minswap team, their FISO model solves some key problems presented by other implementations of the ISO funding model. The FISO model:
- Allows SPOs to directly benefit from the growth of DeFi and other projects on Cardano;
- Further decentralizes the Cardano network;
- And presents an opportunity for SPOs to build trust with delegators as ISO partners.
However, Minswap’s FISO model does not solve the problem of reducing the main barrier to entry for most development teams that could benefit from an ISO — the fact that conducting an ISO requires a lot of marketing and a huge amount of time. On top of the need to market the ISO to delegators, devise a rewards scheme, and manage FISO related communications, Minswap’s model also required their team to create an SPO application and vetting process that required substantial resources from the Minswap team. And Minswap still ended up drawing some criticism from delegators because they weren’t transparent about how stakepools would be selected prior to making their decision, and only announced how the decision had been made after the fact.
Additionally, Minswap’s qualifying criteria for stakepools were (probably of necessity) pretty basic, and confined to data points that could be ascertained from the Cardano Blockchain. To be considered for partnership on the Minswap ISO, stakepools applying had to meet the following criteria:
- Single-pool operators only
- Pool size: 100k-2m ADA at time of snapshot
- Fixed cost: 340 ADA
- Minimum Pledge: 20k
- Margin: less than 5%
- Minimum of 1 block produced
These general parameters seem sensible, but no Socially or Charitably driven considerations in partnering with stakepools were considered. And no wonder — Assuming a development team would want to take more nuanced considerations into effect, how would they free up the resources to vet social, charitable, pro-Cardano or environmental claims being made by SPOs?
Last — the final selection of stakepools (which drew from a large number of qualifying applicants) was algorithmically randomized. Thus, it was fair in the sense that all qualifying applicants had an equal shot at being selected. However, the random selection approach leaves something to be desired in the sense that the delegator community has no say about the SPOs their delegations will support. And a project’s ultimate adoption generally benefits from fostering community engagement as early and often as possible.
Stakeboard’s ISO Partnership Model: FISO Funding Perfected
By partnering with projects that want to launch FISOs, as well as small SPOs already on the Stakeboard platform, Stakeboard will dramatically improve the Fair Initial Stakepool Offering in the following ways:
1. Stakeboard will use its platform to advertise the FISOs of its partner projects to SPOs and delegators, thereby lowering the marketing barrier to entry for projects looking to fundraise via ISO: Upon creating an account on Stakeboard, users will be signed up for notifications about upcoming FISOs by default; upcoming FISO information will be displayed prominently on the Stakeboard platform; and FISOs will be advertised consistently on Stakeboard’s social media accounts.
2. Stakeboard will improve and expedite the SPO selection process for partner projects, providing projects with a list of stakepools that meet their criteria for potential ISO stakepools. These criteria will include basic parameters like those included by Minswap, but improve upon these criteria to improve FISO and Cardano network security.
Partnering with Stakeboard, projects’ FISO criteria can go way beyond basic parameters like pools’ fixed costs and minimum pledges. They can include criteria to specifically include stakepools utilizing renewable energy, women and/or minority owned pools, pools located in specific regions, SPOs developing applications for the Cardano ecosystem, etc. And our partners won’t need to painstakingly vet SPO claims, because doing so is one of Stakeboard’s core value propositions. The qualifications of FISO applicant Stakepools will be verified by Stakeboard in advance.
Finally, Stakeboard will use its Alice Staking Detective to vet applicants on the basis of whether they’ve taken questionable or suspicious actions in the management of their stakepools since the launch of Alice. Alice alerts Stakeboard if and when stakepools greatly increase their margin or reduce their pledge, and these kinds of actions can be a red flag partner projects wouldn’t be aware of unless they have similar software tracking stakepool actions on Cardano.
3. By enabling partner projects to implement a dual selection process, Stakeboard will allow partners to strike the right balance between fairness and community engagement in their FISO Stakepool selection process. Once Stakeboard has assisted partner projects in arriving at a shortlist of SPO applicants, there are two options for making the final selection:
- The selection can be put to community vote (the SundaeSwap model).
- The selection can be made via a random selection algorithm (the Minswap model).
Stakeboard’s approach combines the strengths of each of these approaches: Because putting the final selection to a pure community vote will most likely result in the Stakepools with the most visibility — essentially the best advertised stakepools — being selected, and because many of the stakepools bringing the most innovation and equity to Cardano have negligible marketing reach, we believe most of the final selection should be made at random. But we also believe community engagement throughout the FISO process is important and valuable to a project.
For this reason, we propose to our project partners that no less than ⅔ of the final selection is made via randomizing algorithm, and no more than ⅓ of the final selection is made by a community vote conducted on Stakeboard. In practice, this would mean a selection of six winning stakepools (chosen from a shortlist of, say, 12 candidates) would be composed of four stakepools chosen at random, and two chosen by community vote. Or, with the selection of five winning stakepools, four would be selected at random, and one would be determined by community vote.
We believe this strikes the fairest balance in that it drives community engagement and lets the community decide on their top choice(s), while also offering a fair chance to purpose-driven stakepools, irrespective of their marketing budget or community following.
Compare this to the SundaeSwap model: A project that’s funded by Alameda Research and Cfund just posted around 500 Stakepool applicants on their website, for a community vote that will almost certainly result in the selection of some of the largest SPOs on Cardano being selected as ISO partners. By partnering with Stakeboard, project partners can deploy a vastly improved FISO model with a tiny fraction of the resources accessible to projects like SundaeSwap.
4. As experienced, Cardano Stakepool operators, the leadership team of Stakeboard understands the amount of block rewards a stakepool is likely to receive with varying levels of delegation. So, whereas a project’s winning stakepool partners obviously have an incentive to concentrate as much delegated ADA in as few pools as possible, Stakeboard will advise its project partners on how the FISO can manage delegation distribution to maximize the number of small stakepools that can participate, and keep stakepool pledge/delegation ratio in healthy balance, while also maximizing the ADA rewarded to the overall FISO. What’s more, Stakeboard will provide a simple, FISO staking interface, where delegators’ ADA is automatically deposited in the correct stakepool to maintain the FISO’s delegation distribution model.
5. Stakeboard will allow partner projects to opt for or against optional parameters that could make their FISO seem more fair and equitable to the delegator community. For example, Stakeboard can have users log into their Stakeboard account prior to delegating to a FISO, and limit the amount a logged in user can contribute to a FISO, making it much more difficult for whales to earn a vastly disproportionate share of FISO rewards. An option like this isn’t available when conducting a FISO through other ADA wallets.
6. What’s more, Stakeboard will be able to dynamically respond to FISO conditions to optimize outcomes for our partner projects. For example, if a partner project is an epoc into their FISO on Stakeboard, and delegator participation is lower than expected so stakepools are undersubscribed, Stakeboard will alert the partner about ways the situation could be improved. For example, Stakeboard could inform the partner they may want to remove the limit the project placed on maximum delegations from individual users. And if the partner wants us to remove this limit, stakeboard can send an email notification to every delegator in their FISO, alerting them that the limit has been removed and they can now delegate an unlimited amount to the FISO.
7. By directing delegators to stake to their FISO via Stakeboard, and making that a pre-condition of receiving FISO rewards, projects will greatly undermine the effectiveness of scammers and scam ISO stakepools. It goes without saying that all FISO stakepools accessible via Stakeboard’s FISO delegation dashboard will be legitimate, and delegators who open an account on Stakeboard will receive a notification anytime Stakeboard becomes aware of a fraudulent ISO stakepool. Moreover, project partners will be able to easily communicate all important updates and information to all FISO delegators through Stakeboard’s messaging interface, eliminating a great deal of confusion and the need for overly redundant communications.
Don’t Wait — Start planning your FISO partnership with Stakeboard today:
With these innovations to the ISO concept, Stakeboard and its project partners are going to change the game of who can raise funds to bootstrap projects on Cardano. Until now, it has been challenging for even the mega-projects of Cardano to conduct an ISO without garnering a great deal of criticism and expending a great deal of resources. But now, leveraging Stakeboard’s infrastructure and SPO experience, projects with just a modest amount of capital will be able to conduct a well planned, well conducted, transparent FISO — where fairness to all of Cardano’s stakeholders — developers, delegators, and stakepool operators — is respected. So don’t wait: if you have a Cardano project that could benefit from a FISO, contact us to begin a conversation on how we can help you take your project to the next level.
Register as a delegator as soon as possible to be informed and hop into the first FISO once launched.
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